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Economics has been basically a study of the interactions between
organizations, with some organizations being so small we only have
one person in them. The internal organization of the largest
hierarchies has indeed been looked at, but a good reason for
working less on these organizations is that the internal reactions
are much harder to understand. It is sensible to solve the problems
we can solve and put the others off until later. The author's basic
purpose here is to look at these larger hierarchical organizations,
and develop a scientific account of them. In Economic Hierarchies,
Organization and the Structure of Production Gordon Tullock
examines the internal functioning and organization of the
corporation. In the author's personal tradition, the book relies on
narrative analysis rather than mathematical complexity to convey
insights into the functioning of the corporation.
While income redistribution is one of the most important functions
of modern governments, the world has changed greatly since this
first edition of Economics of Income Redistribution was published
in 1983. Pension systems and medical programs are in a state of
crisis in many parts of the world and the general political mood is
shifting away from income redistribution. Economics of Income
Redistribution (2nd edition) brings this work up to date by
discussing the economic and political aspects of income
redistribution. It examines the classical moral objective of
redistribution to assist the poor, as well as income transfer for
pensions, education and intra-family gift giving.
My first serious thought about a scientific approach to politics
was in Communist China. When the Communists seized China, the
American Department of State, which was planning to recognize them,
left its entire diplomatic establishment in place. At the time, I
was a Vice Consul in Tientsin, so I found myself living under the
Communists. While the Department of State was planning on
recognizing the Communists, the Communist plans were obscure. In
any event, they weren't going to recognize us in the Consulate
General until formal relations were established between the two
governments, so I had a great deal of leisure. As a man who then
intended to spend his life as a political officer in the Department
of State, I decided to fill in this time by reading political
science. I rapidly realized, not only that the work was rather
unsatisfactory from a scientific standpoint, but also that it
didn't seem to have very much relevance to the Communist government
under which I was then living. ! I was unable to solve the problem
at the time, and after a number of vicissitudes which included
service in Hong Kong and South Korea, neither of which was really a
model of democracy, I resigned and switched over to an academic
career primarily concerned with that mixture of economics and
political science which we call Public Choice. Most of my work in
Public Choice has dealt with democratic governments.
Some time ago one of the editors (Gordon Tullock) stumbled on a
paradox in the competition for rents. He asked a previous research
assistant (William Hunter) to work out some examples and gave a
seminar on it. For reasons he cannot recall (but probably bad) he
titled his talk Efficient Rent Seeking'. As Editor of Public Choice
he was able to publish without a referee. Incidentally, The Journal
of Political Economy had turned it down on the grounds that the
economy could not be that chaotic, and hence there must be
something wrong even if the referee couldn't put his finger on it.
There followed a long series of articles, mainly in Public Choice,
in which various distinguished scholars proposed solutions to the
paradox. The editor responded by finding fault with these
solutions. In this case the editor was arguing against interest.
He, like the referee for the JPE, believed that the market works,
if not perfectly, at least very well. Nevertheless, the paradox
resisted and persisted. It was like the paradox of the liar, and
indeed in some cases did show exactly that paradox. Eventually
everyone, including the editor, grew tired of the matter and the
discussion sort of wound down, although it could not be said that
it was either solved or even abated. It also began to appear that
it had a much larger scope than just competitive rent seeking. Any
contest for wealth, privilege, or prestige in which the chances of
winning were affected by the investment of the contestants would
appear to be subject to the same problem. The sum of the
investments in equilibrium might be much less than the prize or
much more. It depended on the structure of the contest, but the
range of structures seemed to include almost all economic
competition. Clearly, from the standpoint of economics, this was a
distressing conclusion. Perhaps the whole vast structure of
economic analysis rested on faulty foundations. Speaking frankly,
neither of the editors thinks the situation is that desperate. We
feel that there is a logical solution, even if we do not know what
it is. The purpose of this volume is to attempt to get economists
to turn to the problem and, hopefully, solve the paradox. We
present here a substantial portion of the literature on the matter.
We hope that the readers will be stimulated to think about the
problem and, even more, we hope they will be able to solve it.
Duncan Black made a significant contribution to the development of
public choice theory during his lifetime. Upon his death it became
apparent that much of his scholarship and critique of economics was
never published. Formal Contributions to the Theory of Public
Choice is a collection of Duncan Black's unpublished works,
representing his continuing contribution to economics and political
science. It provides an insight into Black's intellectual endeavors
and introduces some new ideas and extensions of earlier work.
