Luigi Zingales on the Tullock Paradox | Conversations with Tyler

Luigi Zingales on the Tullock Paradox | Conversations with Tyler


COWEN: One thing that strikes me about the
literature on corruption, and rent-seeking, and political influence is what is sometimes
here called the Tullock paradox. Gordon Tullock worked in this building, and Tullock raised
the question of how much is at stake in politics? In the US, it’s about 40 percent of GDP.
In Europe, it may be above 50 percent of GDP. Tullock was actually surprised, in a way,
relative to that, how little was spent on lobbying. For him, there’s some kind of
structural barrier story. What’s your take on the Tullock paradox? Why aren’t we even
more corrupt yet, given what percent of GDP in this country is allocated through mechanisms
of a mix of force and democratic whatever you want to call it rather than voluntary
exchange? ZINGALES: First of all, let me spend a word
to praise Gordon Tullock. Very sorry he passed away recently, and I’m even more sorry that
he wasn’t celebrated the way he deserved to be celebrated. In my view, he was an extremely
insightful economist who made the point there is not enough money in politics in 1972, if
I’m not mistaken, or ’74. COWEN: A long time ago, yeah.
ZINGALES: A long time ago, at a time where there was much less money in politics. First
of all, he got, clearly, the derivative right, because from 1972 to today, the amount of
money in politics exploded. I think he was very far‑sighted in understanding this.
The second is, in my view, the reason why we don’t see enough money is twofold. Number
one, there is ideology. You can’t really pay everybody. People will have some preferences — especially
when they’re not paid a lot — for some position. That decreases the power of
money. The most important fact is that some people
find it very easy to collect money, which are vested interests. They organize because
they’re small. This is Mancur Olson. They organize much faster, they can collect money
faster. The public at large finds it difficult to
collect money. The paradox of Tullock, the way I like to describe it, the Gordon Tullock
paradox is the following. Imagine you have some lottery tickets in which, unlike most
lotteries, which the state gets most of it, is pure, actuarially fair.
You know that you are going to buy let’s say $5 trillion that pay off, and you start
to sell the tickets. You know that by buying all the tickets, for sure you’re going to
get $5 trillion. It seems that why the collective amount of tickets doesn’t sell for $5 trillion?
That’s basically what Tullock is saying. He’s saying why, if we are purely cynical
and we try to buy all the votes, if you buy all the votes in Congress and for president,
you can get to allocate a lot of goodies. The value of the votes collectively should
be at least the value of the rents you get and all the goodies you allocate, which we
can discuss how much it is, but it’s in the order of trillions of dollars.
The point is that the public at large is not able to coordinate and beat very much for
those votes. Those votes sell cheap. Why do they sell cheap? Because the parties are not
well organized. Since the time of Gordon Tullock to today, people got more and more organized,
and so the price is going up, but there is a way to go. If we don’t do something, there
is a way to go and spend more. I think that Gordon Tullock was absolutely right.
The interesting thing is that Gordon Tullock implicitly, because the type of game he designed
for this, it’s a game in which there is a benefit for society to put some limits.
I actually enjoyed, in my book, to pick a little bit on Robert Barro, because Robert
Barro defends restrictions in basketball and baseball but not in everywhere else in the
United States. I don’t understand why in the United States
the only thing that is really noncompetitive is sports. In Europe, the only thing that
is really competitive is sports. In Italy, soccer you are the first division, second
division, you are promoted or demoted, according to performance. You don’t buy your way into
the NFL or the Major League, et cetera. Here, you buy the franchise, and once you’re
in, no matter how incompetent you are, you stay there, which is completely un‑American.

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