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

Michael Makovi

MPRA Paper from University Library of Munich, Germany

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.”

Keywords: Tullock; rent-seeking; interest groups; efficiency; subjectivism; methodology (search for similar items in EconPapers)
JEL-codes: B31 B41 D61 D63 D72 (search for similar items in EconPapers)
Date: 2015-03-25
New Economics Papers: this item is included in nep-hpe
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https://mpra.ub.uni-muenchen.de/63270/1/MPRA_paper_63270.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/63346/9/MPRA_paper_63346.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/66359/1/MPRA_paper_66359.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/67563/1/MPRA_paper_67563.pdf revised version (application/pdf)

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