do too many cooks always spoil the stew an experimental analysis of rent seeking and the role of a strategic buyer laboratory methods are used to evaluate the effects of institutional arrangements and rent defending activity on rent seeking auction outcomes in part nash equilibrium predictions are a useful behavioral guide as predicted more rents are dissipated in perfectly discriminating auctions where the high bidder wins than in lotteries where relative bids determine the chance of winning also as predicted the introduction of a rent defending buyer reduces social costs nevertheless the social costs of rent seeking consistently exceed predicted levels moreover individual bidding especially by buyers deviates markedly from nash predictions

buying less but shopping more the use of nonmarket labor during a crisis households allocating time between market and non market uses should respond to income variations by adjusting the time devoted to shopping search and other home production activities in this paper we exploit high frequency household expenditure data to examine the use of changes in shopping intensity as a method of mitigating the effects of the 2002 argentine economic crisis although the total quantity and real value of goods purchased fell during the crisis consumers are found to be doing more shopping search this increase in shopping is shown to enable households to seek out lower prices and locate substitutes allowing a given level of expenditure to buy more goods the magnitude and prevalence of these effects suggest that this non market use of labor can be an important coping strategy for households during a recession

inflation and welfare in a monetary economy it is in everyone s private interest to try to get someone else to hold non interest bearing cash and reserves but someone has to hold it all so these efforts must simply cancel out all of us spend several hours per year in this effort and employ thousands of talented and highly trained people to help us these person hours are simply thrown away wasted on a task that should not have to be performed at all

finance as a driver of corporate social responsibility finance is grease to the economy therefore we assume that it may affect corporate social responsibility csr and the sustainability of economic development too this paper discusses the transmission mechanisms between finance and sustainability we find that there is no simple one to one relationship between financial development and sustainable development but there are various often indirect linkages it appears that most of the literature concentrates on the role of public shareholders when it comes to changing corporate policy and performance in a more sustainable direction however this focus neglects the potential impact of the credit channel and private equity on a firm s non financial policies and performance these very powerful mechanisms can govern business policies and practices therefore there appears to be much more scope for finance to promote socially and environmentally desirable activities and to discourage detrimental activities than has been acknowledged in the academic literature so far

competitive search equilibrium in this paper i construct an equilibrium for markets with frictions which is competitive in the sense that all agents are price takers and maximize utility subject to a set of market parameters i show that the equilibrium allocation is socially optimal i also show how the competitive search equilibrium can be achieved if employers with vacancies can advertise publicly the wages they pay

deregulation redux does mandating access to bottleneck facilities necessarily improve welfare we demonstrate that deregulation in the form of vertical separation of network components into natural monopoly and potentially competitive markets does not truly represent a lessening of regulatory burdens that is vertical separation is not synonymous with deregulation more competitors is not equivalent to more competition we assume a public interest regulator that is constrained to set a unit price that maximizes expected welfare subject to a break even constraint we show that under both symmetric and asymmetric information cases the information demands on the regulator of the vertically integrated system are no greater than those in the case of vertical separation

private equity and the public good the dominance of agency theory can reduce our collective scope to analyse private equity in all its diversity and depth we contribute to theorisation of private equity by developing a contrasting perspective that draws on a rich tradition of virtue ethics in doing so we juxtapose private equity with public good to develop points of rhetorical and analytical contrast we develop a typology differentiating various forms of private equity and focus on the take private form these takeovers are where private equity funds are used to buy all a firm s publicly listed shares take private deals reduce reporting requirements and lessen the amount of public scrutiny a firm comes under they allow greater control of a firm s assets and resources but also have effects in terms of the wider social fabric the public good and virtue ethics offer an alternative basis for theorisation of these deals this provides a needed contrast to accounts of private equity based on agency theory

a search theoretic approach to monetary economics the essential function of money is its role as a medium of exchange the authors formalize this idea using a search theoretic equilibrium model of the exchange process that captures the double coincidence of wants problem with pure barter one advantage of the framework described here is that it is very tractable the authors also show that the model can be used to addre ss some substantive issues in monetary economics including the potenti al welfare enhancing role of money the interaction between specializat ion and monetary exchange and the possibility of equilibria with multip le fiat currencies copyright 1993 by american economic association

