The welfare costs of rent-seeking: a methodologically individualist and subjectivist revision

Gordon Tullock is acknowledged for being the first to recognize the true costs of rent-seeking as including not only the Harberger triangle hut also the Tullock rectangle. This rectangle does not constitute merely a lossless transfer of wealth, hut it causes a misallocation of resources as rent-seekers invest resources in lobbying. However, a close reading of Tullock s writings shows that his arguments are formulated in a holistic fashion, speaking of what is efficient or inefficient for society. Bent seeking is inefficient because it reduces societal welfare. But according to a methodologically individualist and subjectivist economics, such a claim is invalid. We must distinguish between positive economic fact and normative moral philosophy. We call for a reconstruction of utility and welfare economics based on methodological individualism and subjectivism with implications for the theories of monopoly and competition: practices which Neoclassical perfect competition theory considers to he evidence of rent seeking should instead he deemed as indications of genuine competition. Political economy should he concerned with ascertaining which institutions will best enable individuals to pursue their individually subjective ends - or else economists should he explicit about their normative preferences and political philosophies.