The demand for military expenditures: An international comparison

Earlier studies have explained inter-country variations in the share of GNP devoted to military expenditures by international spillovers and by differences in the threat of attack related to relative incomes. In this paper, we use the theory of public choice to explain these differences. We attempt to measure the importance of both international spillovers and relative incomes, along with two other factors: the tax-price elasticity of demand and economies of scale in the consumption of security. We find that international spillovers are significant and positive, that the income elasticity of demand is greater than unity, that the tax-price elasticity of demand explains part of observed inter-country differences, and that there are considerable economies of scale in the consumption of military spending. Finally, between 1960 and 1975, there was apparently a substantial increase in the value which each country derived from a dollar of military spending by its allies. This phenomenon, which seems related to the increased importance of deterrent weapons, has tended to induce individual alliance members to reduce the share of their national income devoted to defense.     

Risk aversion and rent-seeking: An extension and some experimental evidence

Theoretical investigations indicate that the risk attitudes of individuals will effect the amount of rent that can be assumed to be dissipated by rent-seeking activities. Following this line of investigation we extend Hillman and Katz's work to a small numbers case and demonstrate that the degree to which a monopoly rent is dissipated is dependent upon the structure of the risk attitudes of two risk averse individuals.Our earlier laboratory results were evaluated with respect to the risk neutral Cournot-Nash predictions. However, given the uncertainty present in the rent-seeking experiment, our ability to reject these risk neutral predictions may not be, in fact, a failure for the model but a result of risk aversion. In laboratory experiments in which we control for the relative risk attitudes of individual agents, we show that risk aversion matters. The relative risk aversion of individuals affects the level of rent-seeking activity and the extent to which rents are dissipated. In our experiments, the relatively less risk averse individuals dissipated relatively more rent.     

An analysis of rent-seeking games with relative-payoff maximizers

In this paper, we introduce relative-payoff maximizing firms into the Tullock model of rent-seeking. These firms try to realize higher (expected) payoff than other firms. As a consequence of this, the outcome of the model changes: Firms, on average, will invest more in the rent-seeking process, the rate of dissipation of the rent becomes independent of the number of rent-seekers, dissipation becomes complete in cases where underdissipation prevails in the original model.     

The design of rent-seeking competitions

In the standard Tullock model of rent-seeking as a noncooperative game, aggregate expenditures by seekers can equal, exceed, or fall short of total rents depending on what is assumed about the number of seekers and the marginal return to a seeker's investment. If the supply of an input into the rent-seeking process is controlled by a politician who receives payment from seekers for it, the indeterminacy of the process becomes a less serious problem. He supplies it and designs the rent-seeking game to maximize his wealth. The author derives expressions for the number of seekers and the marginal return parameter which maximize the politician's wealth in one-input and two-input rent-seeking processes.     

The measurability of budget related rent-seeking

It has been suggested that the extent of rent-seeking expenditures arising from attempts to influence budget allocations should be estimated by the absolute magnitude of the observed changes in allocation. Instead, we argue that it is the extent of theex ante prospective changes that determine the level of rent-seeking, and that in the presence of countervailing activity these may be quite unrelated to the ex post observed values. We further argue that the traditional rent-seeking model of competition for a pre-specified rent is inappropriate in this context.     

The incidence of overdissipation in rent-seeking contests

Tullock's analysis of rent seeking and overdissipation is reconsidered. We show that, while equilibrium strategies do not permit overdissipation in expectation, for particular realizations of players' mixed strategies the total amount spent competing for rents can exceed the value of the prize. We also show that the cross-sectional incidence of overdissipation in the perfectly discriminating contest ranges from 0.50 to 0.44 as the number of players increases from two to infinity. Thus, even though the original analysis of overdissipation is flawed, there are instances in which rent-seekers spend more than the prize is worth.     

The design of rent-seeking competitions: Committees,preliminary and final contests

The paper examines the common practice in multi-contest rent- seeking competitions, where “finalists” are selected, based on rent-seekers' efforts in a preliminary contest. We find that for any single-contest design, rent-seeking expenditures could be reduced by introducing a preliminary contest, if the marginal returns to rent- seeking effort in the preliminary contest is sufficiently low. In addition to other reasons, the paper argues that this may explain why such multi-contest designs are common. We argue that rent-seeking expenditure in the preliminary stage represents the cost of reducing the number of contestants. We also find that the practice of setting a higher “quality” standard in the final contest than the “quality” standard in the preliminary contest reduces rent-seeking waste. We derive an expression for the optimal number of finalists; under certain conditions we find that the optimal number of finalists is directly proportional or equal to the square root of the number of potential contestants. Finally, we show that whether rent-seeking expenditures rise or fall when the rent is awarded by a committee instead of a single administrator depends on the sensitivity of the committee relative to that of the single administrator.     

The political economy of distribution in developing countries: A rent-seeking approach

Economic development in many Third World countries after independence has been biased in the sense that some, mainly urban, social groups have gained much more than the majority of the population who lives in rural areas or urban shantytowns. That bias is to a large extent caused by government policy and, accordingly, by an uneven distribution of political influence. This paper contains an analytical model reflecting the bias in the distribution of the benefits and costs of public sector activities, where those activities are determined by the distribution of political influence. The main elements of the distribution of political influence are determined in a rent-seeking game between society' different social groups.     

Perestroika and public choice: The economics of autocratic succession in a rent-seeking society

An earlier version of this paper was presented at the Public Choice Society Meetings, Tucson, AZ, March 1990, and at the Austrian Economics Colloquium at New York University, September 1990. We would like to thank the participants at our session, and those at the Colloquium, for their comments and criticisms. In addition, Hal Hochman, Israel Kirzner, Mario Rizzo, Charles Rowley, Robert Tollison, Gordon Tullock, and an anonymous referee provided useful comments and criticisms. The usual caveat applies.     

The effect of rent-seeking on family income levels: Some suggestive empirical evidence

The comments of Jason Shogren, Pat Gaynor and Gordon Tullock on an earlier version of this paper are gratefully acknowledged, as is the typing assistance provided by Deborah Culler. I am responsible for any errors or omissions.     

The strategic advantage of interdependent preferences in rent-seeking contests

We study rent-seeking contests, where the set of players contains two groups of players – one with independent preferences and the other with (negatively) interdependent preferences. It turns out that the latter experience a strategic advantage in general two-player contests and in n-player-contests with non-increasing marginal efficiency. For general n-player contests with increasing marginal efficiency, the strategic advantage prevails provIDed convexity of contest technologies is sufficiently weak. For strongly convex contest technologies, other types of equilibria exist, including one where indivIDualists receive strictly higher pay-off.