rent seeking behaviour and its economic costs in urban land transactions in accra ghana the existing body of knowledge attributes to informal land transactions in sub saharan african cities observed problems in city neighbourhoods substantial resources often backed by donor agencies are therefore being spent in revamping bureaux and governmental bodies in a bid to solve the problems this paper examines the economic impacts of this aspect of market intervention employing insights from rent seeking theory it estimates costs brought to bear on agents by government agencies involvement in the urban land market of accra ghana the sum of these wasteful diversions of resources is found to explain a great deal of the haphazard developments that have come to characterise many neighbourhoods in the city market led regulation emerges as the needed focus of future land policy and management strategy towards this the paper calls for the removal of existing unwarranted market interventions and the reorganisation of responsible bureaux in ways that would induce them to operate efficiently

jack of all trades or a master of one specialization trade and money we consider a model of decentralized exchange where individuals choose the set of goods they produce specialization involves producing a smaller set of goods and doing it more proficiently in doing so agents reduce production costs but also reduce the ease of trading their output we derive the equilibrium degree of specialization and examine how it is affected by underlying fundamentals due to the existence of a hold up problem individuals specialize too little relative to the social optimum introducing money leads to more specialization relative to barter and increases welfare

free entry and efficient rent seeking this paper concerns rent seeking and the extent to which rents are dissipated under various circumstances gordon tullock s 1967 insight that expenditures made to capture an artificially created transfer represent a social waste suggested that the cost to the economy of monopoly and regulation is greater than the simple harberger 1954 deadweight loss indeed under tullock s original formulation and in the extensions of his work by krueger 1974 and posner 1975 rents are exactly dissipated at the social level 1 is spent to capture 1 so that the total welfare loss from such activities is equal to the harberger triangle plus the rectangle of monopoly profits

inflation output and welfare this paper studies the effects of anticipated inflation on aggregate output and welfare within a search theoretic framework we allow money holders to choose the intensities with which they search for trading partners so inflation affects the frequency of trade as well as the quantity of output produced in each trade we consider the standard pricing mechanism for search models i e ex post bargaining as well as a notion of competitive pricing if prices are bargained over the equilibrium is generically inefficient and an increase in inflation reduces buyers search intensities output and welfare if prices are posted and buyers can direct their search search intensities are increasing with inflation for low inflation rates and decreasing for high inflation rates the friedman rule achieves the first best allocation and inflation always reduces welfare even though it can have a positive effect on output for low inflation rates

incorporating policymaker costs and political competition into rent seeking games 1 introductionrent seeking in politics involves agents who lobby policymakers for potential benefits in a seminal contribution tullock 1980 modeled rent seeking as a lottery game a major weakness of tullock s game was that it lacked verisimilitude to actual rent seeking because it omitted politics the absence of politics meant that the game essentially assumed that there are no costs to the policymakers of supplying rents but as tollison 1997 and others have pointed out these costs are not zero and the politics surrounding the policy decision influence the pattern of lobbying and the rent seeking outcome in this paper we address two aspects of those politics the costs to policymakers of supplying rents and the variable intensity of political competition among a given number of rent seekers including these aspects increases the similarity of the game to actual rent seeking situations and makes clearer the incentives to rent seekers costs to supplying rents arise due to various constraints legislators must build coalitions acquire parliamentary rights maintain a positive image and service constituent interests policymakers in agencies must follow procedural rules submit to congressional oversight and budgeting pass omb reviews and so forth lower policymaker costs should increase the effectiveness of lobbying and this should attract greater lobbying efforts among rent seekers 1 increasing policymaker costs makes lobbying less effective indeed because of these costs policymakers often turn away lobbies empty handed in short policymakers have constraints that affect the policies they design and this affects lobbying expenditures dougan and snyder 1993 this paper introduces policymaker costs in monetary units such that they are comparable to the value of the rent and rent seeking expenditures political competition among rent seekers also influences the rent seeking outcome competition traditionally has been modeled by varying the number of rent seeking agents actual or potential or their relative lobbying expenditures e g posner 1975 rogerson 1982 sun and ng 1999 competition can vary however even among a given number of rent seekers and for a given profile of expenditures for example two agents may lobby a policymaker for the same unique and exclusive political good then one agent directly opposes the other and only one agent can win the good alternatively the same two agents may lobby a policymaker for two separate political goods in that case the agents oppose each other only indirectly this situation is frequent in politics as rent seeking agents compete for space on the political agenda for policymakers time and for portions of a particular government budget in this situation success by one agent does not necessarily result in failure by the other but it does lower the probability that the other agent will succeed competition is more intense in the first example even though the examples involve the same number of firms industrial organization economists have shown that a single parameter can determine incumbent firms competition in price and quantity regardless of the number of firms present 2 this paper introduces rent seeking competition analogously allowing a parameter to alter the competitiveness of the rent seeking game among a fixed number of firms we incorporate monetized policymaker costs and the political competition parameter into the success probabilities of the standard rent seeking game the resulting model is a game in which the agents simultaneous maximization of expected net returns or profits determines a nash equilibrium in their expenditures incorporating politics into the standard game makes the game more accurate because equilibrium and comparative statics depend in part on the politics of the rent seeking contest more specifically increasing political competition decreases rent seeking expenditures unless the value of the rent is sufficiently large relative to policymaker costs and dissipation rates are lower than in previous research because of policymaker costs

