Rents, Rent-Seeking and Economic Development: Theory and Evidence in Asia

by Mushtaq H. Khan (Editor), Kwame Sundaram Jomo (Editor)

Rent-seeking is about buying influence, which can range from lobbying to corruption. The concepts of rents and rent-seeking are central to any discussion of the processes of economic development. Yet conventional models of rent-seeking are unable to explain how it can drive decades of rapid growth in some countries, and at other times be associated with spectacular economic crises. This book argues that the rent-seeking framework has to be radically extended if it is to explain the anomalous role played by rent-seeking in Asian countries.

Genres: Economics, Public Policy

356 pages, Paperback

First published September 7, 2000

Reviews

[Eugene Kernes · Rating 2 out of 5]

A rent is an income that is above the minimum acceptable income, usually above average income. Rent and rent-seeking are normally perceived as being only inefficient, waste of resources, and bad for economic development. Prompted by the 1997 Asian crisis, the authors of this book ask how rent and rent-seeking was able to sustain economic growth for a long time if they were all bad. Certain types of rents and rent-seeking facilitate development. The process of rent-seeking is composed not only of trying to obtain rents, but also maintaining the rents. In order to work, rents do need to create favored income earners. As rents are ubiquitous, countries have to learn to manage them.

Rent is normally a reference to any income above the average. Average relative to a competitive market. Particularly, rent is an outcome where a person accepts an income that is higher than the minimum acceptable income. Rents can be legal or illegal. Government allocations to specific firms are legal rents while brides are illegal. As rents are above average income, those who get rents will try to maintained their rents. In the rent-seeking process, the rentier will try to influence political and market outcomes to keep the rents. Spending money on rent-seeking activities are not the only reason why rents are seen as inefficient, they also allocate income away from competitive actors and reduce social benefits.

Facilitating good rents promote economic development while bad rents damage the economy. The various types of rents include monopoly rents, nature resource rents, transfer rents, and Schumpeterian rents, learning rents, monitoring and management rents. Although rents can generate positive outcomes, they do favor certain income earners over others. Creating classes of income. There are different ways in which private parties or government can create rents. To sustain the rents, those rents need to be distributed to the compensate rent losers, and society.

This book demonstrated that there is a big definitional crisis in rents. The rent definition used can be used to make any income appear like rent. Making rent ubiquitous reduces the meaning that rent has. Another definition problem is that rent can be achieved with no business taking any action, as if more a random reason more customers make use of their products, that is rent.

Another problem with this book is that the author makes the claim that economic development and rent are not supposed to be complimentary so that when rents promote economic development it is a paradox. The problem with this view is that it means that rents can gained without wealth. For rents to exist, wealth needs to be created in order to allocate income to different uses. Rents are complimentary for economic development and can be sustained for a long time as rent seekers have an incentive to make sure that wealth is created to derive rents from it. It is difficult to do, which is why rent-seeking is tenuous.

[Trent · Rating 4 out of 5]

My interest for this book derived from my love for discourse around all things political economy. While this book is at times heavy with the economic graphs, and equations that some of myself and fellow readers may struggle with, I was not disappointed with this read, providing pragmatic insights into the beast that is understanding economic development in developing countries. Powerful ideas backed by real evidence displayed in Southeast Asia in the second half of the 20th century give credence to nuanced perspectives that rents and rent seeking are not always crippling to a country's ability to develop its economy. A successful critique of the neo-classical approach to economic development that will surely rattle in my mind for years to come.