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Rent Seeking in Economics - Essay Example

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The essay "Rent Seeking in Economics" describes that instead of earning profits by going through the process of a business transaction, rent seeking in economics happens when a person or a business organization aims to earn additional income by manipulating or exploiting the available economic or political resources…
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Rent Seeking in Economics
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Download file to see previous pages Upon analyzing the given case scenario, it is clear that rent seeking in economics happens because of the imperfection within the economic and political markets (Pasour, p. 124). It simply means that the presence of political and economic corruption promotes the strengthening of rent-seeking behavior among the local and international business people. On the contrary, the chances wherein the market will be dictated freely by the movements of supply and demand increases in case of the absence of lobbying, bribery, and political corruption. In a free market economy, movements in supply and demand dictate the market prices of goods and services. In the absence of a direct government regulation, sellers will have to encourage the buyers to purchase the products and services they offer to the public by making the market price more attractive. Because of the presence of political and economic corruption, it is not easy to control unfair business practices. It is difficult to abolish the presence of rent-seeking behavior because of self-interests among the government officials and the business people within a market economy. In line with this, government officials who have the political power to either grant tax protection or give monopoly right to a large corporation is often tempted to accept irresistible offers or bribes coming from the big-time players in the business world. As a way of earning more money, business people would always grab the chance of becoming protected by the government officials whenever possible. Since the general public is the one who votes for the members of the government officials, rent seeking behavior in economics terms does not always occur as a collective decision-making process but a larger context of public choice. This makes rent-seeking behavior a major public choice problem. Looking back at the card game experiment our team had in class, the practice of rent seeking behavior is not possible since the experimental case study has dictated all the conditions behind the game. No matter how hard we try to manipulate the game, there is no other way our team could win the contract but luck. In case our team gets lucky enough to be randomly selected by the local government, we win the contract. If not, our team will always have to pay the paper work and legal fees even without winning the license. ...Download file to see next pages Read More
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