inflation and variety economies undergoing high inflation often experience a reduction of product variety in the marketplace existing models study how inflation affects quantity but very few have studied how inflation affects variety in a monetary model with explicit microfoundations i analyze how inflation affects variety as well as quantity i consider two pricing mechanisms bargaining and price posting with directed search i show that inflation reduces both quantity and variety under both pricing mechanisms quantitatively the model implies that the total welfare cost of 10 inflation ranges from 4 77 to 8 4 under bargaining and is 1 52 under price posting

reconsidering the common good in a business context in our contemporary post modern context it has become increasingly awkward to talk about a good that is shared by all this is particularly true in the context of mammoth multi national corporations operating in global markets nevertheless it is precisely some of these same enormous aggrandizing forces that have given rise to recent corporate scandals these in turn raise questions about ethical systems that are focused too myopically on self interest or the interest of specific groups locations or cultures the obvious traditional alternative to moral bellybutton gazing is the common good which challenges the modern business enterprise to realize non instrumental values that can only be attained in our life together the common good dictates that leadership should be judged first of all according to moral criteria rather than professional competence it helps correct the distorted prioritization of the maximization of profit in every business decision recognizing that businesses have a multitude of rights and responsibilities and the common good reminds us that the first of these is not always profit making

the economic theory of rent seeking tullock s concept of rent seeking was the first statement of a quantitative principle about the social costs of such activities as lobbying and favor seeking as such this part of tullock s legacy to modern economics is one of his most important contributions

deregulation despite transitional gains the brewers guild of cologne 1461 acemoglu and robinson in the american economic review 90 2 126 130 2000 argue that historically economic rents have been less of a barrier to regulatory reform and innovation than political rents contrary to this conclusion i argue that the important margin of distinction for factors preventing deregulation is not whether rents are economic or political but rather what alternative profit opportunities are available and how innovation has changed the entrepreneurial opportunity set using the example of medieval cologne i show that the transitional gains trap framework as developed by tullock in the bell journal of economics 6 2 671 678 1975 applies in a static environment and can successfully prevent reform over long periods of time but that neither political nor economic entrepreneurs will ignore an opportunity for increased profitability in the long run in addition the organization of the political unit to which the regulation applies can determine the persistence of said regulation

rent seeking in natural resource quota allocations this paper examines the incentives for rent seeking in the allocation of natural resource quotas to competing user groups by political bodies the political body has discretion in making the allocation and competing user groups rent seek to influence the allocation we investigate ways in which the governmental body can affect the behavior of the players by setting the ground rules for the competition a political body can affect an allocatively pareto efficient outcome by choosing an appropriate default pre rent seeking policy surprisingly an allocatively efficient default policy is unlikely to minimize social costs however winner take all default policies are likely to maximize not minimize rent seeking a competitive post allocation market reduces rent seeking but is not either itself or in combination with an efficient default policy capable of minimizing social costs however forcing winners in political redistributions to fully compensate losers both lowers the rent seeking levels relative to a potential compensation criterion and when used together with an efficient default policy is capable of obtaining the first best solution of an allocatively efficient allocation with zero rent seeking

inflation and welfare a search approach this paper extends recent findings in the search theoretic literature on monetary exchange regarding the welfare costs of inflation we present first estimates of the welfare cost of inflation using the welfare triangle methodology of bailey 1958 and lucas 2000 we then derive a money demand function from the search theoretic model of lagos and wright 2005 and we estimate it from u s data over the period 1900 2000 we show that the welfare cost of inflation predicted by the model accords with the welfare triangle measure when pricing mechanisms are such that buyers appropriate the social marginal benefit of their real balances for other mechanisms welfare triangles underestimate the true welfare cost of inflation because of a rent sharing externality we also point out other inefficiencies associated with noncompetitive pricing which matter for estimating the cost of inflation we then illustrate how endogenous participation decisions can mitigate or exacerbate the cost of inflaion and we provide calibrated examples in which a deviation from the friedman rule is optimal finally we discuss distributional effects of inflation

