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Disclaimer. Don't rely on these old notes in lieu of reading the literature, but they can jog your memory. As a grad student long ago, my peers and I collaborated to write and exchange summaries of political science research. I posted them to a wiki-style website. "Wikisum" is now dead but archived here. I cannot vouch for these notes' accuracy, nor can I say who wrote them.
Tullock. 1990. The costs of special privilege. In Perspectives on Positive Political Economy, eds. James Alt and Kenneth Shepsle. Cambridge: Cambridge University Press, pp. 195-211.
Y: Social costs (mud holes)
X: Rents, technology (civil servants)
Tullock's example: imagine a would-be farmer whose land is crossed by a road. Rather than raise corn, he makes a big mud hole in the middle of the road. Then, he sits there with his tractor and charges people to pull them out of the mud hole. He's extracting money. But the problem becomes clear when you consider the opportunity cost: he could be raising corn (a net gain) instead of just charging tolls/rents (a zero-gain transfer to the farmer).
What Tullock contributes: a discussion of how much of the rent will be consumed by the person getting it, and how much will be lost to extract the rent. Getting the rent in the first place creates a social loss.
CRITICISM: This leaves a puzzle. If the rent is worth $100 million to the firm getting it, why would the politician sell it for only a $10,000 contribution? Why isn't the price set much, much higher? Noll: legislators seem to be driven more by ideology and party than by these kinds of contributions. --At the same time, there's competiton to provide rents. Various legislators, and various legislatures (state vs federal), all want your support.
Research on similar subjects
Tags
Tullock, Gordon (author) • Economics • Regulation • Rents • Interest Groups
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