Gordon Tullock: A Birthday Appreciation

In the last few years, several economists who should have won the Nobel Prize have passed away. Armen Alchian (2013). William Baumol (2017). Harold Demsetz (2019). The most egregious omission, in some economists’ opinion, is Gordon Tullock, who was born today in 1922 in Rockford, Illinois and who passed away on November 3, 2014.

It has been said that your career as an economist was not complete until you had been insulted by Gordon Tullock. I checked that off my list at the 2007 Public Choice Society meeting, where I and the College of Charleston’s Peter Calcagno sat with Prof. Tullock during dinner. He asked us why South America had been split the way that it was between the Portuguese and Spanish, and asked if we could explain it. He then went on to say that we are clearly not very smart if we couldn’t figure it out. At the time, I don’t recall Professor Tullock having been able to offer a very good answer of his own–but that’s something I’m willing to overlook given his record of fundamental contributions to the analysis of politics using basic economic theory. 

That Tullock never won the Nobel Prize is something of a minor scandal, and the story I’ve heard is that he effectively disqualified himself by remarking once that there were more great economists in the state of Virginia than in all of Sweden. Tullock’s assessment was perhaps justified: he was one of the intellectual leaders of the school of thought that came to be known as Virginia political economy. The movement started at the University of Virginia under the direction of James Buchanan, who co-authored The Calculus of Consent: Logical Foundations of Constitutional Democracy with Tullock in 1962. Tullock was the founding editor of the journal they launched. Originally, it was called Papers in Non-Market Decision Making but eventually became Public Choice. After a falling-out with the University’s administration that saw Tullock depart, Buchanan took his talents to UCLA for one year, then to Virginia Tech, and finally to upstart George Mason University in Fairfax, Virginia. George Mason was his academic home when he won the Nobel Prize in 1986, a prize somewhat conspicuous for the fact that he did not share it with Tullock.

Every year, Tullock was still considered one of the favorites for the prize. He had been passed over for his contribution to the development of public choice, but his path-breaking research on what came to be known as the theory of rent-seeking deserves the prize in its own right. Tullock’s 1968 article “The Welfare Costs of Tariffs, Monopolies, and Theft” paved the way for a new understanding of how resources are used in political processes. In 1974, the economist Anne Krueger would coin the term rent-seeking to describe spending in pursuit of a fixed pie. Their insight is insufficiently recognized in public and popular discussions of the political process even today. Lost consumer surplus–the reduction of output to a point where the marginal benefit is greater than the marginal cost, meaning that there are unexploited gains from trade–is not the only cost of tariffs, monopolies, and theft. The resources invested in getting the policies are wasted, as well.

Tullock was an example of a scholar who did not need an economics degree or even much economics training in order to be a great economist. He had a law degree from the University of Chicago and only took a single economics course. He spent some time working in the foreign service and studying China and the Far East, and then he made his way into academia. In addition to his time at the University of Virginia, Virginia Tech, and George Mason, he spent time at Rice University, the University of South Carolina, and the University of Arizona – which was for a long time the intellectual home of the Nobel laureate Vernon Smith.

The transitional gains trap was another one of Tullock’s important contributions. Tullock argued that the value of an inefficient public policy will be capitalized into the price of an asset; therefore, people will fight to keep inefficient policies even though they are earning normal market returns. Think about the home mortgage interest deduction. The expected value of future tax saving is reflected in home prices: the expected tax savings increases demand for housing and raises the price. My taxes are lower every year because I am deducting the interest I am paying on my mortgage, but I paid for those benefits when I paid a higher price for my house than I would have paid in the absence of the deduction.

Most economists think preferential tax treatment for housing is inefficient and wasteful, and if we had a magic policy wand we could wave, we would eliminate the tax privilege for housing and just cut rates across the board. The problem, of course, is that getting rid of the tax deduction for owner-occupied housing would reduce the value of my owner-occupied house, and I therefore have a pretty strong incentive to oppose it. After all, couldn’t I have both the lower tax rates and the mortgage interest deduction?

Tullock is worth reading for the simplicity of his assumptions and the profoundness of his conclusions. Like other scholars in the public choice tradition, he began with a simple assumption that people seek to maximize their well-being as measured by income. Furthermore, his dedication to thinking at the margin led to profound and at times depressing conclusions. For the person seeking to construct an ideal theory of how society should operate, Tullock offers little comfort. His work contributes directly to what we need to know about constitutional design if we are to have a society in which people get rich by producing and trading rather than by expropriating and redistributing.

Gordon Tullock was a scholar with a first-rate mind, an offbeat sense of humor, and a scholarly record that made him a Distinguished Fellow of the American Economic Association and that should have won him a Nobel Prize. Like his collaborator James M. Buchanan, he focused on fundamental problems and wrote for the ages. Long after many influential economists have been relegated to footnotes or forgotten, I believe people will still be reading and citing Tullock’s work, and not as historical curiosities, either. They will be reading and citing the work of a scholar who made timeless contributions to how we understand the world. He may be gone, but I suspect Gordon Tullock will never be forgotten.

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