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Vol 21 No 9 Sept/Oct 2016

Book of the Month

Cover of Goode on Commercial Law

Goode on Commercial Law

Edited by: Ewan McKendrick
Price: £170.00

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Money for Nothing

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Fred S. McChesneyProfessor of Law and Business and Professor of Economics, Emory University's School of Law, USA

ISBN13: 9780674583306
ISBN: 0674583302
Published: June 1997
Publisher: Harvard University Press
Format: Hardback
Price: £50.95

Surveys reveal that the majority of Americans believe government is run for special interest, not public interest. The increased power of lobbyists in Washington and the excesses of campaign contributions and other favours seem to indicate a government corrupted by big private-interest groups. This gives only a partial understanding of why private interests are paying. The book argues that payments to politicians are often made not for political favour, but to avoid political disfavour as part of a system of ""rent extraction"". Politicians can legally extort from private parties payments to not expropriate private wealth. In this sense it is money for nothing, money paid in exchange for a politician's inaction. The author tests this model of wealth extraction with many examples and shows how it applies more generally to regulation.

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Part I The model: background - the economic theory of regulation; rent extraction - the theory of political extortion. Part II Demonstrations: observing extortion - the practice of rent extraction; validating the model - empirical tests of rent preservation - the durability problem. Part III Extensions: extraction and optimal taxation - excises, earmarked taxes and government user charges; costs and benefits of interest-group organization; improving the model - worthy yet unanswered questions.