Robert D. Tollison

Crime on the Court

This paper addresses the question, What happens to the arrest rate when the number of law enforcers increases? One implication of the analysis is that arrest statistics are a poor instrumental variable for judging the quality of law enforcement. Increasing the number of police can increase of decrease the number of arrests. An increased probability of arrest induces fewer criminal acts; hence the ambiguity. Because of this result, we apply the theory in the setting of college basketball. We find a large reduction, 34 percent, in the number of fouls committed during a basketball game when the number of referees increases from two to three. Additional empirical evidence is presented which suggests that this elastic supply of basketball crime is due to more competent officiating and cleaner play.

Free Entry and Efficient Rent-Seeking

This paper concerns rent seeking and the extent to which rents are dissipated under various circumstances. Gordon Tullock’s (1967) insight that expenditures made to capture an artificially created transfer represent a social waste suggested that the cost to the economy of monopoly and regulation is greater than the simple Harberger (1954) deadweight loss. Indeed, under Tullock’s original formulation and in the extensions of his work by Krueger (1974) and Posner (1975), rents are exactly dissipated at the social level (

An Economic Analysis of the Protestant Reformation

1 is spent to capture

Dry Holes in Economic Research

1), so that the total welfare loss from such activities is equal to the Harberger triangle plus the rectangle of monopoly profits.

Racial Integration as an Innovation: Empirical Evidence from Sports Leagues

This paper seeks to explain the initial successes and failures of Protestantism on economic grounds. It argues that the medieval Roman Catholic Church, through doctrinal manipulation, the exclusion of rivals, and various forms of price discrimination, ultimately placed members seeking the Z good “spiritual services” on the margin of defection. These monopolistic practices encouraged entry by rival firms, some of which were aligned with civil governments. The paper hypothesizes that Protestant entry was facilitated in emergent entrepreneurial societies characterized by the decline of feudalism and relatively unstable distribution of wealth and repressed in more homogeneous, rent‐seeking societies that were mostly dissipating rather than creating wealth. In these societies the Roman Church was more able to continue the practice of price discrimination. Informal tests of this proposition are conducted by considering primogeniture and urban growth as proxies for wealth stability.

Time inconsistency and fiscal policy : Empirical analysis of U.S. States, 1969-89

Between 1974 and 1996, there was a substantial increase in the emphasis on academic research in universities located in the United States and elsewhere throughout the world. This increased emphasis was, and continues to be, reflected in a variety of increased incentives for faculty to produce research, including higher salaries, reduced teaching loads, increased money for travel, on so on. Yet, as we report in this paper, during this time period the rate of uncitedness of economics papers remained constant (at 26 percent). Clearly, universities and taxpayers/supporters of universities are obtaining no enhancement of research output (in terms of citations) from the increased subsidy to faculty research. We discuss the implications of this result for the publication and organization of economic research. In particular, we discuss the fact that resources devoted to up-front screening of papers by authors and journals have risen substantially over this period, but to no avail with respect to reducing the incidence of dry holes. Copyright WWZ and Helbing & Lichtenhahn Verlag AG 2003.

Efficient rents 2 free entry and efficient rent seeking

This paper treats racial integration as an innovation in economic process in which economic entities find it advantageous to utilize potentially more productive inputs previously unavailable due to law, custom, or managerial discretion. Data on the racial integration of Major League Baseball and Atlantic Coast Conference basketball are employed to address this issue. The central question examined is which type of team integrated first—losers or winners? The results strongly support the idea that entrepreneurship trumps competitive rivalry; that is, winning teams led the process of racial integration.

Consumer Choice and the Popular Music Industry: A Test of the Superstar Theory

Abstract We offer an extensive and robust test of the time-inconsistency theory of fiscal politics. We employ data of U.S. states from 1969 to 1989, and the results of our tests indicate the variables such as legislative stability and executive term limits have strongly predictable impacts on the volatility of various measures of fiscal policy.

