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Measuring rent-seeking

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“…I have been perturbed by the difficulty in finding any actual measurable cost of that rectangle” (Tullock 1997, p. 149).

Abstract

Some 30 years ago Gordon Tullock, in his capacity as Editor of Public Choice, made a pointed effort to motivate researchers to measure and quantify resource investments in rent-seeking activities. Despite Tullock’s identification of this aspect of rent-seeking as a significant gap in the literature and call to arms, this remains an under-studied topic of importance. Why is this? In our opinion, the answer is that, for a variety of reasons, measuring rent-seeking turns out to be very difficult. In this paper we identify and discuss several of the difficulties, both theoretical and empirical, although we concede that our treatment surely is not exhaustive.

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Notes

  1. The legal environment affecting torts also is influenced by laws passed by State legislatures.

  2. Such costs include, for example, botched police raids that target innocent individuals and the innocent people killed or injured by drug gangs and, importantly, the opportunity cost of not using the resources to advance other social welfare enhancing activities.

  3. We appreciate this nuanced point which was raised by an anonymous reviewer.

  4. Cash bribes are transfers which are not characterized by loss of social welfare. Social waste results from expenditures of real resources, such as time, in the rent seeking process.

  5. This research possibility was suggested by a reviewer.

  6. There are no U.S. Army installations in New Hampshire.

  7. A potential way of shedding empirical light on one type of politically-induced altered investment activity would be to examine the rate of new business start-ups in a politician’s district or state before and after (s)he is chosen to sit on (or, especially, to chair) a tax or budget committee.

  8. This is a sizable literature; a number of fine contributions are reprinted in Congleton et al. (2008); an excellent discussion of rent seeking contests plus literature review is presented by Long (2013).

  9. While we appreciate the work of Hall et al. (2019) who demonstrate that the majority of textbooks in undergraduate and graduate Public Economics courses contain “in-depth” coverage of rent seeking, these courses are taken almost exclusively by economics majors. We believe the importance of rent seeking needs to be conveyed/emphasized in Principles of Economics courses which reach a considerably larger audience.

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Acknowledgements

We greatly appreciate the helpful comments provided by two anonymous reviewers, Matt Mitchell and Bill Shughart. The usual disclaimer applies.

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Authors and Affiliations

  1. Department of Economics, Auburn University, Auburn, AL, 36830, USA

    David N. Laband & John P. Sophocleus

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  1. David N. Laband
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  2. John P. Sophocleus
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Correspondence to David N. Laband.

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Laband, D.N., Sophocleus, J.P. Measuring rent-seeking. Public Choice 181, 49–69 (2019). https://doi.org/10.1007/s11127-018-0566-9

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