Corruption, Rent Seeking and Multiple Equilibria

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We look at how corruption and rent seeking can trap economies in a low growth equilibrium based in part on "Why is Rent Seeking So Costly Growth" a paper by Murphy

We look at how corruption and rent seeking can trap economies in a low growth equilibrium based in part on "Why is Rent Seeking So Costly Growth" a paper by Murphy, Shleifer and Vishny.

 

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Show 1 Answer (Answer provided by Alex Tabarrok)
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We are assuming competition in rent seeking and constant returns to scale--think of rent seekers as stealing apples from a farmer and each rent seeker takes one basket of apples. Note that the rent seeking return is independent of the producer return but the quantity of potential rent seekers is not. Nothing wrong with your assumptions either - it would be a slightly more complicated model but the conclusions we focus on wouldn't change much.

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You mentioned the creation of cartels, monopolies, tariffs and taxes, so it´s not "people" in general which can start to rent seek but rather regulatory institutions.

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You commit an association fallacy (http://en.wikipedia.org/wiki/Association_fallacy). You've allowed your dislike of Atlas Shrugged (which may itself be an imported dislike) to bleed onto your judgment of surrounding things. Be careful of this! You might disregard a valuable piece of knowledge or evidence because of your distaste for some nearby concept, reference, or belief.

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