Sunday, November 02, 2014

Rent Seeking in a Minarchist State

Intuitively, one may assume rent seeking would be eliminated once government is deprived of the power to regulate. However, one may wonder if government could ever be completely stripped of such a power. Even in a minarchist state, one based on libertarian principles, there would still be opportunities for firms to seek certain beneficial government action. One case I have thought of was in cases of defense; as long as governments exist, their duty will be to defend their subjects. Such a duty involves paying for defense materials: arms, etc.. Hence, defense contractors will seek to have the government buy their weapons, the government only needing a certain amount of a certain type of weapon. There is also another case mentioned in this article. If a libertarian government is constantly engaged in nudging its subjects into certain behaviors (the extent of which is ultimately unclear), there would certainly be cases where a firm could seek for that nudge to be in its favor. The implication of such a realization? A government will almost always lead to rent seeking, which will always lead to the misallocation of resources. One could only hope to limit the amount of resources that are put into rent seeking by limiting what a government could actually do.

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