Complete Dissipation

Here is an item I meant to blog on a while ago. In an article title “Local Governments Spend Millions Lobbying State,” the Pekin Daily Times reports that:  

Thirteen downstate bodies in 2009 together spent more than $194,000 on lobbying for an average of more than $16,000 each.

Now, $16,000 X 13 = $208,000. So, in the aggregate, these governments spent $194,000 in an attempt to gain a prize worth $208,000. 

Economists use the term “rent seeking” to refer to the expenditure of resources—time, money, and effort—in an attempt to redistribute existing wealth (which economists called a “rent”). Rent seeking is a wasteful activity. Instead of creating new wealth by finding new ways to satisfy consumer demand, people end up expending valuable resources chasing existing wealth. It is the difference between fighting over a piece of bread and baking a new loaf.  

Theory predicts and studies have confirmed that the losses associated with rent seeking vary as conditions vary (for example, it makes a difference if lobbying is subject to increasing or decreasing returns to scale). “Complete dissipation” is the term economists use to refer to a situation in which the rent seeking expenditures are equal to the entire size of the rent. In downstate Illinois, it appears that we have an unfortunate example of (nearly) complete dissipation.