Does It Make Sense To Double Count? Problems in Assessing Rent-Seeking Costs

Abstract

Identification of the welfare costs associated with rent seeking depends sensitively on the conditions that pertain to each case being considered It is dangerous to suppose that a particular rule will apply across the board. This argument is illustrated with respect to two examples. In the first example, the extent of rent-seeking costs is shown to depend on whether or not rent seekers are able to benefit from the X-inefficiency that is created by monopoly provision. In the second example, the alleged preference that external diseconomies be corrected by regulation rather than by penalty taxes is shown to be sensitive to individuals'perception of tax costs.