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Public Choice

, Volume 181, Issue 1–2, pp 127–139 | Cite as

Transitional gains and rent extraction

  • Randall G. HolcombeEmail author
Article

Abstract

Tullock (Bell J Econ 6:671–678, 1975) described a transitional gains trap in which the present value of rents is capitalized in the value of an asset required to get the rents. Owners of the assets just earn a normal rate of return on their assets, despite the inefficient policies that produced the rents. The trap was that undoing the inefficient policy would impose a transitional loss on the owners of those assets. Tullock characterized the creation of transitional gains as a mistake, but combined with McChesney’s (J Leg Stud 16(1):101–118, 1987) rent extraction framework, the creation of transitional gains can be seen as a mechanism for rent extraction, not a mistake. Tullock (Bell J Econ 6:671–678, 1975) focuses on the value of assets required to obtain rents. Sometimes investment in those assets imposes a welfare loss on the economy, but the rent-seeking literature does not acknowledge that at other times it does not. Rent-seeking is typically not as economically costly as it appears to be in much of the rent-seeking literature.

Keywords

Rent-seeking Transitional gains Rent extraction Public choice Gordon Tullock 

JEL Classification

H11 structure, scope, and performance of government L51 economics of regulation P16 political economy 

Notes

Acknowledgements

This paper was improved by helpful comments from the editor and two anonymous referees. Any shortcomings remain the responsibility of the author.

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Copyright information

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

Authors and Affiliations

  1. 1.Department of EconomicsFlorida State UniversityTallahasseeUSA

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