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

Makovi, Michael (2015): The Welfare Costs of Rent-Seeking: A Methodologically Individualist & Subjectivist Revision.

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.”

• Item Type: MPRA Paper
• Language: English
• Keywords: Tullock; rent-seeking; interest groups; efficiency; subjectivism; methodology
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B3 - History of Economic Thought: Individuals > B31 - Individuals; B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B41 - Economic Methodology; D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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