the public choice of superior sanctions this paper analyzes the public choice of specific forms of sanctions current sanctions are essentially quantity constraints q sanctions which are like quotas in that they might bestow benefits on certain special interest groups in the target country revenue sanctions r sanctions may be able to recapture such benefits in the form of sender government revenue which could either compensate for the costs of sanctions to the sending country or finance other sanction enhancing activities aimed at the target country hence r sanctions may be superior to q sanctions in general or on the basis of target efficiency however public choice analysis suggests that q sanctions will generally be chosen over r sanctions by democratic countries

political influence motives and the choice between tariffs and quotas abstract tariffs and quotas are not symmetric under a variety of circumstances this paper pursues the implications of one such circumstance domestic market power for the political choice of protectionist instrument in the context of a political support maximization model tariffs dominate quotas in the political model in the absence of revenue seeking motives in the presence of revenue seeking ambiguity arises but limits can be placed on the range of tariff or quota levels also some welfare implications emerge

the relative restrictiveness of tariffs and quotas a reinterpretation from a rent seeking perspective international trade theorists have conventionally argued that a tariff is a less inefficient method of restricting imports than quotas as peter kenen writes tariffs are better instruments than most other trade controls 1 the purpose of this short article is to develop two fundamental points first contrary to the common presumption government limitations on imports will be more restrictive under a tariff system than a quota system that is to say fewer cars will be imported from japan under a system of import tariffs than quotas or what amounts to the same thing voluntary restraints second the relative efficiency of quotas and tariffs cannot be fully settled by way of the apriori arguments used in the past however we might still reasonably conjecture that tariffs will be more inefficient at least as measured by the extent of the deadweight loss than quotas these conclusions unfold from a rent seeking perspective

why voluntary export restraints are voluntary the paper presents an analysis of the effect upon an oligopolistic equilibrium of introducing a voluntary export restraint ver upon an importing firm a ver set at the free trade level of imports is shown to raise the profits of all firms within the industry the result follows as the imposition of a ver upon a free trade nash price competition forces the domestic firm to become an industry price leader the ver raises industry prices by facilitating collusion and lowers consumer welfare pourquoi les restrictions volontaires d 1 exportation sont volontaires ce memoire presente une analyse des effets de l introduction de restrictions volontaires a l exportation rve sur une entreprise qui importe dans un monde en equilibre oligopolistique on montre que l introduction de rve approximant le niveau des importations en regime de libre echange devrait augmenter les profits de toutes les entreprises dans l industrie cela decoule du fait que l imposition de rve sur un univers de concurrence par les prix a la nash en regime de libre echange force l entreprise domestique a devenir le leader en prix l introduction de rve augmente le niveau des prix de l industrie en facilitant la collusion et de ce fait reduit le niveau de bien etre des consomrnateurs

why democracies produce efficient results by applying the standard tools of microeconomic analysis i argue that democratic markets work as well as economic markets in particular i show that previous work has greatly exaggerated the existence of principal agent and informational problems in electoral markets and has drawn incorrect conclusions

redistribution policy and the expansion of the public sector abstract during the first part of this century life cycle and insurance type considerations seem to have dominated redistribution policy in particular when we look at the consequences for the expansion of public spending by contrast during recent decades fragmented horizontal redistributions between various minority groups have probably been the most important mechanisms the self interest of different groups of the electorate seems to have provided the most powerful motive behind these various policies although welfare altruism and what in this paper are called considerations of consequential externalities have probably been important motives behind redistribution in favor of the poor

protection lobbying and market structure abstract we look at a model of lobbying by oligopolistic industry where firms allocate resources between lobbying and internal cost reducing activities we ask the following questions i if firms differ with respect to comparative advantage in lobbying what is the equilibrium allocation of resources between lobbying and cost reducing activities ii can lobbying opportunities reverse the profitability ranking among firms iii under what condition is the conventional wisdom that highly concentrated industries tend to obtain more protection valid the answers depend on various measures of comparative advantage in lobbying and on the demand curve

political economy of public policies insights from distortions to agricultural and food markets the agricultural and food sector is an ideal case for investigating the political economy of public policies many of the policy developments in this sector since the 1950s have been sudden and transformational while others have been gradual but persistent this paper reviews and synthesizes the literature on trends and fluctuations in market distortions and the political economy explanations that have been advanced based on a rich global data set covering a half century of evidence on commodities countries and policy instruments the paper identifies hypotheses that have been explored in the literature on the extent of market distortions and the conditions under which reform may be feasible

