Public Choice

, Volume 181, Issue 1–2, pp 83–100 | Cite as

Tullock and the welfare costs of corruption: there is a “political Coase Theorem”

  • Michael C. MungerEmail author


Gordon Tullock developed an approach to understanding dynamic processes of political change and policy outcomes. The key insight is the notion that political insiders have a comparative advantage—because they face lower transaction costs—in manipulating rules. The result is that political actors can collect revenues from threatening to restrict, or offering to loosen, access to valuable permissions, permits, or services. To the extent that the ability to pay for such favorable treatment is a consequence of private activities that produce greater social value, there is a “political Coase theorem”: corruption makes bad systems more efficient. But the dynamic consequences are extremely negative, because of the inability to institute reforms resulting from application of Tullock’s “transitional gains trap.”


History of economic thought Rent-seeking Corruption Economic development 



Paper prepared for special issue of Public Choice “Commemorating The 50th Anniversary of Gordon Tullock’s ‘The Welfare Costs of Tariffs, Monopolies, and Theft.’” Credit for suggestions, but no blame for shortcomings, goes to William Keech, Matthew Mitchell, David Schmidtz and David Skarbek.


  1. Acemoglu, D. (2003). Why not a political Coase theorem? Social conflict, commitment, and politics. Journal of Comparative Economics, 31, 620–652.CrossRefGoogle Scholar
  2. Becker, G. S. (1983). A theory of competition among pressure groups for political influence. Quarterly Journal of Economics, 68, 371–400.CrossRefGoogle Scholar
  3. Buchanan, J. M., & Tullock, G. (1972). The “dead hand” of monopoly. In J. E. Meade (Ed.), Theory of public choice : Political applications of economics (pp. 277–287). Ann Arbor: University of Michigan Press.Google Scholar
  4. Buchanan, J. M., & Tullock, G. (1962). The calculus of consent. Ann Arbor: University of Michigan Press.CrossRefGoogle Scholar
  5. Chowdhury, S. M., & Sheremeta, R. M. (2011). Public choice. A generalized Tullock contest. Public Choice, 147(3–4), 413–420.CrossRefGoogle Scholar
  6. Coase, R. H. (1960). The problem of social cost. Journal of Law and Economics, 3, 1–44.CrossRefGoogle Scholar
  7. Coate, S., & Morris, S. (1999). Policy persistence. American Economic Review, 89(5), 1327–1336.CrossRefGoogle Scholar
  8. DeLeon, P. (2015). Thinking about political corruption. New York: Routledge.CrossRefGoogle Scholar
  9. Dungan, J., Waytz, A., & Young, L. (2014). Corruption in the context of moral trade-offs. Journal of Interdisciplinary Economics, 26(1–2), 97–118.CrossRefGoogle Scholar
  10. Dwyer, J. (2016). Corruption in New York: A brief history. New York Times. April 19.
  11. Easterly, W. (2001). The Elusive quest for growth: Economists’ adventures and misadventures in the tropics. Cambridge, MA: MIT Press.Google Scholar
  12. Haidt, J. (2007). The new synthesis in moral psychology. Science, 316(5827), 998–1002.CrossRefGoogle Scholar
  13. Hayek, F. A. (1945). The use of knowledge in society. American Economic Review, 35, 519–530.Google Scholar
  14. Hicks, J. (1939). The foundations of welfare economics. Economic Journal, 49(196), 696–712.CrossRefGoogle Scholar
  15. Holcombe, R. (2018). The Coase theorem, applied to arkets and government. The Independent Review, 23(2), 249–266.Google Scholar
  16. Holcombe, R. (2018). Transitional gains and rent extraction. Public Choice. Scholar
  17. Johnston, M. (2005). Syndromes of corruption. New York: Cambridge University Press.CrossRefGoogle Scholar
  18. Kaldor, N. (1939). Welfare propositions in economics and interpersonal comparisons of utility. Economic Journal, 49(195), 549–552.CrossRefGoogle Scholar
  19. Kirzner, I. M. (1963). Market theory and the price system. Edited and with an Introduction by Peter J. Boettke and Frédéric Sautet (Indianapolis: Liberty Fund, 2011). February 24, 2015.Google Scholar
  20. Koopman, C., Mitchell, M., & Thierer, A. (2015). The sharing economy and consumer protection regulation, the case for policy change. The Journal of Business, Entrepreneurship & The Law, 8(2), 529–545.Google Scholar
  21. Krueger, A. (1974). The political economy of the rent-seeking society. American Economic Review, 64(3), 291–303.Google Scholar
  22. Lambsdorff, J. G. (2002). Corruption and rent seeking. Public Choice, 113(1–2), 97–125.CrossRefGoogle Scholar
  23. Le, V. H, de Haan, J. & Dietzenbacher, E. (2013). Do higher government wages reduce corruption? Evidence based on a novel dataset. CESifo Working Paper Series No. 4254. Available at SSRN:
