Why Bitcoin Will Fail to Scale?

Bitcoin falls dramatically short of the scale provided by banks for payments. Currently, its ledger grows by the addition of blocks of ∼2,000 transactions every 10 minutes. Intuitively, one would expect that increasing the block capacity would solve this scaling problem. However, we show that increasing the block capacity would be futile. We analyze strategic interactions of miners, who are heterogeneous in their power over block addition, and users, who are heterogeneous in the value of their transactions, using a game-theoretic model. We show that a capacity increase can facilitate large miners to tacitly collude—artificially reversing back the capacity via strategically adding partially filled blocks in order to extract economic rents. This strategic partial filling crowds out low-value payments. Collusion is sustained if the smallest colluding miner has a share of block addition power above a lower bound. We provide empirical evidence of such strategic partial filling of blocks by large miners of Bitcoin. We show that a protocol design intervention can breach the lower bound and eliminate collusion. However, this also makes the system less secure. On the one hand, collusion crowds out low-value payments; on the other hand, if collusion is suppressed, security threatens high-value payments. As a result, it is untenable to include a range of payments with vastly different outside options, willingness to bear security risk, and delay onto a single chain. Thus, we show economic limits to the scalability of Bitcoin. Under these economic limits, collusive rent extraction acts as an effective mechanism to invest in platform security and build responsiveness to demand shocks. These traits are otherwise hard to attain in a disintermediated setting owing to the high cost of consensus. This paper was accepted by Kartik Hosanagar, information systems.

The nasty face of the liability of foreignness: MNCs and rent extraction

Purpose This study aims to clarify the factors that act as a buffer to rent extraction from multi-national corporations (MNCs) in exchange relationships with the host country’s political actors. Design/methodology/approach This study proposes a conceptual model of the factors that determine rent extraction by host country political actors from MNCs. The model identifies the sources of power the MNC can use to alleviate the power imbalance relative to the political actor to decrease rent extraction. Additionally, it identifies the factors that constrain the power-advantaged political actor, thus moderating the relationship between power imbalance and rent extraction. Findings This conceptual paper’s propositions remain for future empirical validation. Originality/value This study integrates insights from the international business literature and resource dependence theory (RDT) to identify the determinants of firm-specific rent extraction risk for MNCs. First, the model sheds light on the heterogeneity among MNCs in their susceptibility to rent extraction and their ability to manage their liability of foreignness in the host country. Second, by integrating the horizontal and vertical distribution of power in the political environment to analyze the power-dependence relationship between the MNC and host country political actors, the framework addresses a shortcoming of RDT and accounts for the dynamics of the external environment for MNCs managing their dependencies. This study also provides a basis for discussing the rent extraction MNCs face worldwide and lays the foundation for future empirical works.

When Ants Beset the Elephant: Rent Extraction and Resistance on China's E-commerce Platform

E-commerce in China has developed and expanded rapidly in recent years. Conflicts and confrontations have accumulated in parallel. Using Taobao e-marketplace – one pillar platform of the Alibaba group – as its case, this article aims to analyse the developmental logic and profit-seeking strategies of e-commerce capitalism in China and beyond. It also investigates how small online merchants responded to and resisted the particular rent-extractive and exclusive mechanisms designed by the platform. I attempt to identify the emerging responses from below to both the creative and destructive sides of this newest capitalist development in China. I argue that, despite the militancy and innovation involved in these movements, and despite the use of Maoist rhetoric borrowed from the past, the contentious collective actions (online or offline) organized by these small online merchants lack the solidarity, the shared identity and consciousness, and the powerful ideological language observed among the “traditional” working class in industrial capitalism, and hence they are more improvised, transient, and easily defeated.

Rent-seeking Practices in the Housing Development Approval Process

The lengthy, uncertain and onerous planning approval process in various countries around the world has prompted frustrated housing developers to seek influence by paying off approving officials. A research was conducted in Malaysia to investigate in greater detail this rent-seeking phenomenon by asking six fundamental questions. Rich data were obtained by interviewing 22 housing developers and consultants who work for them. Developers engage in rent-seeking behaviours to overcome genuine and artificial hurdles when applying for development approval. All approving agencies, though not all their staff, reciprocate to such behaviours. The monetary value of the payoffs depend on the rank of the public actor and project features. The higher the office holder is, the larger is the expected pay-off. Big and complex development projects in urban centres have a higher pay-off tag. Low value items television sets and car repairs serve to support normal lifestyle whereas high value items such as golfing and holiday trips support lavish lifestyle. Establishing good rapport is a prerequisite to the rent seeking and giving exchange. Elements which help foster reciprocity by state actors to housing developers’ rentseeking behaviours include low civil servant salary and high living cost, and weak punitive action. Common ethnicity facilitates nuanced communication by the latter, but common religion may dampen the former’s enthusiasm to accept any payoffs. Eventually house buyers and the general public are the casualties by virtue of higher house prices and substandard infrastructure. Given the combination of inherent features of the planning system and certain elements that impinge on state actors both of which promote rent-seeking practices, a realistic law enforcement solution is to prioritise illicit market-state exchanges involving grossly distorting rent extraction and pecuniary rewards of significant magnitude rather than total eradication of the practice.