price and quantity controls as facilitating devices abstract this letter examines three cases in which a regulation imposed on one of two duopolists can increase the profit levels of both firms the regulations examined include a price floor an output quota and a sales tax

the endogenous public choice theorist public choice theory has effectively explored defects in collective action and political processes however little attention has been given to the fact that any recommendations as to how to improve the situation can only be realized on the basis of precisely those defective institutions what turns up here can be identified as a problem of self reference normative contributions by buchanan and hayek may serve as an example in order to clear up the seemingly paradoxical situation endogenization of the public choice theorist within an extended theory is suggested a straight forward extension is briefly outlined

cultural institutions and value formation on the art market a rent seeking approach the formation of value in the artistic market can be specifically affected by the behavior of cultural institutions acting on it as monopolistic quality certifiers the rent maximizing strategy limits quantities to sub optimum levels and keeps prices and costs higher this can be worsened by institutional rent seeking the establishment s strategies cannot always be matched through public policies because this can result in an increase of monopoly social losses and of the establishment s lobbying efforts

structural change and the macroeconomic effects of oil shocks empirical evidence from the united states and japan abstract this paper investigates whether the usa and japan have become better insulated from oil price disturbances due to more favorable structural conditions new production technologies allowing greater energy substitution the development of energy commodity markets reduced energy intensity of production more market oriented energy policies and so on we decompose the influences of oil shocks on real gnp growth and inflation movements in the context of a simultaneous equation model where identification is partly achieved by restricting the long run dynamics we find that oil shocks accounted for a greatly reduced fraction of real gnp growth and inflation variance in both countries primarily because of superior insulation characteristics rather than reduced importance of oil disturbances our estimates suggest that a similar percentage oil price hike would have exerted about one quarter the contractionary effect on real gnp and upward push in inflation in the 1980s compared with the previous two decades jel e31 e32 f30

incremental protection and efficient political choice between tariffs and quotas this paper offers a new political economy explanation for the increasing use in recent years of quotas instead of or in combination with tariffs as a form of trade protection we show that under domestic monopoly the comparative efficiency of tariffs and quotas in achieving political objectives will vary depending on the nature of the mark et and the level of protection at high levels of protection quotas can become more politically efficient than tariffs we also show that at low levels of protection a price equivalent quota may not exist

a public choice approach to international organization the purpose of this paper has been to develop a positive theory of international organization which can supplement the conventional normative theory used as a positive theory the conventional approach draws much of its plausibility from the fact that it relies on the reasons given by the decision makers and reported in the media and on the lofty objections stated in the charters of international agencies the public choice approach by its very nature is precluded from accepting such evidence in some respects it must appear dismal and perhaps cynical it is a positive theory which tries to explain but just as the conventional normative theory tends also to be used as a positive theory our positive theory is likely to have normative implications as well it does not imply that international organization is generally undesirable but it can be used to emphasize the advantages of decentralized policy making and to warn against a naive internationalism which welcomes international agreements for their own sake regardless of what is being agreed upon international organization can be and is abused and the cause is not an occasional lack of virtue among politicians but a systematic built in tendency toward collusion at the expense of the citizens such collusion is not only undesirable in itself there is also the danger that it discredits and crowds out unambiguously desirable forms of international cooperation agreements to remove non market obstacles to market interdependence in the field of international trade and capital movements

protectionist policies as the regulation of international industry the political feasibility of protectionist policies that regulate international industry derives from the absence of overt collusion among domestic import competing producers the regulation of international industry cannot be explicit since governments would thereby be perceived to be approving or instigating international collusion hence voluntary export restraints have been popularly presented with a focus on the difficulties confronted by domestic import competing producers and a de emphasis on the mutual gains to domestic and foreign producers from monitoring by a foreign government of a restrictive export cartel arrangement similarly trigger price mechanisms have popularly been explained in terms of the need for anti dumping measures to preserve fair competition likewise the involuntary export tax derived in the first instance from an administratively validated but as demonstrated by kalt s econometric analysis contentious complaint of unfair foreign competition voluntary export restraints trigger price mechanisms and involuntary export taxes are however protectionist devices the beneficiaries of which can transcend national jurisdictions and which have in common the characteristic that the gains to domestic industry interests derive from the regulation of foreign competitors

