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The Welfare Costs of Rent-Seeking: A Methodologically Individualist & Subjectivist Revision

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  • Makovi, Michael

Abstract

Gordon Tullock is recognized for being the first to recognize the true costs of rent-seeking as including not only the Harberger triangle but also the Tullock rectangle. This rectangle does not constitute merely a lossless transfer of wealth, but it causes a misallocation of resources as rent-seekers invest resources in lobbying. However, a close reading of Tullock’s several articles on the subject shows that his arguments are formulated in a holistic fashion, speaking of what is efficient or inefficient for society. Rent-seeking is inefficient because it reduces societal welfare. But according to a methodologically individualist and subjectivist economics, such a claim is invalid. We recast Tullock’s argument accordingly, and conclude that we must distinguish between positive economic fact and normative moral philosophy. Rent-seeking does indeed cause a reallocation of resources – as per Tullock – but only normative moral philosophy can pronounce this to be “bad.”

Suggested Citation

  • Makovi, Michael, 2015. "The Welfare Costs of Rent-Seeking: A Methodologically Individualist & Subjectivist Revision," MPRA Paper 63270, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:63270
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    References listed on IDEAS

    as
    1. Gordon Tullock, 1975. "The Transitional Gains Trap," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 671-678, Autumn.
    2. Gordon Tullock, 1971. "The Cost Of Transfers," Kyklos, Wiley Blackwell, vol. 24(4), pages 629-643, November.
    3. Murray Rothbard, 1982. "Law, Property Rights, and Air Pollution," Cato Journal, Cato Journal, Cato Institute, vol. 2(1), pages 55-99, Spring.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Tullock; rent-seeking; interest groups; efficiency; subjectivism; methodology;

    JEL classification:

    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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