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Rent extraction and rent creation in the economic theory of regulation

In: 40 Years of Research on Rent Seeking 2

Author

Listed:
  • Fred S. Mcchesney
  • John M. Olin

    (University of Chicago Law School
    Emory University School of Law)

Abstract

The economic theory of regulation has advanced considerably since Stigler’s seminal piece explained government’s ability to create rents by cartelizing private producers. Because political action can redistribute wealth generally, it is now seen that private interest groups other than producers also have an incentive to organize, both to obtain the gains and to avoid the losses from a whole menu of government enactments. The configuration of winners and losers depends on many factors, and it changes as the underlying demands for and costs of regulation shift. New technology, for example, may render existing government regulations undesirable to their prior beneficiaries or make current regulations useful to groups previously not benefited. Finally, “government” itself has come to be treated, not as a unit, but as a complicated network of individuals, each with an incentive to maximize his own interest.

Suggested Citation

  • Fred S. Mcchesney & John M. Olin, 1987. "Rent extraction and rent creation in the economic theory of regulation," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 313-330, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-79247-5_17
    DOI: 10.1007/978-3-540-79247-5_17
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