money in search equilibrium in competitive equilibrium and in competitive search equilibrium we compare three market structures for monetary economies bargaining search equilibrium price taking competitive equilibrium and price posting competitive search equilibrium we also extend work on the microfoundations of money by allowing a general matching technology and entry we study how equilibrium and the effects of policy depend on market structure under bargaining trade and entry are both inefficient and inflation implies first order welfare losses under price taking the friedman rule solves the first inefficiency but not the second and inflation may actually improve welfare under posting the friedman rule yields the first best and inflation implies second order welfare losses

production costs and deregulation unlike some of the existing literature our discussion implies that either 1 regulation lowers production costs and makes the gains to deregulation relatively small or 2 regulation increases production costs and makes the social and political gains to deregulation relatively greater while some may not find alternative 1 credible one thing is clear claiming that the deregulatory gains are small because regulation increases costs is not an alternative society faces

rationing and rent dissipation in the presence of heterogeneous individuals this paper discusses the implications of rationing by waiting when consumers have different time costs and personal valuations the joint distribution function of time costs and personal valuations is used to characterize market equilibrium it is argued that under certain conditions an increase in the variance of time costs will reduce the dissipation of rent furthermore it is shown that introducing a secondary market for a rationed good does not necessarily improve welfare because total surplus under rationing by waiting depends more on the variance than on the level of time costs and personal valuations the model is also used to discuss other institutions that involve rent seeking activities such as the patent system and import quotas

does legislative turnover adversely affect state expenditure policy evidence from indian state elections the effect of legislative turnover on the size and composition of government expenditures in indian states over the 1980 2000 period is examined the paper finds that excessive turnover in indian state elections results in inefficient government expenditure policy first the higher the turnover the larger the government size second excessive turnover affects the allocative efficiency of government expenditures by skewing the composition of government spending toward pure consumption and away from more productive investment expenditures third the effect of turnover on fiscal policy is not linear public consumption expenditure is convex in turnover while public investment expenditure is concave in turnover

the disinterest in deregulation in the analysis of the costs of monopoly power the usual experiment is to convert a competitive industry into a monopoly and observe the consequent change in consumer s surplus modern contributions have emphasized the deadweight cost of monopoly arnold harberger 1954 and the possibility of an associated rent seeking cost of monopoly gordon tullock 1967 the harberger cost of course refers to the lost consumer s surplus triangle the tullock cost concerns the role of competition for monopoly returns taken together and assuming that the competition for monopoly rents is perfect the total cost of monopoly power is a trapezoid the rectangle of monopoly profits plus the triangle of lost consumer s surplus richard posner 1975 in this paper we approach the monopoly problem in a different spirit we compare three states of the world competition regulation and deregulation in this setting we ask what happens if a monopoly is eliminated through deregulation our analysis suggests that because under most conditions tullock costs cannot be recouped the returns to deregulation are lower than previously thought rent seeking expenditures in the past leave the economy permanently poorer even if competition is restored to the industry in contrast the returns to preventing monopoly in the first place are relatively high in our model an insight afforded by the analysis is an explanation of the persistence of laws and regulations which appear to serve no interest in this regard the example of railroad regulation in the united states comes to mind the standard explanation for such regulation is either that voters and government decision makers are ignorant of basic economics or that a small interest group like railroad firms wins rents at the expense of uninformed or economically rational consumers of rail services who do not find it cost effective to seek deregulation we offer another and perhaps more plausible explanation for the persistence of regulation and the apathy of consumers about the costs of regulation namely the costs of such regulations are for the most part the original rent seeking expenditures that lead to the regulation in the first place and these costs are sunk abolishing so called uneconomic laws does nothing to recover these losses hence there is little political support from any quarter to return to the status quo ante in fact as we shall show such a deregulatory program can easily impose more costs than it is worth there are numerous examples of this point including tariffs and quotas of all sorts subsidies to farmers the postal monopoly organized labor s antitrust exemption the licensing of doctors and so forth the traditional explanations of these monopoly rights namely ignorance of economic common sense and special interest groups are neither sufficient nor necessary since the primary costs of these laws are rent seeking expenditures which are made prior to their passage there is simply little to be gained by changing them now gains would accrue in the form of reduced harberger costs costs would be borne in passing and implementing the deregulatory program it is not that the potential gainers from deregulation are large in number diffuse heterogeneous and face high organizational costs rather they do not exist to any degree interpreted in this light efforts by political action groups such as the right to work foundation stand to be a drain on society s resources they cannot produce anything unless they prevent further monopolization through regulation we do not of course mccormick and shughart clemson university clemson sc 29631 tollison center for the study of public choice george mason university fairfax va 22030 thanks go to james buchanan rex cottle and gordon tullock for helpful comments the usual caveat applies

