Are rents fully dissipated?

Conclusion

Students of rent seeking have erred in focusing their attention exclusively on the analysis of competitions for exogenously specified transfers. When redistributive policies are treated as endogenous choices, it is clear that there are both incentives and opportunities for policymakers to design them in ways that prevent the wasteful dissipation of a large proportion of the intended transfers. An analytical framework that treats policy design in this way is capable of explaining a variety of common attributes of redistributive policies that are apparent anomalies under the traditional approach to rent seeking. Furthermore, we predict, and find supporting evidence, that authoritarian regimes tend to be associated with higher ratios of government revenue to total income than do democracies. We attribute this tendency to the substantially greater potential for dissipative competition for revenues under democracy than under dictatorship. Finally, available estimates of lobbying expenditures and rents transferred under the recent federal crude oil controls contradict the hypothesis that rents are fully or almost fully disspated through political competition.