Quality Control in Economics

Concluding remarksIn the competition for a monopoly right in which the number of bidders is fixed, Tullock and others have found the value of the resources spent in the aggregate to capture the transfer to be sometimes less than and sometimes greater than the value of the monopoly. We think this approach to be incomplete since it leaves unanswered the question of what determines the number of individuals who will vie for the right to be the monopolist. It is unsatisfactory to imagine, for example, that the franchisor sets the number of contestants. One could then foresee that rent seeking would arise to influence the permissible number of bidders, and this merely moves the rent-seeking dissipation question one step back.Our approach has been to extend these models in two ways. First, for a given number of active rent seekers, the monopoly right is granted according to the contest model developed by Nalebuff and Stiglitz (1983). This model clearly reveals that overdissipation of monopoly rents generally occurs only when there is some fixed cost of effort — or what amounts to the same thing, when active participation requires a nonrefundable entry fee. According to the contest model of granting rents, the extent to which rents are dissipated depends positively on the number of active rent seekers.Second, since expected profit in the contest is generally negative beyond some number of contestants less then the potential number of contestants, we construct an economic model of the entry decision. To avoid Tullocks ‘paradox of the liar’ — the absence of a symmetric pure-strategy equilibrium — our potential rent seekers adopt mixed entry strategies. We show that there is a symmetric mixed-strategy zero-profit equilibrium in which each of N potential rent seekers actively engages in the rent-seeking contest with probability p. Thus, the actual number of active rent seekers is a draw from the binomial distribution with parameters N and p. For the expected number of contestants, Np, rents are exactly and fully dissipated. Over- and underdissipation of monopoly rents are possible, but only ex post.The implications of our analysis are straightforward. First, when there are no restrictions on the number of individuals who may vie for the right to capture an artificially created transfer, entry will occur, and resources will be spent up to the point where the expected net value of the transfer is zero. Such competition leads to exact dissipation of the present value of the flow of rents associated with the transfer, and in static terms, makes the social cost of the monopoly equal to the value of the Tullock trapezoid. Second, even if entry is limited, overbidding for the franchise will in general not occur, the value of the Tullock trapezoid sets an upper limit on the social cost of monopoly.The result that rents are fully dissipated depends critically on the assumption of risk neutrality. While we have not analyzed the case of risk aversion completely, several predictions about the characteristics of equilibrium appear straightforward. First, if the marginal contestant is risk averse, then setting net expected utility equal to zero implies that in the limit the monetary value of the rents will not be fully dissipated. Moreover, the extent to which rents are dissipated will be less the greater the degree of risk aversion, the smaller the value of the appropriable rents relative to initial wealth, and the higher the fixed cost of entry (see Hillman and Katz, 1984: 107). Second, the extent of rent dissipation will also depend on the assumptions made concerning the supply of rent seekers and their risk aversion distribution. For example, there may be a large enough pool of potential rent seekers with zero risk aversion that the equilibrium number of active rent seekers will all be risk neutrál. In this case all rent will be dissipated expectationally. Third, and most importantly, with risk aversion as with risk neutrality, overdissipation will not be observed ex ante.Finally, the theory of rent seeking, as exposited here and elsewhere, puts considerable pressure on the argument that monopoly promotes a transfer of wealth from consumers to owners of monopoly firms (Comanor and Smiley, 1975). As Posner (1975: 821) observed, rent seeking implies that monopoly profits are dissipated, not transferred. This argument is correct as far as it goes. Only it does not go far enough, and it would carry us well beyond the scope of this paper to present a careful analysis of the impact of rent seeking on the level and distribution of wealth. Suffice it to say here that the effect of rent seeking on the level and distribution of wealth will be a function of the mechanism used to assign rents in a society, attitudes toward risk, comparative advantages in rent seeking, and so on (Higgins and Tollison, 1984).

The rookie draft and competitive balance: The case of professional football

The superstar model predicts skewness of market outcomes and returns to artist quality. We test and confirm these predictions using a unique data set on popular music.