Persistent rent extraction

Representative democracy does not necessarily eliminate political corruption. Existing models explain the survival of rent-taking politicians by ideological divisions in the electorate and/or informational asymmetries. The current paper demonstrate that rent extraction can persist even if voters are fully informed and ideologically homogenous. We show that in such an environment, voters may gain by persistently reelecting a rent-taker that limits his rent extraction. Such an equilibrium occurs when voters and politicians do not discount the future too heavily, and the share of honest candidates is relatively small.     

Policy persistence and rent extraction

The existing literature has shown that special interest groups can have both growth enhancing and growth retarding effects on an economy. In either case, it is always assumed that the nature of the special interest groups remains constant over time. The hypothesis of this paper is that a dynamic relationship exists between politicians and lobbyists, i.e., that opportunities for rent extraction for special interest groups can evolve over time. In the short run politicians may support “projects” proposed to them by lobbies, because they yield clear economic benefits. However, continued governmental support may imply a cost to society and yield rents to the lobbies. A theoretical framework in which established and new lobbies overlap is developed to model a government’s incentives to behave in a manner consistent with the hypothesis. In this framework, voters can still rationally reelect politicians even if the latter support lobbies for an inefficiently long period of time, because if they did not, then the quality of the pool of new projects would deteriorate.     

The incumbency dilemma and rent extraction by legislators

An incumbent is able to shirk or otherwise obtain rents based on his tenure of office because more senior representatives are better able to advance their legislative agendas than are more junior members. The realization of incumbent rents implies that an electoral prisoners' dilemma occurs at the level of voters across electoral districts. Pivotal voters in each district would benefit if all incumbents were replaced by challengers with similar legislative programs because the cost of incumbent rents can be avoided, but each benefits if his representative has more seniority than those from other districts.     

The Olson ratio and indirectly endogenous rent

Public Choice - We consider an economy where the rent value depends indirectly on value-adding investment of agents (thus indirectly endogenous) and the win-probability is a function of rent...     

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...     

Economic property and the theorisation of ground rent

The theory of capitalist ground rent that Marx develops in CapitalVol. III is customarily regarded as either unproblematic, or susceptible to technical improvements. This paper argues that there are profound difficulties in Marx's theorization of ground rent and the relation of landed property to capitalist production in agriculture, and draws attention to the concepts of 'property' and 'commodity' that Marx deploys. The persistence of a philosophical anthropology in the later works of Marx emerges clearly in the deficiencies of these concepts when used in the analysis of capitalist agricultural production.     

Imperfect rent dissipation with unionized labor

Traditional rent-seeking theory focused only on socially wasteful expenditures by firms competing for restrictive regulations. More recently, rent-defending expenditures by consumers have also been taken into account. This paper extends the analysis by adding rent-sharing expenditures by organized labor. The paper merges the Tullock lottery model and the monopoly union model and considers both a costless and a costly wage bargaining mechanism. The participation of consumers and workers in the distributional contest is shown to reduce, rather than increase, the social cost of restrictive regulations. The participation of consumers and workers also raises the probability of deregulation.     

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.     

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.     

Taxing capital gains

From 1969 to 1971 he was a member and from 1972 to 1974 the Chairman of the President’s Council of Economic Advisers. His major publications include The Fiscal Revolution in America, Presidential Economics,and Governing the $5 Trillion Economy.He is a member of the board of contributors of the Wall Street Journal, where his writings appear frequently.     

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.     

Deregulation despite transitional gains

Acemoglu and Robinson (in The American Economic Review 90(2):126–130, 2000) argue that historically economic rents have been less of a barrier to regulatory reform and innovation than political rents. Contrary to this conclusion, I argue that the important margin of distinction for factors preventing deregulation is not whether rents are economic or political, but rather what alternative profit opportunities are available and how innovation has changed the entrepreneurial opportunity set. Using the example of medieval Cologne, I show that the transitional gains trap framework, as developed by Tullock (in The Bell Journal of Economics 6(2):671–678, 1975), applies in a static environment and can successfully prevent reform over long periods of time, but that neither political nor economic entrepreneurs will ignore an opportunity for increased profitability in the long run. In addition, the organization of the political unit to which the regulation applies can determine the persistence of said regulation.