Corruption

Blagojevich as a Lesson in The Evils of Rent-Seeking

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George Mason University economist Donald Boudreaux, writing in the Christian Science Monitor, finds that the Blago contretemps reminds him of the importance of the economic concept of rent-seeking, and how government income transfers do more, and worse, than create a zero-sum game of special interest wins, taxpayer loses. An excerpt:

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.

[But] 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. …..

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…..

……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.

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  1. But if you elect the right people, they won’t be rent-seeking asshats. Right, joe?

  2. The only thing worse than unregulated business is unregulated government.

  3. But it’s also about how government itself creates the very conditions for corruption

    Hello, anarcho-capitalism.

  4. Hello, anarcho-capitalism.

    You’re there too, now?

  5. Been there for years, Nigel. Years.

  6. I’ve been there for something like 4 months, since I realized the judicial system is just as evil as the rest of it.

  7. Rent seeking isn’t so bad. Just ask the UAW.

  8. I’m in the process of developing a rent-seeking missile. It’s already applying for its own federal grant money.

  9. Right. Except, there are some forms of “rent” that Reason stumbles over themselves to support.

  10. Damnit, Nigel, don’t tempt him. You know he can and will engage in a seven hour pissing contest with whoever wants to play.

  11. Nigel,

    Nigel Watt | December 23, 2008, 1:47pm | #

    But if you elect the right people, they won’t be rent-seeking asshats. Right, joe?

    Go back, reread the post, maybe read the link, and see if you can figure out what “rent-seeking” means. Because you got it wrong, in the very first comment.

    Hint: rent-seeking is not something done by elected officials. See if you can work it out from there.

    But I love the fact that you can’t stop writing about me, even when I’m not here.

    I loom large, don’t I?

  12. So, if we want to eliminate rent-seeking, we should shrink the government back to the size it was when the railroad grants were given out, because back then, nobody with economic might used it to get goodies out of the government, because it was small.

    Sure. That makes sense – so somebody who can’t keep the definition of “rent-seeking” straight between the post and the first comment, maybe.

  13. LONEWACKO!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    *shakes fist in air*

  14. Hey OLS, I’m still waiting to be served with that SpoofingSubpoena.

  15. “YO! Fuck LoneWacko!!!

    Inspired by Xeones.

  16. BDB,

    You too? I thought I was the only one.

  17. Did you get your AttorneyBooked yet for that LibelSuit, Naga Shadow?

  18. Maybe I can get the MexicanGovernment to represent me pro bono.

  19. Don’t MessWith me, Urkobolds. You’ll be HearingFrom MyLawyer.

  20. BDB,

    I have that 24 hour lawyer thing thanks to some family influence. It’s gotten me through a few roadblocks. I assume it will work for LoneRetard too. Unless he goes FULL RETARD!!! Then we are fucked!

  21. Internet Tough Guys are people who will threaten physical or legal harm to anyone who bugs them enough. Don’t worry, these threats are always empty, and these bullies couldn’t fulfill most of these threats even if they wanted to. If you ever find yourself on the receiving end of these threats, just remember that most of these morons wouldn’t even be able to figure out your IP address. Not surprisingly, Trolls love these people, and the ineffectual threats only make it funnier.

    Common Internet Tough Guy threats include:

    * Libel lawsuits (that would immediately be thrown out of court).
    o Lawsuits in general, even if the two parties live in different countries.
    o Bonus points if they threaten slander lawsuits instead.

    Emphasis mine.

    http://tvtropes.org/pmwiki/pmwiki.php/Main/InternetToughGuy

  22. Go back, reread the post, maybe read the link, and see if you can figure out what “rent-seeking” means. Because you got it wrong, in the very first comment.

    I’m certain Nigel knows exactly what rent seeking is, joe. The point he was making is not so difficult that an erudite man such as yourself could miss it.

    When government has the ability to bestow favors, people will invariably seek to receive those favors. With the exception of the Obama, government officials, elected or otherwise, will bestow those favors in a less than altruistic manner. They will be open to bribery, blowjobs and bling swaying their position. Rent seekers will of course provide the 3 Bs.

    This leads to the unmistakeable conclusion that the more power the government has over the economy, the more rent seeking and favoritism/corruption will occur.

  23. Go back, reread the post, maybe read the link, and see if you can figure out what “rent-seeking” means. Because you got it wrong, in the very first comment.

    Poor sentence structure, I’ll admit.

    So, if we want to eliminate rent-seeking, we should shrink the government back to the size it was when the railroad grants were given out, because back then, nobody with economic might used it to get goodies out of the government, because it was small.

