Table of Contents

Companion to the Political Economy of Rent Seeking

Companion to the Political Economy of Rent Seeking

Edited by Roger D. Congleton and Arye L. Hillman

The quest for benefit from existing wealth or by seeking privileged benefit through influence over policy is known as rent seeking. Much rent seeking activity involves government and political decisions and is therefore in the domain of political economy, although it can also take place in personal relations and within firms and bureaucracies. Rent seeking, which involves the unproductive use of resources, is however primarily associated with policies that create rents as well as rent extraction or political benefit for the creators of rents. The contributions in this outstanding volume provide an accompaniment or “companion” to the literature on rent seeking and the related political economy of rent creation and extraction. The chapters, written by leading scholars in the field, demonstrate the centrality of rent-related incentives to the study of economics, politics, culture, public administration and history.

Chapter 13: Rent seeking through public finance

Michael Brooks

Subjects: economics and finance, political economy, public choice theory, politics and public policy, political economy, public choice


This chapter reviews the consequences for basic public finance theorems when revenue from various sources is a contestable rent. The basic theorems change because revenue, which is viewed in the orthodox public finance literature as a transfer that facilitates social benefit through public spending, becomes a source of social loss through the wasteful use of resources when that revenue is contestable. In a world of rent seeking, pure rent taxes seem to be a mirage. The Ramsey rule for efficient taxation need no longer apply. Basic theorems about the Pigovian externality-correcting tax and efficient user charges based on peak and off-peak demand are compromised.

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