inflation and productive activity in a multiple matching model of money abstract this paper investigates the relationship between money growth inflation and productive activity in a dynamic general equilibrium multiple matching framework where trade frictions are manifested by limited consumption variety productive activity and matching in the goods market are endogenized by a time allocation decision of work and search effort we find that a high degree of complementarity between participation in the labor and goods markets creates a channel by which inflation can positively influence production and output this feature arises when household preferences for consumption variety is sufficiently large and it can also lead to the multiplicity of monetary equilibria

deadweight costs and the size of government abstract we provide a model for analyzing effects of the tax system and spending programs on the determination of government spending and taxpayer welfare an improvement in the efficiency of either taxes or spending would reduce political pressure for suppressing the growth of government and thereby increase total tax revenue and spending we demonstrate the similarity of the political responses to revenue shocks spending shocks changes in tax efficiency and changes in spending program efficiency empirical analysis of oil shocks intergovernmental grants and other autonomous changes in taxes or spending indicates that cause and effect is not only from spending to tax structures

deal structuring in philanthropic venture capital investments financing instrument valuation and covenants philanthropic venture capital phvc is a financing option available for social enterprises that like traditional venture capital provides capital and value added services to portfolio organizations differently from venture capital phvc has an ethical dimension as it aims at maximizing the social return on the investment this article examines the deal structuring phase of phvc investments in terms of instrument used from equity to grant valuation and covenants included in the contractual agreement by content analyzing a set of semi structured interviews and thereafter surveying the entire population of phvc funds that are active in europe and in the united states findings indicate that the non distribution constraint holding for non profit social enterprises is an effective tool to align the interests of both investor and investee this makes the investor behaving as a steward rather than as a principal conversely while backing non profit social ventures philanthropic venture capitalists structure their deal similarly as traditional venture capital as the absence of the non distribution constraint makes such investments subject to moral hazard risk both in terms of perks and stealing and social impact focus

money and specialization in a neoclassical growth model this paper studies the links between money specialization and capital accumulation in a neoclassical growth framework for tractability the transactions role of money is introduced through a cash in advance constraint in contrast to the standard cash in advance model an individual s reliance on money balances for transactions is endogenous through the choice of specialization although the cash in advance constraint only applies to consumption the model exhibits a reverse tobin effect we conclude by discussing the implications of the model for the welfare costs of inflation

the empirical measurement of rent seeking costs this survey focuses on the efforts carried out mainly by public choice scholars to measure the social cost of rent seeking the concept introduced by gordon tullock in 1967 and coined by anne krueger in 1974 is well known and accepted by the profession but its empirical measurement has fallen behind with respect to its theoretical formulation an often criticized lack in the literature although there are good general surveys none has specifically focused on reviewing the empirical efforts made to measure the phenomenon the purpose of this paper is to provide such a survey it could be said that the rent seeking concept has been fully integrated into economic jargon it is commonly used when some agent seeks to obtain an artificial transfer usually from government and covers all the actions efforts or expenses that the agent has to carry out to obtain the prize the key issue however is the possible social waste that arises in these situations the empirical efforts to measure such waste constitute the main purpose of this survey the concept of rent seeking was introduced by tullock 1967 although the term was first coined by krueger 1974 in a paper not related to the former in a recent paper tullock himself wrote of the history of the concept and the intellectual context within which it arose tullock 2003 starting with the pioneering work by harberger 1954 several studies were conducted during the 1950s in which the calculation of the social cost of monopolies and tariffs always gave the result of very modest figures the first response to these results was made by leibenstein 1966 and his x efficiency which refers to a hypothetical loss in efficiency due to the absence of competition shortly after leibenstein s paper appeared tullock argued that the deadweight costs of monopoly and tariffs understate the true social cost because the expenditures made to capture related rents have to be included so rectangles as well as harberger s triangles have to be included in the calculations let us see this argument once more figure 1 depicts the iconic tullock graphic analysis of rent seeking it represents the demand schedule d for a monopolized good where pm is the monopoly

the economics of product variety a survey demand for variety may arise from a taste for diversity in individual consumption and or from diversity in tastes even when each consumer chooses a single variant the full degree of variety potentially demanded will not in general be supplied because scale economies even to a small degree mean that the potential welfare or revenue gain from greater variety must be balanced against the lower unit production costs with fewer variants the economics of product variety consists essentially in analysing the effect of this balance in different situations and comparing the degree of product variety for different market structures with each other and with the optimum the survey commences with the work on market structures with single product firms generalized monopolistic competition tracing modern developments in both the chamberlinian and hotelling traditions the latter has been particularly fruitful due to the expansion of the original locational ideas into virtual spaces in product characteristics the emphasis in recent work on product variety has been on multiproduct firms in both monopolistic and oligopolistic structures including strategic market preemption although most work has been in a full information context there have been advances in product variety under imperfect information either by consumers to properties of the firms products or firms as to consumers demands

