Dinosaur Wars: When Competition Goes Extinct
How is a competition to find dinosaur bones like lobbying the government?
Back in the 19th century, Edward Cope and Othniel Marsh competed to find dinosaur bones. What started as a healthy competition that drove them to better themselves eventually drove the two scientists to actively work against each other, even to the point of destroying dinosaur bones so that their competitor couldn’t get to them.
This type of competition, taking away opportunities from your competitors or seeking special privileges, is called “rent seeking” by economists. It’s when special interests try to get special treatment for themselves, or harder rules for their competitors, by lobbying the government. Some recent examples include government bailouts for companies like GM and CitiGroup, or direct subsidies for big agribusiness.
Dr. Matt Mitchell of the Mercatus Center at George Mason University explains how this rent seeking behavior destroys wealth, much like how unhealthy competition and dynamite destroyed priceless dinosaur bones.
Government Handouts Hurt Business Like They Hurt You (Article): Article by Matt Mitchell on the the Dinosaur Wars and rent seeking.
Dinosaur Wars (Documentary): Documentary on the “Dinosaur Wars” from PBS.
Rent Seeking (Encyclopedia entry): Concise explanation of “rent seeking” from Prof. David Henderson.
The Political Economy of the Rent-Seeking Society (Article): Anne Kreuger’s scholarly article where she coined the term, “rent seeking”.
Prof. Matt Mitchell: Ever heard of the dinosaur wars? No the term doesn’t refer to T. Rex’s duking it out with stegosaurus’. Instead it refers to a way a couple of scientists became downright nasty in their pursuit of fame, fortune and dinosaur bones. Meet Othneil Marsh and Edward Cope. These two 19th Century Paleontologist were some of the most successful and esteemed dinosaur hunters of their day. They wowed the public with their discoveries and attracted a lot of research money in the process. In the early days, their competition was beneficial to science. Each drove the other to work hard and each was quick to point out if the other had made a mistake. Over time, the feelings between them grew less and less friendly. By 1890 the competition had literally become destructive. Their teams began throwing stones at one another when digging in the same territory.
Both sides allegedly destroyed important sites with dynamite just to keep them out of the reach of the other. Burying or obliterating a still unknown number of priceless specimens in the process. This rivalry which at once pushed these men to advance science, now grown them to undermine it. Here’s where their story can teach us an economics lesson. Under what circumstances does competition of vital force for innovation and progress actually become destructive? The answer is, the competition becomes destructive when people start using fraud or force to out-compete their rivals. By literally destroying the competition’s work, an economist would say that each of these men was attempting to artificially contrive exclusivity. In other words, they were trying to get an unfair advantage.
In today’s economy big businesses rarely dynamite one another but they don’t have to because they can use force provided by the government instead. Economists refer to the profits gain from exclusivity as rents. The attempt to use government power to get exclusive benefits has been dubbed rent seeking. Rent seeking is probably the most important economic term that most people have never heard of. It’s everywhere in our economy today. Whenever big corporations and other special interests ask a government for special favors, they’re rent seeking. They do this because government can offer them a number of special privileges. Some firms like Goldman Sachs, City Group and GM have obtained the privilege of a federal bail out. Others like major agribusinesses are privileged with federal farm subsidies. Still others like major Hollywood production companies are privileged through favorable state and local tax laws.
There have now been studies of rent seeking in the economics of special privilege. These studies find that whatever it’s guise rent seeking is an enormously destructive force. It wastes resources, it slows the entrepreneurial process and it locks in inefficient technologies. Beyond this though, it’s fundamentally unfair. It allows some to succeed based not on their ability to please customers, but on their ability to work the political system. Like the dinosaur wars, rent seeking is an ugly corruption of fair competition and an impediment to progress. Click here to learn more about the destructive economic consequences of rent seeking and government favoritism.