Li Hongjin
(Operations Office, The People’s Bank of China)
Abstract: The role of government in economy is to rectify the market failure, but rent-seeking and captured government are one of the most obvious characteristics of so called government failure. In this article, using the basic methods of game theory, we prove that the measures to overcome the rent-seeking problems, such as the more severe to punish the rent-seeker, enhancing the rewards to the regulator, more severe to punish the default regulator, will only achieve the effect in short term. In the long run, it won’t go out of the rent-seeking-regulation dilemma. Then we come to the conclusion that government intervene is the source and necessary condition of rent-seeking behavior, so what we are to do is to eliminate the government power to intervene the economy and relax regulation.
Key Words: Market Economy；Regulation； Rent-seeking; Internet Booking Taxi