Black Hole Tariffs and Endogenous Policy Theory: Political Economy in General Equilibrium

This book provides a special interest theory of protection, developing a full general equilibrium theory that explains the distribution of income with goods markets, factor markets, lobbies, political parties, and voters all pursuing their self interest. This probabilistic voting model shows how well-organized groups can use seemingly irrational government policies to exploit poorly organized groups. Given rational predatory behavior between these groups, protection or any other redistributive policy that improves the chances of election of a party increases political efficiency. This can create an economic black hole, conditions under which an entire economy can disappear into lobbying. Paradoxically, the tariff rates accompanying an economic black hole are very low. The economic waste is confined to lobbying costs. The book contains both theoretical and empirical work explaining protection in the United States (1900-1988) and levels of protection in about sixty foreign countries in the 1980s.

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The most formally sophisticated model of its kind:

This is a fine book, easily the most formally sophisticated model of its kind. The idea is to formalize political economy, getting beyond stale ideological discussions, and instead plop down an entire political subsystem in the middle of a standard (if simplistic) general equilibrium economic model. Groups allocate resources between economic and political activity; parties position themselves to gather financial support as well as votes. The economic and political consequences of their mutual... more info

loved it:

I never would have been able to understand this kind of technology if i didn't read the book!