    The hell? That’s an absurd strawman. The government was already far too big by the mid-1800s, and Lincoln’s enshrining of corporate welfare is one of my chief problems with him.

  24. See that, LoneRetard?

  25. J sub D,

    I’m certain Nigel knows exactly what rent seeking is, joe.

    Then why did he describe it as an action carried out by elected officials?

    But if you elect the right people, they won’t be rent-seeking asshats.

    Third grade English time: what does “they” refer to in this sentence?

    If you want to make a point about rent-seeking, J sub, just make it. Why would you want to start out by linking your ideas to such an obvious intellectual flub?

  26. joe, you want to address the point I was making, instead of a sentence structure failure?

  27. Hey Joe – way to totally miss the point.

    Go back, reread the post, maybe read the link, and see if you can figure out what “rent-seeking” means. Because you got it wrong, in the very first comment.

    Hint: rent-seeking is not something done by elected officials. See if you can work it out from there.

    But I love the fact that you can’t stop writing about me, even when I’m not here.

    I loom large, don’t I?

    So, if we want to eliminate rent-seeking, we should shrink the government back to the size it was when the railroad grants were given out, because back then, nobody with economic might used it to get goodies out of the government, because it was small.

    Sure. That makes sense – so somebody who can’t keep the definition of “rent-seeking” straight between the post and the first comment, maybe.

    What Nigel was saying the first post is clearly that the lefties in this country think that it’s the people in office who are the problem and that replacing them with the Obama crowd will fix said rent seeking.

    The trouble is that there is rent to be sought. That the Govt, no matter WHO is in charge can dispense favors, means there will by definition be rent seekers.

    You also seemingly willingly miss the point that if the size of the Govt. is shunk substantially, by definition, there will be less potenital goodies to be handed out. Shrink the size of the teat to the point that the game isn’t worth the candle and rent seeking will go away.

  28. When government has the ability to bestow favors…

    See, there’s the problem. The government ALWAYS have the power to “bestow favors” – that is, to undertake actions that will benefit somebody. If it’s not carrying out some policy at this particular moment, it could alway change at the drop of a hat.

    Look at how small the government was when it was handing out railroad easements. Look how small it was when it ruled for the mining company in the Pennsylvania Coal case.

    Rent-seeking and the provision of favors are a consequence of concentrated economic power and dishonesty among the individuals occupying government positions, not the formal role of government. Changing the formal, structural role of government is very often how rent-seeking takes place.

  29. BDB,

    I guess you don’t visit the Urkobold site much. LoneWacko is helping to build the wall to keep out the MexicanHordes. He only has time to post comments, not read comments.

  30. Rent-seeking and the provision of favors are a consequence of concentrated economic power and dishonesty among the individuals occupying government positions, not the formal role of government.

    Concentrated economic power is part of the formal role of government, and I don’t see how you plan on ensuring that the individuals occupying government positions aren’t dishonest.

  31. Concentrated economic power is part of the formal role of government

    What the hell? What does that even mean?

    The formal role of government: social welfare, national defense…and conctrated economic power?

    What is that even supposed to mean?

    I don’t see how you plan on ensuring that the individuals occupying government positions aren’t dishonest.

    Precisely the same way you propose to keep the government small – be electing people who will do so to public office.

  32. Now we’re on guarnatees, are we?

    I’ll note that the government was considerably smaller than it is today during the heyday of the urban political machines.

  33. You know, Naga, I’m almost tempted to go to LoneWacko’s site and attempt to troll it. Should I?

  34. What the hell? What does that even mean?

    The formal role of government: social welfare, national defense…and conctrated economic power?

    Stop playing dumb. Concentrated economic power, achieved by taxation and policy, is necessary to fund the government programs we’re talking about being used to help rent-seekers in the first place.

    Precisely the same way you propose to keep the government small – be electing people who will do so to public office.

    I don’t propose to keep the government.

  35. Would anyone care to argue that there was less rent-seeking during the century between the Civil War and the Great Depression?

    You know, when Tammany and Predergast machines were at their peak? When the National Guard was frequently called out to break strikes?

    Hell, Blago’s worst deeds would have been run of the mill in 1880, and the government was a lot smaller then.

  36. joe, nobody has been arguing that point but you. You have arbitrarily picked the mid-1800s as what all libertarians want the size of government to hearken back to.

  37. Stop playing dumb.

    Start writing coherent sentences.

    Concentrated economic power, achieved by taxation and policy, is necessary to fund the government programs we’re talking about being used to help rent-seekers in the first place.

    So, you’re accusing me of playing dumb, and are basing your argument around the pretense of having no idea what the phrase “contrated economic power” is supposed to refer to in the following passage?