  24. Leff, N. (1964). Economic development through bureaucratic corruption. American Behavioral Scientist, 8(3), 8–14.CrossRefGoogle Scholar
  25. Lessig, L. (2004). Free culture: How big media uses technology and the law to lock down culture and control creativity. New York: Penguin Press.Google Scholar
  26. McChesney, F. S. (1989). Regulation, taxes, and political extortion. In R. E. Meiners & B. Yandle (Eds.), Regulation and the Reagan era (pp. 223–241). New York: Holmes & Meier.Google Scholar
  27. Méon, P.-G., & Sekkat, K. (2005). Does corruption grease or sand the wheels of growth? Public Choice, 122(1/2), 69–97.CrossRefGoogle Scholar
  28. Merton, R. K. (1938). Social structure and anomie. American Sociological Review, 3(5), 672–682.CrossRefGoogle Scholar
  29. Merton, R. K. (1949). Social theory and social structure. Glencoe, IL: Free Press.Google Scholar
  30. Mises, L. (1952). Profit and loss. In L. Mises (Ed.), Planning for freedom. South Holland, Ill: Libertarian Press.Google Scholar
  31. Mises, L. (1998). Human action: A treatise on economics. Auburn, AL: LVM Institute.Google Scholar
  32. Mitchell, W., & Munger, M. C. (1993). Doing well while wntending good: Exploitation and the pPareto criterion. Journal of Theoretical Politics, 5, 34–79.CrossRefGoogle Scholar
  33. Munger, M. C. (2014). Kaldor-Hicks coercion, Coasian bargaining, and the state. In J. Martinez & S. Winer (Eds.), Coercion and social welfare in public finance: economic and political dimensions (pp. 117–135). New York: Cambridge University Press.CrossRefGoogle Scholar
  34. Munger, M. C. (2018). Tomorrow 3.0: Transaction costs and the sharing economy. New York: Cambridge University Press.CrossRefGoogle Scholar
  35. Munger, M. C. On the contingent vice of corruption. Social Philosophy and Policy (forthcoming).Google Scholar
  36. Murphy, K., Shleifer, A., & Vishny, R. (1991). The allocation of talent: Implications for growth. Quarterly Journal of Economics, 106(2), 503–530.CrossRefGoogle Scholar
  37. Murphy, K. M., Shleifer, A., & Vishny, R. W. (2009). Why is rent-seeking so costly to growth? American Economic Review, 83(2), 409–414.Google Scholar
  38. North, D. (1990). Institutions, institutional change, and economic performance. New York: Cambridge University Press.CrossRefGoogle Scholar
  39. North, D. (2005). Understanding the process of economic change. Princeton: Princeton University Press.CrossRefGoogle Scholar
  40. North, D., & Thomas, R. (1973). The rise of the western world: A new economic history. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  41. North, D., Wallis, J. J, & Weingast, B. (2009). Violence and social orders: A conceptual framework for interpreting recorded human history. New York: Cambridge University Press.CrossRefGoogle Scholar
  42. Parisi, F. (2003). Political Coase theorem. Public Choice, 115(1/2), 1–36.CrossRefGoogle Scholar
  43. Romig, R. (2017). How to steal a river, to feed an enormous building boom, India’s relentless sand miners have devastated the waterways that make life there possible. New York Times, March 1.
  44. Scitovsky, T. (1941). A note on welfare propositions in economics. Review of Economic Studies, 9(1), 77–88.CrossRefGoogle Scholar
  45. Shleifer, A., & Vishny, R. W. (1993). Corruption. Quarterly Journal of Economics, 108(3), 599–617.CrossRefGoogle Scholar
  46. Thierer, A. (2016). Permissionless innovation: The continuing case for comprehensive technological freedom. Arlington, VA: Mercatus Center.Google Scholar
  47. Tollison, R. (2012). The economic theory of rent seeking. Public Choice, 152(1/2), 73–82.CrossRefGoogle Scholar
  48. Tullock, G. (1967). The welfare costs of tariffs, monopolies, and theft. Western Economic Journal, 5(3), 224–232.Google Scholar
  49. Tullock, G. (1975). The transitional gains trap. Bell Journal of Economics, 6(2), 671–678.CrossRefGoogle Scholar
  50. Tullock, G. (1980). Efficient rent-seeking. In J. Buchanan, R. Tollison, & G. Tullock (Eds.), Towards a theory of the rent-seeking society. College Station: Texas A&M University Press.Google Scholar
  51. Tullock, G. (1987). Rent seeking. In J. Eatwell, M. Milgate, & P. Newman (Eds.), The new Palgrave: A dictionary of economics (Vol. 4, pp. 147–149). London: Macmillan Press.Google Scholar
  52. Tullock, G. (1996). Corruption theory and practice. Contemporary Economic Policy, 14(3), 6–13.CrossRefGoogle Scholar
  53. Wittman, D. (1989). Why democracies produce efficient results. Journal of Political Economy, 97(6), 1395–1424.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Duke UniversityDurhamUSA

Personalised recommendations