When people compete for grants, subsidies, and other government handouts, economists see a phenomenon called rent seeking.
When people compete for grants, subsidies, and other government handouts, economists see a phenomenon called rent seeking. The "rent" is the money being offered. When government gives money away, the people who compete for it incur costs—sometimes more money will be spent in total trying to compete for a grant than the amount of money being given away. These costs are rarely considered in policymaking, but perhaps they should be. One major cost of rent seeking, as Prof. Michael Munger points out, may be that the government awards money to organizations with the best lobbyists, not necessarily those providing the best services.
In this video Prof. Bruce Yandle explains the idea behind the Bootleggers and Baptists theory of government regulation.
We all know bootleggers and Baptists rarely see eye to eye. Ask one group and its members will probably tell you they despise the other group. Yet, when it comes to government regulation, both bootleggers and Baptists work together. Prof. Bruce Yandle explains that this happens because both groups actually desire the same outcome. The Baptists benefit, for example, from laws that make the sale of alcoholic beverages illegal on Sundays. Bootleggers benefit because now they can sell alcohol on Sundays. Groups who would never meet together but both desire the same outcome can often be found upon closer examination of many government regulations. Prof. Yandle demonstrates how environmental regulations fit into the bootlegger-Baptist theory. What are some other "bootleggers" and "Baptists" who benefit from government regulations? Let us know in the comments.