Monday, July 05, 2010

Rent-Seeking

A classic example of rent-seeking. Because the police can "make money" by distorting their efforts to focus more than is appropriate on marijuana busts. As the Wall Street Journal reported.

In private markets you can only make money if you produce something other people value.

But in the presence of artificial rents like this drug enforcement subsidy, the link between "make money" and "produce something of value" is broken. It is an artificial rent. And the resources devoted to seeking the rent, to the extent that such resources are taken away from other useful purposes (preventing property crimes, protecting citizens) are wasted.

Rent-seeking isn't really about the rent, which is a transfer. The cost of rent-seeking is the wasted resources devoted to capturing the rent.

Here's the bizarre thing to me. You know who IS producing something of value? THE FOLKS WHO GROW AND SELL MARIJUANA! Yikes!

(Nod to Angry Alex)

2 comments:

Dirty Davey said...

Yeah. And if growing in the US were legal, that would take one big chunk out of the revenue stream of Mexican organized crime, and would quiet things down along the border.

(The other big chunk of business we gave them by cracking down on the sale of Sudafed--large-scale meth production went south of the border.)

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