Tyler Cowen: evaluation

Transcript context

…Right. As I understand the Tullock paradox, it’s that essentially the amount of lobbying should approach the overall amount of rent, right? That is the amount that everyone expends, trying to capture whatever rents there are, should go up to that level, and the paradox is, why doesn’t it? One is, that can be a institutionally established equilibrium, that is in the Tullock model, there’s no institutions. Whereas, we have a very substantial separation of powers that tends to lock in the status quo and reduce therefore the incentives for investing in lobbying. You also have severe limits on the political agenda which again means there’s only so many things that you cannot debate simultaneously. That creates a very substantial protection for the status quo. In that sense, if you’re given that a huge amount of lobbying is designed simply to keep political actors from doing anything. From simply having them take a walk and not on challenge the existing status quo, both institutions and the institutional factor of limited agendas. A limited agenda space would suggest that they don’t need to invest all that energy and at least protecting their existing rents, it would all go into expanding the ones they don’t have. Let me play devil’s advocate for a moment and try to defend crony capitalism. You look at the last 50 years and you ask yourself, “What are the two greatest growth miracles that have been seen on planet Earth?” Maybe the two greatest ever. It seems plausible candidates would be one, China and two, South Korea. And they’re about the most crony capitalistic societies you could imagine. If someone says, “Well, there’s two kinds of crony capitalism. Under one kind, the incentives are for the cronies to invest in infrastructure and human capital and then it does just fine. And then there’s other kinds of crony capitalism that stifle investment in education and infrastructure, but maybe the key is education and infrastructure and we just need a better crony capitalism of the sort, that say, South Korea and to some extent China have had. ” What’s your reaction? Well, so first of all, the politics of rent in the economics or in operations we think very differently whether you’re at the outer edge of growth like the United States or Germany or Britain, and very different if you’re in a developing country… That is developing countries, first of all, have a lot of catch up growth that they can do, and if they… They’re not since they have a potential for 10%, 11%, 12% growth. If some of that, substantial amount of that, gets filtered off into payoffs and lobbying or whatever, that’s not a big deal. They’ve got, in some sense, more room to do that. Also there’s some political science that suggest, at least at that level of development, some level of cronyism might actually facilitate growth in a way that it wouldn’t necessarily in an advanced economy. I wouldn’t assume that you can look at the two sides as being parallel in that sense.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.