Surplus Seeking and Rent Seeking Through Back-Door Deals in Mainland China Price Control and Central Planning Fix Prices Below Market Clearance, Creating a Contrived Surplus |
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| Authors: | K. K. Fung |
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| Affiliation: | [K. K. Fung, Ph.D., is professor of economics, Memphis State University, Memphis, TN 38152.] This work was supported by a faculty development award from Memphis State University in Spring, 1983, and a grant from the Memphis State University Faculty Research Fund in Summer, 1984. The grants do not necessarily imply endorsement by the university of the conclusions and opinions expressed. The idea for this paper germinated in the ideal research environment for Chinese studies provided by the Universities Service Center in Hong Kong. The support and hospitality from the director, John Dolfin, and the staff of the Center in Spring, 1983, are gratefully acknowledged. Ezra Vogel provided encouraging and critical comments on an early draft. The author also thanks Ju Ju Fung for typing the first draft. |
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| Abstract: | Abstract . When the selling price is set below the market-clearing level through government price control, the price gap represents a contrived surplus transferred from the producer to the buyer. But, due to incomplete assignment of property rights to this contrived surplus and/or high enforcement costs, contrived surplus is often a non exclusive income subject to competitive capture. Exchange of favors between buyers and sellers to gain preferential access to rationed goods has become a dominant method of surplus seeking (cf. rent seeking) in the People's Republic of China. But since only well-placed individuals in the distribution channels for such goods and officials who control access to positional goods have favors to exchange, these exchanges sabotage government efforts to achieve fairer access to scarce goods. And since favors involve illegally diverted resources, such back-door deals threaten the integrity of government. Furthermore, exchange of favors fosters particularistic values which hinder modern economic development. |
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