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Public Choice (2012) 152:7382
DOI 10.1007/s11127-011-9852-5
Robert D. Tollison
Received: 8 December 2010 / Accepted: 23 July 2011 Springer Science+Business Media, LLC 2011
Abstract Tullocks concept of rent seeking was the rst statement of a quantitative principle about the social costs of such activities as lobbying and favor seeking. As such, this part of Tullocks legacy to modern economics is one of his most important contributions.
Keywords Rent seeking Social costs Monopolies Tariffs Crime
1 Introduction
The concept of rent seeking is the idea that transfers are converted into social costs when individuals expend real resources and efforts to capture them. Prior to the invention of the concept by Tullock (1967), transfers were treated as costless redistributions from losers to winners in activities such as regulation and monopolization. The social costs of monopoly and regulation (and other governmental activities) were considered to be limited to the relevant deadweight cost triangles. Unfortunately, these triangles turned out to be empirically small so that the estimated gains from deregulation and free trade were trivial magnitudes as a percentage of total economic output, hardly justifying the investment of economists in studying such matters.
Tullocks insight went against this conventional wisdom in the strongest possible way. Simply put, the rent-seeking insight put rectangles and trapezoids into play, in addition to triangles, and thereby expanded by several multiples the social costs of government intervention in the economy. Transfers were no longer inconsequential. The social costs of transfers had equal standing with traditional deadweight costs, and indeed were likely to be larger than the smaller triangles.
The purpose of this paper is to take a closer look at Tullocks idea and to examine its development over time. In so doing, the following issues will be covered, albeit in varying levels of detail. What were the major works on rent seeking? What is the idea of rent seeking in its simplest possible form? Are there any examples of rent seeking in the private
R.D. Tollison ( )
Department of Economics, Clemson University, Clemson, SC 29634, USA e-mail: [email protected]
The economic theory of rent seeking
74 Public Choice (2012) 152:7382
economy? What are the various classes of models of rent seeking and rent dissipation? What does the empirical evidence suggest about the magnitude of...