Illegal Economic Activities and Purges in a Soviet-Type Economy: A Rent-Seeking Perspective

Whether in the setting of Western developed or Third World developing societies, the substantial literature on rent seeking or directly unproductive profit-seeking activities has focussed on the activities of agents in decentralized market economies.1 The literature describes how resources are expended as private agents lobby governments for the creation of rents via interventionist activity and how individuals seek rents which have arisen as the consequence of prior government regulatory activities. Redistributive transfers in market economies, whether governmental or private charity, also evoke rent-seeking behavior. At the same time, incumbents who are the beneficiaries of rents confront the incentive to expend resources in preempting those aspiring to their positions. On the supply side of the political market, government officials have an incentive to engage in rent creation via regulatory activity and protection. These various unproductive activities would of course be absent from an idealized decentralized competitive economy. Nor is such behavior consistent with the idealized planned economy, where, just as in its idealized decentralized competitive dual, no rents arise to be sought or protected. In the perfectly planned economy centralized resource allocation simply forestals the discretionary use of resources in unproductive rent-seeking quests.