domestic politics foreign interests and international trade policy reply this paper incorporates the foreign interest in the determination of a country s international trade policy into a model of political competition between candidates contesting elective office we envisage foreign and domestic producer interests as expressing political support for a candidate via campaign contributions and candidates as making trade policy pronouncements to maximize political support from producer interests tariffs are divisive but vers are consistent with conciliatory policy positions yielding mutual gain to foreign and domestic interests no candidate has an interest in formulating a trade policy position using a tariff if a ver is a policy option protection in the developed countries has in recent years often taken the form of bilaterally negotiated voluntary export restraints vers rather than the more traditional unilaterally imposed import restrictions the use of voluntary export restraints has been paralleled by interest in the theoretical literature the effects of vers have been compared with tariffs and quotas and vers have been examined in a political economy framework with a view to identifying the gainers and losers from this form of restric

trade restrictions as facilitating practices abstract the effect of quantitative restrictions in oligopolistic markets is shown to depend on whether imports are substitutes or complements for domestic products in the former case they have profound effects even when set at free trade levels because they impede the ability of the foreign firm to compete in the domestic market thereby acting to facilitate collusion and raise prices and profits for this reason tariffs and quotas are fundamentally non equivalent with substitute goods when goods are complements a voluntary export restriction ver at the free trade level has no effect and tariffs and quotas are equivalent

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

the rhetoric and reality of redistribution it is customary when giving a presidential address to begin by remarking on how happy you feel i have an even stronger reason for being happy than most presidents it will at long last permit me to break into the southern economic journal up to this point referees of that august institution have always rejected everything that i sent them finally however i am privileged to put an unrefereed paper in the journal and hence do not have to worry about this one being rejected the audience may feel that although it is nice for me it is hard on the journal but under the sacred traditions of the southern economic association the editors and referees can do nothing about it the blame if there is any has to be laid on me and not on the management of the journal in a way the fact that i will not face referees is important because in this paper i propose to violate a number of implicit taboos in the discussion of income redistribution indeed i propose to argue that most of the current discussion of income redistribution is drastically defective this will not only include rawls it will include what most members of the economic profession normally say on the subject and presumably what the potential referees of this paper would have thought let me very briefly survey the existing economic as opposed to the philosophic literature on the redistribution of income firstly a good many economists have said simply that economics can say nothing about the subject because somebody gains and somebody loses but we can t say whether this is a good or a bad thing with our apparatus hochman and rodgers 9 have started another tradition of dealing with income redistribution in which the government is seen as simply organizing what is essentially a voluntary transfer from the better off american citizens to the less well off american citizens why the government should be used as an instrumentality for this kind of transfer was interestingly enough first explained by milton friedman 6 191 92 such redistribution has the interesting characteristic that it does not actually involve redistribution because the people who make the gift are maximizing their own utility and hence are better off it is a case in which human preferences are so arranged that a given dollar of income benefits two people a full dollar s worth the donor gains a dollar from expending money at its best use to him i e making a gift to the poor and the poor gain the dollar in a somewhat metaphysical sense it can be said here

the simple macroeconomics of an oil dependent economy abstract this paper constructs and analyzes a simple macrodynamic model of a small economy that is completely dependent upon opec for oil imports the impact and dynamic behavior of wages prices output and exchange rates is analyzed under several alternative scenarios initially it is assumed that oil is denominated in dollars and the consequences of an increase in oil prices are investigated under a system of free floating in later sections the effects of this disturbance are re examined under various kinds of managed float systems

endogeneous protection factor returns and resource allocation we consider a heckscher ohlin samuelson trade model with two lobbies representing the interests of factor owners and two political parties the lobbies contribute resources to politics equating their returns to political and economic activity at the margin while the parties maximize their probability of election trading off general voter dissatisfaction with protection against the electioneering resources that favorable policies attract from the lobbies the equilibrium level of protection of a factor and its expected rate of return increase with its relative endowment if this relative endowment is high low then the factor will be better worse off than under free trade but at intermediate factor endowment ratios both factors will be worse off under parameter changes making lobbies more sensitive to the commodity price the lobbies contribute more resources to politics and can both be worse off even though the parties are proposing lower trade distortions

input price shocks and the slowdown in economic growth the case of u k manufacturing this paper provides a theoretical and empirical analysis of the effects of input price shocks on economic growth with a focus on united kingdom manufacturing in the 1970s the theoretical model predicts a discrete decline in output and productivity after an input price rise and a longer run slowdown in productivity growth real wage growth and capital accumulation these features characterize the united kingdom and most other oecd economies after 1973 the empirical results confirm the important role of input prices in recent u k adjustment but also point to an important role for other supply and demand factors two types of explanations have been offered for the sharp deterioration in u k economic performance in the past decade focusing respectively on demand and supply factors a standard keynesian view holds that macroeconomic demand management has been either too expansionary or too contractionary and that rising unemployment and falling output reflect the burden of anti inflationary policies an alternative view holds that various supply shocks are the main source of the poor output performance in this interpretation higher raw material prices particularly oil competition from the newly industrializing countries nics and perhaps an independent decline in productivity growth all have lowered output growth and raised unemployment

