Companion to the Political Economy of Rent Seeking
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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.
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Chapter 12: Rents and international trade policy

Arye L. Hillman


Whether the presence of politically created rents is acknowledged has distinguished two approaches to the study of international trade policy. A model that excludes politically created rents proposes that: (1) governments’ efficiency objectives give rise to protectionist policies; (2) social welfare can be increased by a government providing subsidies to firms competing in international markets; (3) tariffs are used by governments to improve the terms of trade, with the population benefitting through distribution of tariff revenue; and (4) trade liberalization takes place to reduce or eliminate the trade restrictions that were imposed to improve the terms of trade. A second model that includes politically created rents offers quite different interpretations of governments’ trade policy decisions. The latter rent-inclusive model is consistent with revealed political preference for using trade policy to provide private benefits and with the political insignificance of tariff revenue. McCloskey (1998) has proposed that we view economists as storytellers. Given the evidence that governments’ trade policy decisions create rents for private benefit, we can ask why the story without rents has been told.

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