ECO204 Week 5 Discussion 2 Public Choice and Rent Seeking

Class,

What is the public choice idea or theory?

“Public choice analysis thus begins with the assumption that people who act in a self-interested way when making personal economic decisions are the same people who vote, run for office, or are employed in the bureaucracy” (Amacher & Pate, 2019, Ch. 14.1).  Public choice theory suggests that politicians make self-interest decisions and vote for certain legislations that fits their economic motives and make decisions that are counterproductive to all other members of society, whom of which they were voted into the position to protect (Worstall, 2017).

Explain what rent seeking is.

Rent seeking is when companies lobby for legal privileges that they can enact, like extra tariffs or charges pressed upon consumers for the companies to make more money.  An example given by Gordon Tullock describes a tire company lobbying to create tariffs to be placed onto people who do not buy American made tires (Worstall, 2017).

How can you combine the ideas of public choice and rent seeking?

Worstall states the game theory, which states, “If it is of benefit to politicians to be lobbied–which it is, this is how election campaigns are paid for, from the donations lobbied for–and it is also of value to rent seekers that privileges be granted, then we should see a constant expansion of the regulatory state as politicians can then farm ever more of the economy for those donations” (2017).

Choose one real-world example of combining public choice and rent seeking to evaluate.

Basically, it’s very easy to combine these two ideas; politicians have self-interest to be voted for, to raise the money they need donors, these donors are the rent seekers because they want favors later (legal privileges).

Resources

Amacher, R., & Pate, J. (2019). Microeconomics Principles and Policies. San Diego, California: Bridgepoint Education, Inc. Retrieved from https://content.ashford.edu

Worstall, T. (2017, August 6). One benefit of Nancy MacLean’s democracy in chains - public choice and rent seeking popularised. Forbes. Retrieved from https://www.forbes.com/sites/timworstall/2017/08/06/one-benefit-of-nancy-macleans-democracy-in-chains-public-choice-and-rent-seeking-popularised/#2764ee496aca