Political Asylum - Case Study Example

They found high social costs of monopoly in both economies, emphasizing that their social cost estimates were, in contrast to Posner, for private monopoly power. As will be argued later, the empirical magnitude of rent-seeking costs is now a matter of some controversy in the literature. There are many empirical consequences on the social expenses of rent seeking, depending on the methodology, coverage, and economy analyzed by the author. Krueger (1974) recommended that 7 percent of Indian GNP was wasted in rent seeking and 15 percent of Turkish GNP was lost because of rent seeking for import licenses.

Posner (1975) estimated that as much as 3 percent of U.S. GNP was lost because of the social costs of monopolization throughout regulation. These are clearly substantial sums of money in any economy. Cowling and Mueller (1978) consequential a guesstimate that the rent seeking and deadweight costs of private monopoly in the United States was 13 percent of gross corporate product. (Ekelund, pp 13-19) The consequenThe consequences of the different studies are summarized in table 1. In one sense, the table shows the importance of the rent-seeking insight.

No longer can the costs of tariffs, monopolies, and theft be called a trivial problem in virtually any economy. These are commonly not little numbers. Table # 1Estimates of the Costs of Rent Seeking STUDY ECONOMY YEAR RENT-SEEKING COSTS Krueger India 1964 7% GNP Krueger Turkey 1968 15% GNP (trade sector) Posner U.S. Various Years 3% GNP (regulation) Cowling U.S. 1963-66 13% GCP* and Mueller (private monopoly) Cowling U.K. 1968-69 7% GCP* and Mueller (private monopoly) Ross Kenya 1980 38% GDP (trade sector) Mohammand India 1980-81 25-40% GNP and Whalley Laband U.S. 1992 50% GNP and Sophocleus Regression- Various Various Years Up to 45% GNP Based Studies Countries * Cowling and Mueller (1978) use gross corporate product as the basis of their calculation.

This consequence suppose a labor market balance in which, for example, a lawyer's wage is an exact proxy for his chance cost as an engineer and in which the lawyer is indifferent at the margin with respect to option of occupation. Keep in mind the above point that rents are not transfers or bribes but must be expended in real assets devoted to regulatory favor seeking. Cowling and Mueller (1978) also create the major point that since a lot of rent seeking costs are unseen in business expenses, there is a bias toward underestimation in the way most studies calculate rents.

That is, observed rents will understate the true costs of rent seeking. Magee takes the analysis a step additional by seem to be at the rent-seeking costs of containing an extra lawyer in the legislature. He estimates that each additional lawyer in the U.S. Congress costs more than $1 billion. For a similar exercise, see Joseph Phillips in an appendix to Baran and Sweezy (1966), who expected the "cost" of monopoly capitalism at 56 percent of