    Look at how small the government was when it was handing out railroad easements. Look how small it was when it ruled for the mining company in the Pennsylvania Coal case.

    Rent-seeking and the provision of favors are a consequence of concentrated economic power and dishonesty among the individuals occupying government positions, not the formal role of government.

  38. BDB,

    No! Don’t do it! You’ll turn into . . . a troll!!! Once you go troll you don’t go back, my brotha! Plus he’ll have your IP address and mercilessly spam you with invitations to help build a certain wall.

  39. joe, nobody has been arguing that point but you. You have arbitrarily picked the mid-1800s as what all libertarians want the size of government to hearken back to.

    Actually, most libertarians seem to accept a government that’s considerably larger than that which existed in the mid-1800s.

  40. So, you’re accusing me of playing dumb, and are basing your argument around the pretense of having no idea what the phrase “contrated economic power” is supposed to refer to in the following passage?

    My point was that any government capable of doing the things you believe are part of its formal role will include individuals with “concentrated economic power” who cannot realistically be kept honest. I’m sorry if you want to read bizarre meanings into my statements.

  41. Actually, most libertarians seem to accept a government that’s considerably larger than that which existed in the mid-1800s.

    Well, I’m a voluntaryist, so saying “Look! Small government is corrupt too!” is like saying “Look! Small dogs have fur too!”

  42. My point was that any government capable of doing the things you believe are part of its formal role will include individuals with “concentrated economic power” who cannot realistically be kept honest.

    And MY point was that any government period full stop, even the limited government you would prefer, will include individuals with “concentrated economic power” who cannot realistically be kept honest.

    The scope of the government is simply not the issue. People who want to rent-seek will game the system. They did so MORE before the existence of the modern state, not less.

    Well, I’m a voluntaryist That’s nice. Yes, you can fully eliminate state corruption by fully eliminating the state. Once you’re working with the assumption that there is a state, on the other hand, that option goes out the window.

  43. And MY point was that any government period full stop, even the limited government you would prefer, will include individuals with “concentrated economic power” who cannot realistically be kept honest.

    The scope of the government is simply not the issue. People who want to rent-seek will game the system. They did so MORE before the existence of the modern state, not less.

    Which is why I pointed out that, chiefly because of this, I don’t believe in government at all.

    Yes, you can fully eliminate state corruption by fully eliminating the state. Once you’re working with the assumption that there is a state, on the other hand, that option goes out the window.

    Obviously.

  44. I wonder how many more anarcho-capitalists there are on this site versus, say, two years ago? Certainly the events of the past two years must have convinced more people that the very structure of government—specifically the imbalance of power resulting from one group possessing a monopoly on force or justice—creates a system that is inherently corrupt and unjust.

  45. If the existence of government itself, rather than its scope, is the proble, Nigel, why single out me, rather than any of the other non-anarchists who make up a large majority of the commenters?

  46. joe: Because it’s more fun to argue with people who you disagree with greatly than with people you disagree with slightly, and I know I can count on you to bite.

  47. Yes, you can fully eliminate state corruption by fully eliminating the state. Once you’re working with the assumption that there is a state, on the other hand, that option goes out the window.

    It follows that you could minimize state corruption by minimizing government. That is reducing it’s role to essential government functions that preserve a free society like law enforcement, courts and national defense.

    Government should not be propping up stock and home prices, not setting minimum prices for agriculteral products, not subsidizing inefficient organizations like public schools, not subsidizing the poor for having children they cannat afford to feed, not spending money on a manned mission to fucking Mars, …

    You know the spiel.

  48. It follows that you could minimize state corruption by minimizing government.

    But it doesn’t. There was a very minimal state at the time that the corrupt, bought and paid for Penn Coal court ruled that owning subsurface rights allows you to undermine and distroy the property of homeowners above your mine.

    The size of government can change. If the plotocrats have enough influence over the government, they just blow it up to whatever size or scope they need for their ends.

  49. joe: Because it’s more fun to argue with people who you disagree with greatly than with people you disagree with slightly, and I know I can count on you to bite.

    There there isn’t really anything about liberalism per se, or about me, that makes your argument more appropriately aimed at me.

    OK.

  50. I wonder how many more anarcho-capitalists there are on this site versus, say, two years ago?

    I already was, but Nigel is a young convert. I don’t know how many others. Anarchism is a tough sell to a lot of people. They just cannot conceive of a lack of central authority. I’ve had the discussions and tried.

  51. joe, who sold those mineral rights to the railroads? I’m gonna guess that the federal government did. In fact, I’ll go so far as to guess that the government sold/gave all that land to railroad companies because they (the government) owned it. I’ll further guess that a public auction of the lands was not held.

