Problem of government handouts is more than money, it pulls producers away from their products making them inefficient.
By Donald J. Boudreaux
Business & Media Institute
1/26/2009 10:12:39 AM
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
To the Editor:
The headline of your report on Mayor Lawrence Morrissey of Rockford, Ill., spending time in Washington begging pooh-bahs there for money speaks volumes: "Wish List in Hand, Mayor Travels to Washington and Finds He's Not Alone" (Jan. 24).
Mayor Morrissey's use of his time seeking government handouts is an ideal, if unintentional, tribute to a great son of Rockford, the economist Gordon Tullock. Forty-two years ago, in one of the most important papers published in economics during the 20th century, Tullock identified the phenomenon of "rent-seeking."* Rent-seekers generate huge amounts of waste by using resources to plead for handouts. It's not so much the actual transfers from taxpayers to successful supplicants that are wasteful, Tullock showed, but the fact that the prospects of receiving these transfers prompt producers to form themselves into special-interest groups. These interest groups divert the time and resources that they, as producers, would have spent doing socially productive things – such as administering cities efficiently – into lobbying for government favors. Successful rent-seekers benefit, but the diversion of resources from productive uses into pleading and pandering at the feet of politicians makes society poorer.
* Gordon Tullock, "The Welfare Costs of Tariffs, Monopolies and Theft," Western Economics Journal, Vol. 5, 1967, pp. 224-232.
Sincerely,
Donald J. Boudreaux
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