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Public Choice and Rent Seeking

Yet the reality of voters’ rational ignorance is one of the chief reasons why public-choice scholars argue that political choices are often less prudent and less sensible than are choices made by people in private markets – and why special-interest groups have a much greater chance of co-opting political processes than they have of co-opting market processes.

Put differently, the reality of public choice is among the main reasons given by public-choice scholars for why political outcomes will often be less desirable than they are imagined to be by those who are enthusiastic about democratic politics. Even democratic political processes that are inclusive and non-corrupt feature inordinate amounts of free-riding and other ‘market-failure’ flaws that render such processes much less likely to work to promote the general welfare than the champions of politics suppose. Politics neither performs miracles nor is itself blessed by miracles.

So Jonathan Gruber simply admits that the very process that people on the left romanticize and celebrate – democratic politics – isn’t what it’s cracked up to be. Of course, libertarians and public-choice scholars say the same. The difference between the Jonathan Grubers of the world and the Russ Robertses and Bryan Caplans of the world is that the former believe that politics is still commendable as long as good, smart people (such as Gruber) are performing deceptions necessary to trick voters into supporting policies that good, smart people somehow divine are best for the masses, while the latter believe that the very need to deceive rationally ignorant (indeed, rationally irrational) voters is itself a major flaw in politics – a flaw that makes politics far less reliable and admirable than competitive, private markets.

GruberGate, by Don Boudreaux

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Rent Seeking

You can’t give money away.

“Rent seeking” is one of the most important insights in the last fifty years of economics and, unfortunately, one of the most inappropriately labeled. Gordon Tullock originated the idea in 1967, and Anne Krueger introduced the label in 1974. The idea is simple but powerful. People are said to seek rents when they try to obtain benefits for themselves through the political arena. They typically do so by getting a subsidy for a good they produce or for being in a particular class of people, by getting a tariff on a good they produce, or by getting a special regulation that hampers their competitors. Elderly people, for example, often seek higher Social Security payments; steel producers often seek restrictions on imports of steel; and licensed electricians and doctors often lobby to keep regulations in place that restrict competition from unlicensed electricians or doctors.

Rent seeking

Examples of rent-seeking behavior would include all of the various ways by which individuals or groups lobby government for taxing, spending and regulatory policies that confer financial benefits or other special advantages upon them at the expense of the taxpayers or of consumers or of other groups or individuals with which the beneficiaries may be in economic competition.


Rent-seeking behavior

[M]y 1967 paper (Tullock 1967) was not received well by an economics profession that largely perceived government to be an omniscient and impartial enforcer of the public good. It was rejected both by The American Economic Review and by The Southern Economic Journal ostensibly on the ground that it made no contribution to knowledge. Eventually I had it published in a relatively obscure, new journal, The Western Economic Journal, where it remained largely unread for the better part of a decade. This self-same paper is now one of the most widely cited papers in economics – an ultimate triumph of science over ideology.

The Fundamentals of Rent-Seeking

Tullock, G. (1967). ‘The Welfare Costs of Tariffs, Monopolies and Theft‘ Western Economic Journal, 5, pp. 224-232. (9-page PDF)

If a case of soap is pilfered from a U.S. military base here or pinched from a NATO shipping container, it will probably, sooner or later, end up for sale in the Bush Market, a sort of thieves’ outlet mall in central Kabul.

Named after George W. Bush, the U.S. president who launched the war in Afghanistan, the bazaar has flourished for more than eight years, thanks to the long presence of foreign troops that provided war booty aplenty. But in the Obama era, with its steady withdrawal of U.S. forces, the good times are ending in the sprawling hive of vendors who hawk mountains of Pop-tarts and enough Head & Shoulders shampoo to combat the dandruff of untold army divisions.

In a way, the market serves as a microeconomic barometer of the concerns of Afghans across class lines when 2014 ends — and with it, the U.S.-led coalition’s combat mission. President Obama’s announcement in his State of the Union address Tuesday of the accelerated pullout of 34,000 troops in the coming year has only heightened many merchants’ worries about what happens after Western forces finally step on their air hose of cash and material support.

Kabul vendors of stolen U.S. goods fret about future

Ozymandias

Mockery, truculence, and minimalist living are best, then enjoy the decline. We also need a Revolving Door Tax (RDT).

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