It is now twenty years since the concept of rent-seeking was first
devised by Gordon Tullock, though he was not responsible for
coining the phrase itself. His initial insight has burgeoned over
two decades into a major research program which has had an impact
not only on public choice, but also on the related disciplines of
economics, political science, and law and economics. The reach of
the insight has proved to be universal, with relevance not just for
the democracies, but also, and arguably more important, for all
forms of autocracy, irrespective of ideological com plexion. It is
not surprising, therefore, that this volume is the third edited
publication dedicated specifically to scholarship into rent-seeking
behavior. The theory of rent-seeking bridges normative and positive
analyses of state action. In its normative dimension, rent-seeking
scholarship has expanded, enlivened, in some respects turned on its
head, the traditional welfare analyses of such features of modern
economics as monopoly, externalities, public goods, and trade
protection devices. In its positive dimension, rent-seeking
contributions have provided an important analy tical perspective
from which to understand and to predict the behavior of
politicians, interest groups and bureaucrats, the media and the
academy within the political market place. This bridge between
normative and positive elements of analysis is invaluable in
facilitating an understanding of and evaluating the costs of state
activity within a consistent paradigm."
As the reader of this book probably already knows, I have devoted a
great deal of time to the topic which is, rather unfortunately,
named rent seeking. Rent seeking, the use of resources in actually
lowering total product although benefiting some minority, is,
unfortunately, a major activity of most governments. As a result of
this, I have stumbled on a puzzle. The rent-seeking activity found
in major societies is immense, but the industry devoted to
producing it is nowhere near as immense. In Washington the
rent-seeking industry is a very conspicuous part of the landscape.
On the other hand, if you consider how much money is being moved by
that industry, then it is comparatively small. The first question
that this book seeks to answer is: How do we account for the
disparity? A second problem is that almost all rent seeking is done
in what superficially appears to be an extremely inefficient way. I
recently got estimates of the net cost to the public of the farm
program and its net benefit to the farmers. The first is many times
the second. Indeed, it is not at all obvious that in the long run,
today's farmers are better off than they would be if the program
had never been implemented. Of course, in any given year,
cancelling the program would be quite painful. The first section of
this book, then, is devoted to this problem.
Some time ago one of the editors (Gordon Tullock) stumbled on a
paradox in the competition for rents. He asked a previous research
assistant (William Hunter) to work out some examples and gave a
seminar on it. For reasons he cannot recall (but probably bad) he
titled his talk Efficient Rent Seeking'. As Editor of Public Choice
he was able to publish without a referee. Incidentally, The Journal
of Political Economy had turned it down on the grounds that the
economy could not be that chaotic, and hence there must be
something wrong even if the referee couldn't put his finger on it.
There followed a long series of articles, mainly in Public Choice,
in which various distinguished scholars proposed solutions to the
paradox. The editor responded by finding fault with these
solutions. In this case the editor was arguing against interest.
He, like the referee for the JPE, believed that the market works,
if not perfectly, at least very well. Nevertheless, the paradox
resisted and persisted. It was like the paradox of the liar, and
indeed in some cases did show exactly that paradox. Eventually
everyone, including the editor, grew tired of the matter and the
discussion sort of wound down, although it could not be said that
it was either solved or even abated. It also began to appear that
it had a much larger scope than just competitive rent seeking. Any
contest for wealth, privilege, or prestige in which the chances of
winning were affected by the investment of the contestants would
appear to be subject to the same problem. The sum of the
investments in equilibrium might be much less than the prize or
much more. It depended on the structure of the contest, but the
range of structures seemed to include almost all economic
competition. Clearly, from the standpoint of economics, this was a
distressing conclusion. Perhaps the whole vast structure of
economic analysis rested on faulty foundations. Speaking frankly,
neither of the editors thinks the situation is that desperate. We
feel that there is a logical solution, even if we do not know what
it is. The purpose of this volume is to attempt to get economists
to turn to the problem and, hopefully, solve the paradox. We
present here a substantial portion of the literature on the matter.
We hope that the readers will be stimulated to think about the
problem and, even more, we hope they will be able to solve it.
While income redistribution is one of the most important functions
of modern governments, the world has changed greatly since this
first edition of Economics of Income Redistribution was published
in 1983. Pension systems and medical programs are in a state of
crisis in many parts of the world and the general political mood is
shifting away from income redistribution. Economics of Income
Redistribution (2nd edition) brings this work up to date by
discussing the economic and political aspects of income
redistribution. It examines the classical moral objective of
redistribution to assist the poor, as well as income transfer for
pensions, education and intra-family gift giving.