    Yep, small, miniscule, itsy bitsy, almost inconsequential government led to all of that corruption.

    I do wish to congratulate you for not bringing up Teapot Dome.

  52. I wonder how many more anarcho-capitalists there are on this site versus, say, two years ago?

    I’m still a minarchist. In the holiday spirit I will not be deriding anarchists as pipe dreamers until 2009.

  53. I’m in yr blg, SKOOLIN U

  54. joe, who sold those mineral rights to the railroads?

    Nobody. Was this a typo? Penn Coal and the railroads were two different examples. Which one did you mean?

    In fact, I’ll go so far as to guess that the government sold/gave all that land to railroad companies because they (the government) owned it. You would be wrong. They granted the RRs eminent domain power over other people’s land using the Takings Clause (for an unambiguous public purpose, btw).

    So basically, your argument is dead wrong – the fact you pointed to in an effort to demonstrate that the railroads episode was big government going beyond the constitution is entirely false.

  55. I kind of thought I saw joe’s point here, but I think I lost it.

    J sub D’s point that if rent seeking is inevitable then a government that does more things will simply have more overall rentseeking going on strikes me as right.

    Yes as an empirical matter the smaller governments of the 1880’s was terribly corrupt, but if all you have are policeman and post office jobs to give out, and government land to sell, then you just don’t have as much rent seeking overall as if you have a government which has the policeman, post office, welfare administrator, city planner, etc. to give out and can, in addition to selling lands, have big defense contracts, program administration contracts, etc., etc.

    Right?

  56. Of I think joe is hitting on something here, plutocrats were certainly not held back from getting their way in 1880 by the smaller role of government…

  57. joe
    Are you saying that if you have government x which limits its scope to building roads and national defense and government y which does many more things the plutocrats will in the former just use their influence to rent seek through road and defense contracts to z extent and in the latter just spread it around but to the same z extent?

    I’m curious about your thinking here because I do think your empirical point is plainly true (that there was as much rent seeking under governments with smaller scope as under big ones in history). I just ain’t putting the mechanism together.

  58. You could get caught up in joe’s 1880 example, but really what about it? I’m sure there were more crime (per capita) in 1880 as well. I’d venture to guess it was because it was easier to get away with and not due to the smallish (by today’s standards) size of government.

    Tho shit, Blago almost got away with it.

  59. I’m sure there were more crime (per capita) in 1880 as well.

    I’m not sure of that at all.

    joe is truly a master of playing stupid redirecting the conversation away from points that do not fit comfortably within his worldview.

    Of course, rent-seeking cannot occur without public officials who have the power and the willingness to collude with the rent-seekers. joe knows that, but pretends he doesn’t, to avoid the uncomfortable conclusion that even The Right People are going to wind up facilitating a lot of rent-seeking before they are done, especially if their core mission is to expand the size and scope of government.

    Poor joe. His only hope of avoiding massive disappointment in the out years of the Obama administration is to escape into denial and delusion,

  60. Of course, rent-seeking cannot occur without public officials who have the power and the willingness to collude with the rent-seekers.

    I think the point is that there has never been a government, historical or theoretical, short of actual anarchy where rent-seeking could not take place in amounts sufficient to corrupt policy processes *and* enrich plutocrats.

  61. FWIW, I believe that the capacity for rent-seeking is truly only limited by the creativity of those in office/those asking for favors. Once we grant the empirically supported notion that the small government of the 1880’s was as corrupt in this fashion as the humongous government of the 2000’s, there is decent reason to believe that a good portion of what makes rent-seeking possible is “government size-agnostic”.

  62. I love that Joe’s argument boils down to such a silly and obviously false premise (shocking!!). A normal, thinking, rational person might think that by reducing the opportunity for corruption by limiting the power of officials to sell favors and privileges, we could do something good, because there would be less corruption. In Joe’s brain, he takes one solid premise, that having government at all provides some opportunity for rent seeking and corruption, and then jumps off the deep end and says that because we can’t totally eliminate it, clearly what we need to do is expand government in every imaginable way.

    Non.. sequitur… wow.

    By limiting the power of government to things like preventing fraud and violence, Joe, we can be rid of much of the rent seeking behavior that our government’s size enables. Cite all the examples from the 1800s you want, no one’s ever said that reducing the size of government will completely eliminate the vices that concentration of power enables. An intellectually honest debater would have admitted that. Joe realized it and ignored it. Again, shocking!

    The fact that a problem cannot be completely solved is never an argument in and of itself for not trying. That’s a pretty shameful and delusional path to go down. I don’t expect our nation’s murder rate to hit zero, but that’s no excuse for just giving up and saying that since we can’t stop the problem, we might as well not do the things that might help.

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