Tullock's "Rent Seeking" Cited in News Article
St. Paul economist and writer Edward Lotterman believes that when Congress banned the Social Security Administration from negotiating drug prices for Americans covered by the new Medicare Part D program, it was a classic example of what Professor Gordon Tullock described as "rent seeking" in his groundbreaking work in economics.
Is drug-cost bargaining sound policy?, St. Paul Pioneer Press (MN), November 16, 2006. By Edward Lotterman.
"Gordon Tullock, long a professor of law and economics at George Mason University, coined 'rent seeking' in a 1967 paper. Together with 1986 Nobel laureate James Buchanan, Tullock explored the economics of how special interest groups secure favorable treatment by government.
"Both scholars are politically conservative Libertarians. I think that both probably look askance not only at the Part D drug benefit, but also at Medicare and Social Security in general. Nevertheless, I think they would see the ban on Social Security price negotiation as a classic case of rent seeking.
"Before the drug benefit's enactment, drug companies lobbied Congress and showered millions of dollars in campaign contributions on lawmakers. There certainly was no popular demand for such a ban, and no member of Congress offered an articulate exposition of the principles behind it. It seemed to be a straightforward case of political influence-buying.
"Defenders of the ban did argue generally that allowing Social Security to bargain over drug prices for Medicare recipients would violate free-market principles. But the Veterans Affairs Department, the federal government's largest direct provider of medical care, long has practiced just such negotiations with little evidence of adverse effects."
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