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Rent Seeking and the Presence of Existing Distortions

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  • Alex Robson

Abstract

When market distortions already exist, producers may attempt to surpress or encourage the establishment of new distortions in hitherto undistorted markets, and may have a strong incentive to appeal to the language of second best to further their private interests. In these situations, the total amount of resources spent on trying to encourage or discourage intervention in an undistorted market can exceed the sum of the partial equilibrium Harberger (1964) “triangle” and Tullock (1967) “rectangle” measures of welfare loss. This paper uses a simple example to illustrate these points

Suggested Citation

  • Alex Robson, 2005. "Rent Seeking and the Presence of Existing Distortions," ANU Working Papers in Economics and Econometrics 2005-448, Australian National University, College of Business and Economics, School of Economics.
    • Handle: RePEc:acb:cbeeco:2005-448
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    File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp448.pdf
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    References listed on IDEAS

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    1. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 24(1), pages 11-32.
    2. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    3. Arnold Harberger, 1964. "Taxation, Resource Allocation, and Welfare," NBER Chapters, in: The Role of Direct and Indirect Taxes in the Federal Reserve System, pages 25-80, National Bureau of Economic Research, Inc.
    4. Harberger, Arnold C, 1971. "Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay," Journal of Economic Literature, American Economic Association, vol. 9(3), pages 785-797, September.
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    Cited by:

    1. Ron Bird & Harry Liem & Susan Thorp, 2014. "Infrastructure: Real Assets and Real Returns," European Financial Management, European Financial Management Association, vol. 20(4), pages 802-824, September.

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