The Phenomenon of Rent-Seeking Behavior from the Institutional Aspect

Abstract

Lyudmila Danilenko — Associate Professor, Pskov State University. Address: 2, Lenin Square, Pskov, 180760, Russian Federation. E-mail: daniluda@rambler.ru

Rents are additional yields which can be gained from exploitation of various resources. However, their acquisition is rarely associated with social and economic development and innovative activity. Rather, it leads to the expansion of rent-seeking behavior among other economic agents, thus causing the deformation of social and economic relations and impeding normal development of society.

A sign of “sickness” in the social economic system, which has emerged in Russia, is the fact that newly established institutions (of power, property, rule of law, etc.) allow for the extraction of huge additional incomes. These incomes are weakly correlated to the agents’ contribution to the national product. Such incomes can be characterized as rents. The mere possibility of gaining unearned (unproductive, undeserved) incomes gives rise to corresponding interests and motives of economic agents (rent interests), which, in turn, determine the spread of rent-seeking behavior and unproductive activity. According to the author, many aspects of national economy at micro- and macro-levels can be explained by adopting the concept of rent-seeking behavior for both market and beyond-market relations. For instance, why has Russia’s business-elite failed to become a class of efficient proprietors? Why is the political elite not oriented towards the modernization of national industries?

The methods of analyzing market behavior in individuals are universal and can successfully be applied to any sphere with the problem of choice. This article attempts to apply these methods to the large-scale phenomenon of rent-seeking behavior in post-reform Russia and the particularities of its current system of power.