Arnold Kling  

Can you say "rent-seeking?"

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Ed Kane writes,

TARP recipients paid out $76.7 million on lobbying and $37 million on federal campaign contributions in 2008 and (through Feb 2, 2009) received access to $295.2 billion in TARP funds. The ratio of lobbying expense to TARP receipts suggests that, during the initial stages of the crisis, financial institutions have reaped extraordinary benefits from investing in efforts to scare federal officials and to tell them how "best" to dispel crisis pressures. Following this self-interested advice has been ineffective partly because the return from expanding large firms' investments in lobbying activity has dwarfed the return they could expect to earn from diligently attending to their ordinary business of intermediating the nation's flow of savings and investment.

This is what I call the "strangled by the state" scenario. At the Kauffman Foundation, I described it as the most ambitious and gifted people fighting for a share of government money, rather than trying to develop innovations or build businesses.

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CATEGORIES: Public Choice Theory

COMMENTS (2 to date)
Methinks writes:

This is a taste of things to come. Soon most "surviving" firms will by-pass the messiness of competing for customers and use government to simply transfer the ever decreasing amount of wealth created into the coffers of their top executives.

hayekian writes:

This seems like a best case scenario.... pretty small ratio of rent-seeking/rents. Given more time we could have seen a ratio >1. I think the ratio will increase in '09... and perpetually increase until the Gov't turns off the tap.

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