the growth of competitive governments consumers are indifferent about the provenance of the goods and services they consume given their information income and preferences they choose from the lowest price source with price defined to include transaction and deadweight costs there are many supply sources families charitable and humanitarian organizations cooperatives business enterprises and governments these compete with each other competitive success is determined by comparative advantage which in turn depends not only on differential economies of scale and other standard factors but also on the differential capacity to control free riding and to reduce the deadweight burdens of the sums that have to be levied to pay for the goods and services demanded

measuring the energy input substitution and output effects of energy price changes and the implications for the environment abstract previous studies of decomposition of factor inputs have limited their analysis on the estimation of substitution and output effects however this paper develops a two step approach to estimate the substitution and output effects of changes in energy demand resulting from changes in prices and further examines the implications of these effects on co2 emissions using european industrial dataset over the period 1995 2007 in our empirical estimations instead of relying only on isur model like previous studies we introduced a multilevel model which is a more befitting model to our data our analysis covers industry as a whole and for different sector types the primary results emerged from our analysis suggest a strong evidence using the multilevel model generally our results show that production inputs are substitutable we find the substitution and output effects to be negatively related to co2 emissions however the substitution effects dominate from policy perspectives our results suggest that output adjustments may not play a significant role in reducing emissions we find the overall effects of changes in energy demand to be moderate then we argue that increment in energy taxes should be complemented by cleaner factor substitution and sustainable growth to achieve a desirable carbon reduction

political instability in africa a rent seeking approach the foregoing analysis developed the paradigm of self interest motivated revolutionary activities in effect the construct presented differs from the by product theory developed by tullock only in its specific modeling of government created rents as the engine which drives the violent political behavior the empirical test of the positive relationship between rent creation by the government and the amount of destabilizing political activity yields strong support for the structuring of politically destabilizing activities as rent seeking in nature it is the authors hope that further empirical investigation and a more general and rigorous modeling of revolution as a rent seeking activity will become an important part of the literature in public choice

risk averse rent seekers and the social cost of monopoly power there is now quite general recognition that the social cost of monopoly power encompasses the resources expended by individuals seeking to become the beneficiaries of monopoly rents however since the activity of rent seeking is generally not observable direct estimates of resources expended in quests to acquire monopoly power are usually impossible to come by 1 as a consequence the indirect approach of taking the observed value of monopoly rents as indicative of the unobserved value of the resources expended in rent seeking is quite generally adopted in approaches to evaluation of the social cost of such activity

economic impact of oil price shocks on the turkish economy in the coming decades a dynamic cge analysis as a small open economy turkey depends on both imported oil and natural gas importing almost two thirds of its primary energy demand this paper analyzes the economic effects of oil price shocks for turkey as a small open oil and gas importing country to analyze the potential long term effects of oil price shocks on macroeconomic variables of interest including gdp consumer price inflation indirect tax revenues trade balance and carbon emissions we developed turgem d a dynamic multisectoral general equilibrium model for the turkish economy using turgem d we analyzed the impact of oil price shocks under three distinct scenarios reference high and low oil prices the simulation results show that these oil prices have very significant effects on macro indicators and carbon emissions in the turkish economy

endogenous lobby formation and endogenous protection a long run model of trade policy determination this paper provides a theory of lobby formation within a framework in which trade policy is determined through political contributions under certain conditions free trade turns out to be an equilibrium outcome either when the government has a high affinity for political contributions or when it cares a great deal about social welfare moreover greater inequality in asset distribution results in a greater number of lobbies and in most cases more protection for each of these lobbies furthermore industries with higher levels of capital stock fewer capitalists more inelastic demand and smaller geographical dispersion are the ones that get organized

