Rent Seeking and The Provision of Public Goods

Public good provision is a typical example of market failure, having served as an argument for government intervention since the time of John Stuart Mill (In Principles of Political Economy, Book V, Chapter XI). Many economists were quick to recognise the limits of government intervention and the corresponding causes of ‘intervention failure’. One of these causes has to do with the observation that for reasons such as pressure by interest groups (Becker, 1983, 1985), wasteful rent seeking (Tollison, 1982), legislative failure (Fiorina and Noll, 1978), and others, the government is unlikely to act purely in the interests of the public. These factors question the validity of the benefits of government intervention relative to decentralised provision. To resolve the ambiguity pertaining to welfare enhancing possibilities of intervention, it is interesting to depart from models in which the government is represented in a purely benevolent manner and introduce some realistic features into the underlying political process. This approach has been emphasised in the writings of the public choice scholars (see, e.g. Buchanan, 1968, and Buchanan and Tullock, 1962). Pursuing this line of inquiry, a related recent paper (Gradstein, 1992) presents a preliminary analysis of the effect of incomplete information on the welfare comparison between public and private provision of public goods. The results are quite surprising: sometimes, even an extremely uninformed government performs well (and frequently even better) relative to the voluntary action of uninformed individuals. Incomplete information is only one among several reasons for the possible inferiority of intervention. An alternative likely reason investigated in this paper is non-benevolent behaviour of the government.