are rents fully dissipated students of rent seeking have erred in focusing their attention exclusively on the analysis of competitions for exogenously specified transfers when redistributive policies are treated as endogenous choices it is clear that there are both incentives and opportunities for policymakers to design them in ways that prevent the wasteful dissipation of a large proportion of the intended transfers an analytical framework that treats policy design in this way is capable of explaining a variety of common attributes of redistributive policies that are apparent anomalies under the traditional approach to rent seeking furthermore we predict and find supporting evidence that authoritarian regimes tend to be associated with higher ratios of government revenue to total income than do democracies we attribute this tendency to the substantially greater potential for dissipative competition for revenues under democracy than under dictatorship finally available estimates of lobbying expenditures and rents transferred under the recent federal crude oil controls contradict the hypothesis that rents are fully or almost fully disspated through political competition

gordon tullock s contributions to the theory of public choice i introduction gordon tullock came to economics and political science through a circuitous route he had almost no formal training in economics beyond a one quarter course that he took as a law student at the university of chicago from henry c simons he served in the foreign service for a number of years his first publications in economics date from the mid 1950s and were on monetary economics campbell and tullock 1954 1957 tullock 1956 tullock s formal entry into academia came in 1958 when he arrived at the thomas jefferson center for studies in political economy and social philosophy part of the department of economics at the university of virginia as a postdoctoral fellow tullock s biography from this point is fairly well known 1 tullock s contributions to economics and political science span almost forty years the following discussion is offered as a modest review of tullock s contributions the presentation is not meant to be detailed or copious but simply efficient in conveying what is important in tullock s work 2 ii methodology and style before turning to tullock s work a brief word is in order about his general approach to economic analysis and his writing style in fact tullock has shown far more interest in obtaining useful results than he has in how he happened to go about obtaining them in this way he has been a methodological anarchist operating under the general maxim that in science anything goes and results count his well known papers generally rely upon simple price theoretic or spatial constructs and perhaps a little algebra and game theory where he has found a need for more formidable tools he has generally acquired them through coauthors this anything goes approach does not seem to have hampered his work he has shown a talent for getting at the essence of problems and avoiding clutter in his work moreover he has shown almost no penchant for methodological exegesis in his work with the major exception of his general insistence that rational economic man models are the best description of behavior in almost any setting on this point he has been steadfast in fact buchanan 1987 uses tullock s emphasis on the homo economicus assumption to describe tullock as a natural economist i think this is an accurate interpretation of tullock we have all known people who are naturally good at things like playing short stop or the piano and in this sense it is analogous to say that tullock has a natural inclination toward economic reasoning and behavior tullock is not a great stylist his normal routine is to dictate the first draft of his papers and work through them from there this allows him to make his points but sometimes not very eloquently or clearly 3 the real question about scientific writing style is whether it matters or not there are protagonists on either side of this issue empirical research laband and taylor 1992 suggests that style has no marginal impact on citations this result can be interpreted in various ways but perhaps the most appropriate interpretation is that researchers have not yet found the margin on which writing style matters tullock of course could interpret this differently to say that style does not matter only results matter and this is what he has been about nonetheless mccloskey lists tullock along with several other modern economists as a good writer to wit when you read any of these in economics pay attention this is as good as it gets 1987 9 this either defends tullock s writing skills or calls into question the care with which mccloskey drew up his list of economists as writers iii the calculus the calculus of consent 1962 by james m buchanan and gordon tullock is a work of astounding creativity of all the classic works in the theory of public choice this book stands out for its range and depth of contribution it is moreover a readable book

assessing the impact of management buyouts on economic efficiency plant level evidence from the united kingdom we assess the total factor productivity of 35 752 manufacturing establishments before and after management buyouts mbos mbo plants are less productive than comparable plants before the transfer of ownership they experience a substantial increase in productivity after a buyout which appears to be due to measures undertaken by new owners to reduce the labor intensity of production via outsourcing of intermediate goods and materials these findings which are pervasive across industries imply that mbos reduce agency costs and enhance economic efficiency our evidence is consistent with jovanovic and rousseau 2002 who suggest that ownership changes shift resources to more efficient uses and to better managers