Rent-seeking and asset-price inflation: a total-returns profile of economic polarization in America

This paper reconstructs the National Income and Product Accounts to add asset-price (‘capital’) gains to national income to derive a measure of total returns. It also treats rent-extraction as a charge against national income and GDP, not as a contribution to national output. Segregating the Finance, Insurance, and Real Estate sector from the rest of the private sector shows that most growth in wealth and income derives from rentier activities – from the dynamic of finance capitalism more than that of industrial capitalism.

The association between ownership concentration and payout behaviour: Evidence from South Africa

Orientation: The study investigated the association between ownership concentration and different payout methods of selected companies listed on the Johannesburg Stock Exchange (JSE) in South Africa for the financial reporting periods 2012 to 2019.Research purpose: The research objective was to investigate whether payout behaviour differed when low and high ownership concentration was compared.Motivation for the study: An understanding of the association between ownership concentration and payout policies is an important corporate governance aspect that could reveal the agency conflict between majority and minority shareholders. No previous South African empirical study has considered testing or investigating the two opposing agency-based hypotheses, namely the monitoring and rent extraction hypotheses, with reference to different payout methods.Research design, approach, and method: An empirical research design was followed, which is descriptive in nature. Descriptive statistics and a mixed-model analysis of variance were employed to describe the different payout methods – that is ordinary dividends, special dividends, capital distributions, additional shares, general share repurchases, and specific share repurchases – employed by companies listed on the JSE based on a distinction between low and high ownership concentration.Main findings: High ownership concentration was found to be associated with statistically significant lower ordinary dividends and capital distributions in support of the rent extraction hypothesis. Rent extraction highlights the agency conflict between majority and minority shareholders.Practical/managerial implications: Findings of the present study revealed agency conflicts that may be informative to those charged with corporate governance to help them resolve agency conflict.Contribution/value-add: This study is the first to consider the association between ownership concentration and payout behaviour in South Africa subsequent to the introduction of the dividends tax regime in 2012. The descriptive evidence submitted can serve as a basis for further explanatory research relating to ownership concentration and payout behaviour of companies.

Fronteras internas, extracción de rentas y enclaves ganaderos: La colonización agraria del Istmo Central mexicano, 1945-1985 / Internal frontiers, rent extraction and livestock enclaves: The agricultural colonization of the mexican Central Isthmus, 1945-1985

Este artículo analiza los procesos de construcción y expansión de redes sociales y dispositivos de patronazgo privado que coordinaron el proceso de frontera interna del Istmo de Veracruz durante la segunda mitad del siglo XX. Se interesa en particular en los diversos soportes institucionales, oficiales e informales en los que actores privados, vinculados con la red de poder del presidente Miguel Alemán, apoyaron sus estrategias de control sobre los recursos naturales y estatales movilizados en dicho proceso. En muchos aspectos, estos dispositivos sociales e institucionales se han cristalizado en dinámicas de enclaves, es decir, en la formación de espacios regulados por sistemas de reglas y autoridades privadas, segregados en lo esencial de las jurisdicciones territoriales establecidas por la ley y los reglamentos oficiales. En el Istmo Central, son dispositivos personalizados de patronazgo privado los que confirieron a las estructuras territoriales características de campos jurisdiccionales de excepción.Abstract: This article analyzes the processes through which social networks and private patronage devices developed in order to coordinate the internal frontier process in the Isthmus of Veracruz during the second half of the 20th century. It particularly focusses on the institutional bases, both official and informal, which enabled private actors, associated with the power network of President Miguel Alemán, to establish and expand their strategies for controlling the natural and state resources mobilized in this process. In many ways, such social and institutional arrangements crystallized in enclave dynamics, i.e. in the formation of spaces regulated by private sets of rules and authorities, segregated to a major extent from the territorial jurisdictions established by laws and official regulations. In the Central Isthmus, territorial structures were molded by personalized private patronage networks that conferred them the characteristics of exceptional jurisdictional fields.Keywords: internal frontier; patronage; cattle reeding; enclave; privatization.Résumé : Cet article analyse les processus de construction et d’expansion de réseaux sociaux et de dispositifs de patronage privé qui ont coordonné le processus de frontière interne dans l’Isthme de Veracruz, au cours de la seconde moitié du XXe siècle. Il s’intéresse en particulier aux bases institutionnelles, tant officielle qu’informelles, qui ont permis à des acteurs privés, associés au réseau de pouvoir du président Miguel Alemán, d’asseoir leurs stratégies de contrôle des ressources naturelles et étatiques mo­bilisées dans ce processus. A bien des égards, ces dispositifs sociaux et institutionnels se sont cristallisés dans des dynamiques d’enclave, c’est-à-dire dans la formation d’espaces régulés par des systèmes de règles et d’autorités privées, ségrégués dans une large mesure des juridictions territoriales établies par la loi et les règlements officiels. Dans l’Isthme Central, ce sont des dispositifs personnalisés de patronage privé qui ont conféré aux structures territoriales les caractéristiques de champs juridictionnels d’exception.Mots-clés : frontière interne ; patronage ; élevage bovin ; enclave ; privatisation.