Redistributional Externalities and the Ethics of Rent Seeking and Coasean Bargains

Abstract

Tullock identified resources invested in acquiring rents as socially wasteful. Several authors have argued that this identification is value-laden and normative, resting on interpersonal comparisons of utility, measurement of subjective opportunity costs, and presumptions concerning the legitimate scope of government and the ideal structure of property rights. This paper suggests a constructive way to assimilate this normative criticism into positive, value-free economics, using the concept of externalities developed by Buchanan and Tullock. Buchanan and Tullock argue that individuals will seek that constitution which reduces redistributional externalities. We suggest that the costs of rent seeking are a type of redistributional externality which constitutional political economists must consider in their positive study of constitutional choice. In addition, we challenge the claim that redistributional consequences of policy can be ignored because the government can always reverse its own redistribution. The endogenization of the political process by Public Choice renders this argument untenable.