Transfers rather than transactions: rent-seeking is expensive

In 1967, Gordon Tullock published an article entitled “The welfare costs of tariffs, monopolies and theft‘ that described the workings of what Anne O. Krueger would call later “the rent-seeking society.” Rent-seeking may seem a bit abstract, but when you understand why theft makes the world worse off on the Internet, you understand why rent-seeking society is such a burden.

We got a stark lesson in this recently when I checked my text messages and saw one from my wife telling me to cancel a credit card because her wallet had been stolen. She had gone kayaking with a friend and when they returned to their car, the window had been shattered and their wallet had been stolen. It’s easy to cancel the credit cards, but obviously the money they were carrying is lost.

From an economic perspective, the Handover doesn’t really matter. Instead of us spending $100, someone else does. The stolen money is a cost to us, but not a cost to ‘society’. It just changes hands.

Tullock and Krueger explained that rent seeking is inefficient because people consume real resources to achieve a goal Handover rather than one transaction. Others expend real resources to prevent transmissions. The thieves could have used their time and tools to produce things, and if they had produced something that they could sell at a price higher than its cost, they would have created value. They could have built a birdhouse, or swept someone’s garage, or an almost infinite number of things.

Instead, they just used their time and resources to redistribute things. The cost to society is the cost they could have incurred while stealing plus whatever they destroyed in the process (in this case a van window, plus the time we had to spend canceling credit cards and monitoring transactions) .

Lobbying – and distributive politics in general – is like breaking into a car and stealing a wallet rob a record store. Instead of creating something new, lobbyists and special interests spend their money trying to take over something that already exists. The world is worse off when you think about what they could have done instead.

If you look at the federal registeryou can see example after example after example of special privileges being doled out to visible and sympathetic interest groups. People celebrate when they win, because who doesn’t like free money? It is of course not free, despite statements that the additional spending will stimulate the economy. As Frederic Bastiat reminds us, the money has to come from somewhere. Importantly, too, the time and money spent lobbying Congress to secure the privilege could have been spent earning rather than taking – just as thieves could use their time and talents for something else .

Art Carden is a Professor of Economics & Medical Properties Trust Fellow at Samford University, and by his own admission he’s as Koched as they come: he has an award in his office named after Charles G. Koch, he does a lot of work for and is affiliated with a range of Koch-related organizations, and he has applied for and received funding from the Charles Koch Foundation to host events on campus.