Rent-setting
(also spelled as rent setting;
), also known as rent-creating,
refers to the act of
government
A government is the system or group of people governing an organized community, generally a State (polity), state.
In the case of its broad associative definition, government normally consists of legislature, executive (government), execu ...
s or
bureaucrat
A bureaucrat is a member of a bureaucracy and can compose the administration of any organization of any size, although the term usually connotes someone within an institution of government.
The term ''bureaucrat'' derives from "bureaucracy", wh ...
s using their
power
Power may refer to:
Common meanings
* Power (physics), meaning "rate of doing work"
** Engine power, the power put out by an engine
** Electric power, a type of energy
* Power (social and political), the ability to influence people or events
Math ...
to intervene in the
market
Market is a term used to describe concepts such as:
*Market (economics), system in which parties engage in transactions according to supply and demand
*Market economy
*Marketplace, a physical marketplace or public market
*Marketing, the act of sat ...
, resulting in the formation of new economic rents and creating
rent-seeking
Rent-seeking is the act of growing one's existing wealth by manipulating the social or political environment without creating new wealth.
Rent-seeking activities have negative effects on the rest of society. They result in reduced economic effi ...
opportunities for certain market entities.
In short, it means that the power itself committed an act in order to take a bribe.
The concept of rent-setting was coined by Appelbaum and Katz in 1987.
This theory holds that since the regulator itself may become a rent-seeker, the rent-seeker itself will become a rent-setter and thus endogenously determine the size of the rent.
Rent-setting is part of the chain of the rent-seeking process.
It can generally be divided into three types: unintentional rent-setting, passive rent-setting and active rent-setting.
In a 'power-money' transaction, rent-setting is from 'power' to 'money', while rent-seeking is often 'money-power-money increment'. In fact, rent seeking and rent setting are two sides of the same behavior and cannot be separated.
See also
*
Rent-seeking
Rent-seeking is the act of growing one's existing wealth by manipulating the social or political environment without creating new wealth.
Rent-seeking activities have negative effects on the rest of society. They result in reduced economic effi ...
*
Rent extraction
Rent extraction () is a notion formulated by American jurist Fred S. Mcchesney (1948–2017) in his 1987 essay ''Rent Extraction and Rent Creation in the Economic Theory of Regulation''. It refers to the phenomenon by which entrepreneurial politi ...
*
Economic rent
In economics, economic rent is any payment to the owner of a factor of production in excess of the costs needed to bring that factor into production. In classical economics, economic rent is any payment made (including imputed value) or bene ...
References
{{Corruption
Factors of production
Political corruption
Public choice theory