Managerial Economics 2nd Edition by William Boyes

Exercise 6

Rent Seeking
Rent seeking comes in several forms but is generally defined as a private entity pursuing favorable treatment from the government. Corporate welfare is a good example; ADM is practically the poster child for rent seeking at the federal level. Large corporations including Boeing, Xerox, Motorola, Dow Chemical, and General Electric have received millions in taxpayer dollars.
Recipients of subsidies have a substantial interest in protecting the flow of money to them. That leads to a great deal of lobbying by special interests. It has been estimated that at least $50 billion each year is transferred from taxpayers to business as a result of lobbying. The deals are typically sold as benefiting the local community. Virginia Governor Tim Kaine gave Dollar Tree $200,000 to enable it to expand its Chesapeake headquarters. The press release about the Dollar Tree deal went something like this: Governor Kaine Announces 100 New Jobs for Chesapeake. Similarly, Governor George Pataki of New York, a Republican, approved a $1.2 billion package of grants and tax reductions for AMD to build a microchip factory in Saratoga County. The project is supposed to create 1,200 jobs, and these jobs were touted in the press releases. Of course, not much mention was made of the fact that this implies a cost per job of $1 million apiece for New York taxpayers
What is the real purpose of government giveaways to business? Copyrigh