Equal Treatment Rules and Rent Seeking: A Public Choice Approach

Abstract

Equal treatment rules (ETR) serve as low-cost-enforcement-mechanisms to curb wasteful rent-seeking contests among individual constituents of a third party. This is accomplished by vesting individual Intervention Rights (such as the right to participate in the rents granted by the third party (Sharing Right) or the right to demand the prohibition of the granting of the rents to others (Prohibition Right)) to individuals (as members of a who are equal to the rent-seekers (the Group), i.e. who (i) would derive direct utility from the Rent (if granted) the same way as the rent-seeker and (ii) are as easily able to detect and monitor the behavior of a rent-seeker as would be the rent-seeker vice versa (i.e. vis-a-vis the individual). With the exercise of such rights being less costly than rent-seeking-efforts their existence would serve as a strong impediment to such behavior: In case of a Sharing Right the benefits of effort would no longer be directly related to the respective efforts of the rent-seekers; rather, members of the Control Group could take a free ride on such efforts. In case of a Prohibition Right the rents of the members of the Comparison Group could be entirely dissipated through compensation payments to members of the Control Group threatening to invoke such rights. Both prospects would weaken the incentive to engage in rent-seeking in the first place. Interestingly, ETR as enforcement-mechanisms are particularly well suited to curb rent-seeking behavior as they are not only a low-cost-alternative to third-party-monitoring but also because they make control complete as the monitored (i.e. the members of the Comparison Group) become the monitors of their monitors (i.e. the members of the Control Group).