Bureaucracy & Rent Seeking

Question 1

Rent

Answer 1

Privileged benefit that would not be present in a competitive market.

Question 2

Healthy Competition

Answer 2

Higher efficiency = progress and quality.

Question 3

Unhealthy Competition

Answer 3

Competition of Rent-Seeking.

Question 4

Two sources of rent-seeking behavior

Answer 4

Governments or Monopolies

Question 5

Regulatory Capture

Answer 5

b-crats serving the producers (who are supposed to be regulated), not the consumers (who the b-crat is supposed to be protecting).

Question 6

Bureaucracy

Answer 6

An entity whose source of funding is separate from the service they provide.
- This is a principal agent problem. The agent (bureaucrat) makes rules that affect me (principal), but I have no way (vote or funding) to transfer my preferences to the agent.

Question 7

Principal-Agent Problem

Answer 7

When an actor “agent” decisions have a burden on someone else “principal” who has no say in the matter.

Question 8

Niscanen Budget Maximizer

Answer 8

All bureaucrats are not trying to serve me, they are trying to maximize their own budget, to best serve themselves. This is exacerbated by asymmetric information – b-crat says, “I do my job better when I can go to vacation in the Bahamas.”