Duncan Black made a significant contribution to the development of
public choice theory during his lifetime. Upon his death it became
apparent that much of his scholarship and critique of economics was
never published. Formal Contributions to the Theory of Public
Choice is a collection of Duncan Black's unpublished works,
representing his continuing contribution to economics and political
science. It provides an insight into Black's intellectual endeavors
and introduces some new ideas and extensions of earlier work.
Economics has been basically a study of the interactions between
organizations, with some organizations being so small we only have
one person in them. The internal organization of the largest
hierarchies has indeed been looked at, but a good reason for
working less on these organizations is that the internal reactions
are much harder to understand. It is sensible to solve the problems
we can solve and put the others off until later. The author's basic
purpose here is to look at these larger hierarchical organizations,
and develop a scientific account of them. In Economic Hierarchies,
Organization and the Structure of Production Gordon Tullock
examines the internal functioning and organization of the
corporation. In the author's personal tradition, the book relies on
narrative analysis rather than mathematical complexity to convey
insights into the functioning of the corporation.
As the reader of this book probably already knows, I have devoted a
great deal of time to the topic which is, rather unfortunately,
named rent seeking. Rent seeking, the use of resources in actually
lowering total product although benefiting some minority, is,
unfortunately, a major activity of most governments. As a result of
this, I have stumbled on a puzzle. The rent-seeking activity found
in major societies is immense, but the industry devoted to
producing it is nowhere near as immense. In Washington the
rent-seeking industry is a very conspicuous part of the landscape.
On the other hand, if you consider how much money is being moved by
that industry, then it is comparatively small. The first question
that this book seeks to answer is: How do we account for the
disparity? A second problem is that almost all rent seeking is done
in what superficially appears to be an extremely inefficient way. I
recently got estimates of the net cost to the public of the farm
program and its net benefit to the farmers. The first is many times
the second. Indeed, it is not at all obvious that in the long run,
today's farmers are better off than they would be if the program
had never been implemented. Of course, in any given year,
cancelling the program would be quite painful. The first section of
this book, then, is devoted to this problem.
It is now twenty years since the concept of rent-seeking was first
devised by Gordon Tullock, though he was not responsible for
coining the phrase itself. His initial insight has burgeoned over
two decades into a major research program which has had an impact
not only on public choice, but also on the related disciplines of
economics, political science, and law and economics. The reach of
the insight has proved to be universal, with relevance not just for
the democracies, but also, and arguably more important, for all
forms of autocracy, irrespective of ideological com plexion. It is
not surprising, therefore, that this volume is the third edited
publication dedicated specifically to scholarship into rent-seeking
behavior. The theory of rent-seeking bridges normative and positive
analyses of state action. In its normative dimension, rent-seeking
scholarship has expanded, enlivened, in some respects turned on its
head, the traditional welfare analyses of such features of modern
economics as monopoly, externalities, public goods, and trade
protection devices. In its positive dimension, rent-seeking
contributions have provided an important analy tical perspective
from which to understand and to predict the behavior of
politicians, interest groups and bureaucrats, the media and the
academy within the political market place. This bridge between
normative and positive elements of analysis is invaluable in
facilitating an understanding of and evaluating the costs of state
activity within a consistent paradigm."
My first serious thought about a scientific approach to politics
was in Communist China. When the Communists seized China, the
American Department of State, which was planning to recognize them,
left its entire diplomatic establishment in place. At the time, I
was a Vice Consul in Tientsin, so I found myself living under the
Communists. While the Department of State was planning on
recognizing the Communists, the Communist plans were obscure. In
any event, they weren't going to recognize us in the Consulate
General until formal relations were established between the two
governments, so I had a great deal of leisure. As a man who then
intended to spend his life as a political officer in the Department
of State, I decided to fill in this time by reading political
science. I rapidly realized, not only that the work was rather
unsatisfactory from a scientific standpoint, but also that it
didn't seem to have very much relevance to the Communist government
under which I was then living. ! I was unable to solve the problem
at the time, and after a number of vicissitudes which included
service in Hong Kong and South Korea, neither of which was really a
model of democracy, I resigned and switched over to an academic
career primarily concerned with that mixture of economics and
political science which we call Public Choice. Most of my work in
Public Choice has dealt with democratic governments.
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