Tullock, Blagojevich and Rent-Seeking

Don Boudreaux on Tullock, Blagojevich and rent-seeking.

Fairfax, Va. - Gordon Tullock is not a household name. It's a shame that he's not. In contrast, disgraced Illinois Gov. Rod Blagojevich is a household name. It's a shame that he is.

These two men have little in common except that Mr. Tullock, an eminent economist, is the first scholar who systematically grasped and explained why the actions of politicians such as Mr. Blagojevich are so harmful to the rest of us.

It takes no genius to understand why Blagojevich sought to enrich his purse and enlarge his power by allegedly trying to sell a US Senate seat. Four-year-old children understand self-interest and aren't shocked by it. And all sensible adults understand that politicians are no less self-interested than are bankers or beauty queens. As H.L. Mencken observed long ago about homo politicus: "...it is to his interest to augment his powers at all hazards, and to make his compensation all the traffic will bear."
Understanding just how actions such as Blagojevich's create widespread harm, however, is more involved than it appears.

Obviously, a governor who uses his appointment powers to feather his own nest is a scoundrel. And such ill-begotten appointees are likely to be inferior, so the public suffers.

But this is only the tip of the antisocial iceberg. As Tullock first recognized (in a paper published in 1967), enormous amounts of resources – including human talent – are wasted in the pursuit of government privileges.

The income derived from possessing a special privilege is called "rent" (which, by the way, has nothing to do with the monthly payments that tenants make to landlords). Rents themselves are just a transfer of value from some people to others. So, for example, when each American pays an extra $10 annually for sugar because of the special protections that Uncle Sam gives to American sugar farmers, that $10 winds up in the hands of sugar farmers. Each of us who doesn't grow sugar is worse off by $10, while those who do grow it are better off by the sum total.
Sugar consumers' losses are balanced by sugar farmers' gains. On net, then, it appears that society comes out even.

But that's not the case. Tullock's insight is that the very ability of government to create lucrative special privileges diverts resources from socially productive pursuits into wasteful ones.

Knowing that government is willing and able to impose tariffs that will protect them from foreign competition – and knowing that such protection will raise their incomes – sugar farmers understandably spend some of their resources farming government rather than farming their land.

Such lobbying can reap advantages worth millions. So it's understandable that companies spend considerable effort courting politicians who can bestow such privileges. That's wasteful. Time, energy, and other materials that could be used to expand the output or improve the quality of goods and services are instead used to lobby government for narrow benefits that may harm society at large. And the larger the potential gain from being granted such a privilege – that is, the larger the rents – the more intense will be rent-seekers' incentives to chase after them. That puts tremendous pressure on – and gives tremendous leverage to – politicians.
It's easy to look at the Blagojevich case and see a failure of personal ethics. It is about character. But it's also about how government itself creates the very conditions for corruption. Think of all the special privileges governors can bestow: subsidies for stadiums, public-works contracts, special taxes and fees, not to mention myriad regulations with myriad loopholes. Chief executives – mayors, governors, and presidents – are supposed to be the chief enforcers of the law. Today, though, they are also chief bestowers of privileges. As such, the trading of favors is intense, leaving little bandwidth for actual public service. Society loses.

He didn't use the phrase "rent seeking," but Blagojevich captured the toll it takes in an interview he gave in 2005: "There's a loneliness and a certain sadness [to this job] because you have to isolate yourself to some extent. There are so many people who want so many different things from you." He was more right than he knew. Blagojevich's shenanigans – though probably illegal in ways that grants of other special privileges aren't – are nevertheless appropriately seen as a product of the rent-seeking culture that today's increasingly unconstrained government engenders.
During the campaign, both Barack Obama and John McCain pledged to limit the influence of lobbyists and special interests. But you can't stop politics as usual when government grows. And as Washington embarks on a trillion-dollar-plus shopping spree, the conditions that cultivate rent-seeking – and thus corruption – are sure to grow, too.

The antidotes for this poison are integrity and constitutionally limited government. The need for them has never been greater.