efficient rents 1 rent seeking behavior in the long run we have analyzed long run behavior in rent seeking under several conditions and behavioral hypotheses the question of interest is whether or not the long run expenditures will exactly equal the value of the rents our results depend on the type of competitive response which is assumed to exist in the long run and on the r value governing the probability of winning

does increased equity ownership lead to more strategically involved boards according to jay lorsch boards will be increasingly expected to exercise more leadership even strategic leadership in the running of a firm in order to align directors to the best interest of the firm directors are increasingly required to purchase the equity of the companies on whose board they serve and in the majority of cases the minimum shareholding is 1000 shares the rationale for this is that the directors will take the perspective of real owners of the company partly based on a study by the national association of corporate directors in 1995 using behavioral economics this paper makes some counterintuitive predictions about how involved boards are likely to react to an offer for a hostile takeover by studying their reactions the paper inductively analyzes the use of equity ownership as an incentive mechanism

holdups and efficiency with search frictions a natural holdup problem arises in a market with search frictions firms have to make a range of investments before finding their employees and larger investments translate into higher wages in particular when wages are determined by ex post bargaining the equilibrium is always inefficient recognizing that capital intensive production relations have to pay higher wages firms reduce their investments this can only be prevented by removing all the bargaining power from the workers but this in turn depresses wages below their social product and creates excessive entry of firms in contrast to this benchmark we show that efficiency is achieved when firms post wages and workers can direct their search toward more attractive offers this efficiency result generalizes to an environment with imperfect information where workers only observe a few of the equilibrium wage offers we show that the underlying reason for efficiency is not wage posting per se but the ability of workers to direct their search toward more capital intensive jobs

bargaining and the value of money abstract search models of monetary exchange have typically relied on nash 1950 the bargaining problem econometrica 18 155 162 bargaining or strategic games that yield an equivalent outcome to determine the terms of trade by considering alternative axiomatic bargaining solutions in a search model with divisible money we show that the properties of the bargaining solutions do matter both qualitatively and quantitatively for questions of first degree importance in monetary economics such as i the efficiency of monetary equilibrium ii the optimality of the friedman rule and iii the welfare cost of inflation

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

licensing and nontransferable rents traditionally restrictive licensing is assumed to create monopoly profits by restricting output and therefore to produce two kinds of social costs the deadweight loss due to reduced output and the resources devoted to rent seeking however the fact that nonsalvagable resources spent on rent seeking create their own barriers to entry has not been recognized by increasing nontransferable rents licensing prevents the least costly producers from entering and thus produces a third kind of social cost while harold demsetz 1982 dismissal of the traditional notion of entry barriers is correct when assets are transferable the idea of entry barriers is still useful when assets are nontransferable as this note shows in the case of professional licensing

pricing and matching with frictions suppose that n buyers each want one unit and m sellers each have one or more units of a good sellers post prices and then buyers choose sellers in symmetric equilibrium similar sellers all post one price and buyers randomize hence more or fewer buyers may arrive than a seller can accommodate we call this frictions we solve for prices and the endogenous matching function for finite n and m and consider the limit as n and m grow the matching function displays decreasing returns but converges to constant returns we argue that the standard matching function in the literature is misspecified and discuss implications for the beveridge curve

the social cost of rent seeking first estimates omists have been unanimous in their verdict that rent seeking is socially wasteful if rational from the practitioner s perspective 1 the entire literature on rent seeking that has developed over the past twenty years has focused on a describing the process of rent seeking b describing the theoretical consequences of rent seeking and c applying the theory to examination of political behavior and political outcomes to our knowledge there have been no attempts to empirically verify quantify the alleged social waste due to rentseeking the purpose of this paper is to report our first stab efforts in this regard we make no pretense of advancing the theory of rent seeking the investigation is an empirical search for a phillips curve type of relationship between incidence of rent seeking in the u s economy and the size growth of that economy our findings based on both time series and cross sectional analysis of the u s economy verify the existence of a social cost to rentseeking our crude estimate of the impact of rent seeking suggests that rentseeking as we measure it cost the economy an additional 22 6 percent of measured gnp in 1985

interest group politics under majority rule abstract we develop a model of interest group politics in which the groups and coalitions that arise and the form of redistributive policies sought are jointly determined the model generates three key results first programs intended to reduce income inequality are more likely to involve direct payments than are programs that redistribute wealth across groups with similar incomes second nonequalizing redistribution is unlikely unless the various participants in the political process face significantly different political and economic costs of obtaining transfers third many policies that induce asymmetries among interest groups also impose significant deadweight costs stable nonequalizing redistribution will therefore tend to involve indirect and economically inefficient methods of transferring income

