A culture of rent seeking

Public Choice - Tullock [J Dev Econ 67(2):455–470, 1967] introduced the concept of rent seeking and highlighted the social costs associated with collecting and lobbying for or against...     

The economic theory of rent seeking

Tullock’s concept of rent seeking was the first statement of a quantitative principle about the social costs of such activities as lobbying and favor seeking. As such, this part of Tullock’s legacy to modern economics is one of his most important contributions.     

Monopoly rent seeking under conditions of uncertainty

In recent years, economists have come to recognize that the competition to obtain monopoly rents, i.e., rent seeking, may consume resources whose value greatly exceeds that associated with traditionally measured deadweight welfare loss triangles (Tollison, 1982). Early articles by Tullock (1967), Krueger (1974), and Posner (1975) all concluded that this competition would exactly dissipate the rents sought. Later articles by Tullock (1980) and Baysinger and Tollison (1980) modified that original conclusion. The present paper develops a model which raises further doubts about the complete transformation of rents into costs. The emphasis of the analytical framework presented is on the implications of the fact that rent seekers may typically be uncertain about being able to maintain a monopoly position even if they are initially successful in attaining one. It is demonstrated that when there is even a moderate level of uncertainty about retention, the likely effect will be a relatively large reduction in the magnitude of resources invested in rent seeking activities. In addition, it is shown that the size of this waste of resources depends somewhat on the extent to which rent seeking opportunities involve once and for all transfers as opposed to flows of rents. Finally, in those cases where a flow of rents is at stake, it is shown that considerable social waste might be eliminated through institutional changes which would reduce the subjective probabilities of potential monopolists retaining their rent streams once attained.     

Rent-seeking for pure public goods

In this paper we present a formal analysis of rent-seeking for public goods by two or more groups with different numbers of individuals. We begin by considering equally wealthy groups under risk neutrality, a case which constitutes our basic model. Several surprising and interesting results emerge from the analysis of this basic case. The problem is then extended to deal with (a) groups with different wealth levels, and (b) risk aversion. This last extension brings about a further crop of interesting and useful results.     

Free-riding on rent seeking—an empirical analysis

The Common Agricultural Policy is modelled as a club good providing the European Union (EU) farmer with financial benefits. We build an economic model which explains how much farmers in individual EU countries invest in rent-seeking activities in order to test for free-riding behaviour on lobbying costs. For our investigation we group the EU member countries by farm structure, and the type of benefit received. We explain the fees paid by farmers for lobbying by other countries’ fees, political variables, and country and regional agricultural characteristics. The model shows that some member countries free ride on others suggesting a form of policy path dependency.     

Revealed preferences for public goods: Applying a model of voter behavior

Most analyses of preferences for government-supplied goods disregard the fact that in a democratic society, these preferences are revealed by an individual choice: the vote. In this paper this is taken account of in a model, explaining the dynamics in voting behavior in a multi-party system. The model assumes that voters may be categorized into K groups of individuals, pursuing the same interests, who remember how parties do in representing these interests (given the level to which they are held responsible for government policy). The model allows one to estimate party identification, sensitiveness to economic performances, time preference, and relative preferences for public versus private goods, all for each of the groups. Furthermore, the model allows for an estimation of the level to which various parties are held responsible for government policies.An empirical application of the model to the Netherlands is presented, albeit that data restrictions did not allow a distinction of more than one group. The results in terms of significance of the coefficients as well as the interpretation of the original parameters are promising. The two main conclusions are that the relative preference for private versus collective consumption is lower than the existing ratio in the Netherlands, and that two parties forming a government coalition are not held equally responsible for the policies.     

Bequests, sibling rivalry, and rent seeking

We examine bequest-sharing rules where sibling rivalry creates wasteful competition for intergenerational transfers. We show that equal division of bequests minimizes rent-seeking expenditures by siblings while primogeniture maximizes rent-seeking costs. Our results lend theoretical support to the empirical findings of equal bequests without appeal to complex models of the parent-child relationship.     

Rent seeking and rent setting with asymmetric effectiveness of lobbying

This paper provides a more general model of the determination of rent-seeking costs by combining the following features: endogenous rent determination, asymmetric effectiveness of contending agents in their lobbying efforts, and multiple periods. In doing so, the paper generalizes some aspects of the work of Applelbaum and Katz (1987), Rogerson (1982), Leininger (1992) and Kohli (1992). Some results obtained are: (i) in the short run, when the regulator's salary is higher than in an alternative occupation, both the per unit cost of rent-seeking and the total rent set by regulator are highest for the same value of the relative effectiveness parameter; (ii) in the long run, an increase in the effectiveness parameter leads to a reduction in the social costs of rent seeking; (iii) in a repeated game, the equilibrium rent is lower the higher is the regulator's discount factor.     

Voluntary purchase of public goods

This paper examines the application of Buchanan's ‘independent adjustment’ model of public good provision to individual donations to voluntary or non-profit organizations. An individual's donation function is a simple transformation of the Marshallian demand function; consequently donation functions ‘reveal,’ in principle, preferences for public goods. The existence of a tax-subsidy system sustaining a Pareto optimal level of provision is demonstrated, and the relationship to the existing subsidy scheme in the U.S. is examined. Finally, two implications of the model suggest that it is not appropriate as a representation of actual donor behavior.