New Orleans has a colorful political history to say the least. Remarkably, the previous mayor is the first in the city's history to go to jail for corruption. C Ray Nagin, who was in office from 2002-2010, is now federal prisoner number 32751-034. Ray Nagin was found guilty on 20 of 21 charges of fraud, bribery, false tax returns, conspiracy, and money laundering resulting from kickback schemes in cooperation with city contractors. Among his misdeeds, Nagin gave preferential contracts to city contractors who included his son's granite company in their bids for municipal work; he was sent on extravagant vacations in order for firms to secure million dollar contracts, and he also received outright bribes.
The welfare loss due to the unjust distribution of city contracts is concerning. Instead of putting together the best bids possible and therefore the best city projects as possible, crony capitalism led to those with the right connections receiving the bids. This is harmful to the taxpayers whose money isn't being used as efficiently and who will be using these public goods. However, this is not the sole loss as Tullock is clear to point out in his paper. The costs of the bribes themselves and the effort put forth by the contractors to secure the windfalls from the extravagant city contracts add significantly to the welfare cost. The plane tickets from New Orleans to Las Vegas, Hawaii, Chicago and many places in between add up, as do the luxurious meals and hotel stays. Furthermore, the efforts put forth by Nagin and the politicians around him to be in a position to receive bribes contribute to the welfare loss. The corruption and bribery under Nagin's watch led to less qualified applicants receiving city contracts and a welfare loss resulting from rent seeking, particularly harmful in Katrina's wake.
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