tariffs quotas and domestic content protection some political economy considerations in this paper we have focused our attention on the relation between the configuration of protection seeking and of rent seeking interests and the choice of the protection instruments in doing so we have abstracted from the problem of nonequivalence of tariffs and quotas recent writings on product differentiation rodriguez 1979 donnenfeld 1984 have thrown new light on this old issue it may well be that the discussion is of key importance to the understanding of industry s predilection for quantitative restraints we also failed to deal with the question on nonequivalence of restrictive measures under conditions of uncertainty finally we touched only peripherally on the interaction among state it is perhaps more realistic to regard trade barrier formation as a game among nations as in baldwin and clarke 1985 every player seeks at once to protect its import substituting industries and to promote its exports by putting up barriers and by demanding that others lower theirs this approach is more suited however to explain the severity of restraints than it is to explain the nature of restraints which is the problem at hand trade restrictions have a protective and a revenue effect in less developed countries with ineffectual internal revenue collecting systems revenue seeking governments may ally themselves with protection seeking emergent industries and institute high tariffs tariffs and quotas may coexist if the trade restriction seeking alliance includes traders voluntary export restraints the newest of the protective devices may be popular because they circumvent international treaties and short circuit cumbersome procedures associated with changes in tariffs or quotas but they also have the virtue of inviting foreign exporters to act like price setters the harm to the foreign exporters is thereby mitigated in fact exporters may be gainers hence the danger of retaliatory action on the part of foreign governments is lessened domestic content legislation is a unique device in that the same domestic factor benefits from protection and also collects the protection created revenue we show the formal identity between the south african situation in which the maximum black white worker ratio is a binding constraint and regulations requiring that a given percentage of the value of the product be domestically produced we also derive formally the maximum permissible foreign content ratio which is optimal from the point of view of the protected interests in our analysis we have said virtually nothing about the victims of protectionism a discussion of the impact of the various measures on those who bear the cost of protection would doubtless deepen our understanding of the problem we should thus consider the magnitude of the deadweight loss and of the income transfer and the concentration or dispersion of the losers last but not least we should consider the question of awareness thus the cost impact of a tariff is easier to perceive than that of a quota with the cost of a ver or of domestic import content rule the most difficult to calculate of all it may be that the principle of the hiding hand is as important to the new political economy as the benthamite principles were to the old

efficient unemployment insurance this paper constructs a tractable general equilibrium model of search with risk aversion an increase in risk aversion reduces wages unemployment and investment unemployment insurance has the opposite effect insured workers seek high wage jobs with high unemployment risk an economy with risk neutral workers achieves maximal output without any unemployment insurance but an economy with risk averse workers requires a positive level of unemployment insurance to maximize output therefore moderate unemployment insurance not only improves risk sharing but also increases output

liquidity a new monetarist perspective this essay surveys the new monetarist approach to liquidity work in this literature strives for empirical and policy relevance plus rigorous foundations questions include what is liquidity is money essential in achieving desirable outcomes which objects can or should serve in this capacity when can asset prices differ from fundamentals what are the functions of commitment and collateral in credit markets how does money interact with credit and intermediation what can and should monetary policy do the research summarized emphasizes the micro structure of frictional transactions and studies how institutions like monetary exchange credit arrangements or intermediation facilitate the exchange process

constitutional prohibitions in a rent seeking model i extend the standard rent seeking model to allow lobbying fora constitutional prohibition on wealth transfers i examinetwo issues 1 the ability of special interests withsignificant political capacity to block constitutional change and 2 the effect of adding a constitutional stage on totallobbying expenditures defeating a prohibition on wealthtransfers is a public good for rent seekers success inconstitutional politics merely allows them to lobby for wealthtransfers the resulting collective action problem for rentseekers in constitutional politics offsets the generalinterest s free rider problems reducing the probability oftransfers and expected total lobbying expenditures compared tothe traditional rent seeking contest introduction of aconstitutional stage also reverses several comparative staticsresults from the rent seeking game an increase in the numberof rent seekers or the general interest s consumers abilityto organize increase lobbying in the rent seeking game butgenerally reduce expected lobbying in the constitutionalprohibition game

efficient rents 2 free entry and efficient rent seeking in the competition for a monopoly right in which the number of bidders is fixed tullock and others have found the value of the resources spent in the aggregate to capture the transfer to be sometimes less than and sometimes greater than the value of the monopoly we think this approach to be incomplete since it leaves unanswered the question of what determines the number of individuals who will vie for the right to be the monopolist it is unsatisfactory to imagine for example that the franchisor sets the number of contestants one could then foresee that rent seeking would arise to influence the permissible number of bidders and this merely moves the rent seeking dissipation question one step back