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

combining rent seeking and public choice theory in the analysis of tariffs versus quotas economists continuing criticisms of protectionism make a valuable contribution to the general interest element of the forces which operate to keep propensities to protect somewhat in check mckenzie rightly warns however that proposals by economists for giving protection in more efficient forms run the danger of increasing the total supply of protection thus we agree that serious consideration should be given to the political economy responses which may be induced before one advocates ways of doing more efficiently what one believes should not be done in the first place it does not follow however that all such policies will have net negative unanticipated consequences in the case of tariffs versus quotas we do not believe that we have yet sufficient knowledge of all of the relevant political economy considerations to predict about the full effects of legislation which allowed trade protection to only take the form of tariffs we are doubtful however that such a measure would increase the total quantity of protection through the channels outlined by mckenzie we believe that the same type of basic public choice analysis of the individual incentives to lobby which suggests that consumer taxpayers will not force the political process to operate so as to maximize aggregate economic efficiency with respect to the level of protection also suggests that the net lobbying for quotas is likely to be higher on average than the net lobbying for tariffs political effectiveness and ability to overcome free riding on the part of tariff revenue seekers is likely to be low at the margin furthermore issues of visibility and institutional structure are likely to lessen the ability of anti protection forces to lobby against quotas placed within a broader framework public choice and rent seeking theory is consistent with the empirical evidence that where quotas are used protection is high

energy capital substitution wage flexibility and aggregate output supply abstract this paper analyzes the relationship between factor substitution labor market conditions and aggregate output supply in order to study the transmission mechanism of energy price change to the rest of the economy it shows that the energy capital complementarity vs substitutability issue may turn out to be crucial in shaping the direction of the adjustment of aggregate output supply following energy price changes how crucial it is it is shown to depend on the beliefs of firms regarding the stock of capital on the degree to which labor markets clear and on the wage elasticity of labor supply some empirical evidence is presented about the relationship between energy price changes and output supply

endogenous choice of trade policy instruments abstract recently developed theories of endogenous trade policy formation have attempted to explain tariffs as the result of economic interest seeking by individuals or groups this note demonstrates that tariffs will not emerge as a policy choice if income is redistributed solely through trade policy induced factor price changes a production tax cum subsidy will be adopted as both gainers and losers are better off than with a tariff

transitional politics emerging incentive based instruments in environmental regulation abstract this paper proposes a positive theory of environmental instrument choice we study a democratic society that seeks to lower the level of pollution from industrial sources to a pre specified target the target can be implemented by one of three instruments s uniform emission standards p tradeable permits and t emission taxes the conflict of interest between special interests representing polluters and the electorate is resolved by an elected politician we characterize when each of the three policy instruments is chosen in political equilibrium and show that the transition observed in many countries from s to either p or t can be understood as a natural consequence of increasingly ambitious environmental targets

regional free trade and social integration this paper analyzes recent free trade arrangements from a positive political economy perspective in contrast to most other literature which fails to take into account geographical factors it is argued here that proximity and transportation costs play an important role in trade arrangements another important also largely neglected factor is the degree of social cohesion in terms of labor standards among potential trading partners a political support maximizing government will consider these factors when balancing political support from free traders and protectionists

using threshold models to explain international relations the outcome of political opposition or revolution is a public good which suggests that free riding will diminish the effectiveness of these forms of collective action the private gains from contributing to collective goals are increased however if individuals place some value on ideological conformity or group identity nevertheless some external stimulus is often needed to set in motion a tendency toward social motivation that is strong enough to outweigh the free rider incentive this paper investigates the extent to which international pressure and demonstration effects can serve to signal support for the objectives of domestic groups in a target country and thereby mobilize collective action in pursuit of their goals it is of interest to know not only the extent to which inherent barriers to effective collective action are overcome by outside support but also to show how foreign economic policy can have an impact on political processes in the target country even when that policy itself has minimal economic effects

service induced campaign contributions and the electoral equilibrium candidates for office are modeled as promising services such as support for legislation and intervention in the bureaucracy to interest groups in exchange for campaign contributions an electoral equilibrium is characterized in which candidates choose service contribution offers and interest groups choose whether to contribute the model provides several explanations of congressional incumbents success in over 90 percent of their reelection contests a recognition advantage a high personal valuation of the office a lower cost of providing services and policy alignment with high demand interest groups the model yields predictions that are consistent with empirical findings on the relation between campaign contributions and election outcomes

tariffs subsidies and welfare with endogenous policy abstract it is a well established proposition of trade theory that in the absence of directly trade related distortions or policy goals subsidies are superior to tariffs for achieving any economic or non economic objective this paper shows that once the endogeneity of the distortion or non economic objective is allowed for the welfare ranking of various policies can be reversed the particular model analyzed is one where the level of non economic objectives that have to be fulfilled itself depends on the policy tools considered to fulfill them with this arises from the public good nature of tariffs compared to subsidies