Tuesday, October 03, 2006

Nobel Series: Gordon Tullock

Another economist who has been discussed as a possible Nobel winner is Gordon Tullock. Dr. Tullock is known for his work in public choice economics (which basically applies economic logic to how government makes decisions). He is mostly known for introducing the idea of "rent-seeking behavior."

Rent-seeking behavior is where an individual or business seeks to gain by changing the economic environment instead of through a productive activity. To make the idea more clear, here are some examples:

  • A group of businesses join together to form a cartel and agree to raise prices.
  • An industry pays lobbyists to get Congress to pass a bill giving subsidies to the industry.
  • One country invades another to take natural resources, like oil.
  • A union tries to negotiate higher wages without increases in productivity.
  • Any type of theft of property.

The basic idea in all of the examples is that the action is not adding to the total welfare to society, merely providing more profit or resources to the rent seekers (many times just transferring resources from one group to another).

As a sidenote, one of his colleagues at George Mason University posted this about how Tullock always comes up with great insults. Here is my favorite:

The other day Gordon asked me to read one of his papers and Ipointed out a few typos. "Excellent," he said, "this will surely be your greatest contribution to economics."

Can you think of any other examples of rent-seeking behavior? Any ways in which you try to gain without providing any productivity?


Anonymous said...

The best example of "rent-seeking behavior" that I could come up with was the idea of welfare. Although the idea isnt to seek gain without providing any productivity, the overall motive of transfering resources from one group to another seems to be the overriding idea of this government plan. Rent-seeking behavior seems to have more than one interpretation in economics. Although seemingly altrustic and beneficial to society, Welfare might appear as a government plan that hurts the rich and helps the poor. The program was innacted to provide for those with lesser fortune, which helps one group at the expense of another without providing productivity for the rest of society.

Anonymous said...

The example that came to mind for me is more of an application of economics outside the realm of money. Cheating in school is an example of rent-seeking behavior. Students who cheat aren't actually putting forth extra effort for a good grade but try to take advantage of someone else's work by copying their answers. The student hasn't become any more productive (proficient in the subject) but makes a gain (at least hopes to) by raising his grade.
-Jordan Croom

Anonymous said...

One example of a "rent-seeking behavior" is with ideas for a company. There have been many cases where someone has a great idea to increase revenue for the company and someone, probably their good friend that they trust to keep a secret, would tell the boss the idea and claim the idea his. Its on the lines of theft but instead of being phsyical theft its more of a moral theft where you don't own physical property but you claim others work as your own.

Anonymous said...

the above post is by Chris Templin

Anonymous said...

One example i came up with of "rent seeking behavior" that i hope applies to the situation is that of migrant workers. These workers, in some cases, are payed by the job. Contractors often hire these workers for certain jobs or hire them for a series of jobs. Now these workers, recieving their money only after the work is complete, work as fast as they can to get the job done, not always worried about quality. The $ sign comes from quantity. So these workers in a sense are recieving money for cheating the contractors out of money by doing a half hearted job. Materials and supplies are wasted in the shauty workmanship, and the contractors still have to pay the workers even though they are losing money on goods that are not being properly allocated. So in this case, the rent seekers are the migrant workers who work only per job to get as much money as quickly as they can so they can move on to the next job, irregardless of the quality, hurting their employers and not benefitting society to its full potential.

-john schmidt