David Zetland, who has occasionally posted here in the past, recently uploaded a good college lecture classroom video snippet demonstrating the Tullock Auction, which is an instrumental concept in the field of Public Choice. A Tullock auction is "all-pay" auction where all submitted bids, from both the losers and the winner, must be paid. These submitted bids are therefore a type of "sunk cost," meaning a cost which has already been incurred, cannot be recovered, and thus irrelevant to future decisions. In a Tullock Auction that allows repetitive bidding or which has certain other rules(such as a minimum bid requirement), the sunk costs often can exceed the rent being sought.

The principle of the Tullock auction applied to zero-sum competitive games bidding on artificially created transfers or rents is the essence of Gordon Tullock's 1967 paper, "The Welfare Costs of Monopolies and Tariffs." The paper introduced the term "rent-seeking"(replacing the more blunt libertarian term, "theft") and is one of the foundational papers of modern public choice. The reality, of course, is that bidding out such rent through a Tullock Auction is a "sucker's game" for all players, except for the auctioneer, who always gets a cut of the action. However, there is a sort of "prisoner's dilemma" involved which explains why players play the game, even though the outcome is pareto inefficient. And, the more competitive these games are, the more likely the increase in sunk costs, which are welfare costs. It is exactly this type of "institutional failure" which underlies the pessimism expressed in such books as Government's End. The fact that the only "winner" is the auctioneer is also an explanatory factor in such theories as the "Investment theory of party competition."

Although the likes of James Madison viewed political competition as essential to a well-functioning Republic, not all political competition is the same. In the case of Tullock Auctions, competition is hardly a counter-acting safeguard against "political ambition." Public choice lies at the heart of the flaws in "Madisonian Constitutionalism."

Although "Prisoner's Dilemmas" are often cited as the primary flaw in libertarianism, the reality is that prisoner's dilemmas sink the institution of "corporate federalism," which is what the US really is(although the National Security State threatens to morph this into "corporate nationalism"). There is a whole host of literature documenting how prisoner dilemmas can be avoided, given the right institutional frameworks and the right incentives. However, I've yet to come across any credible solution to the "public choice problem" vis a vis our corporate federalist institutions. Such futility often leads to arguing for the need of some force of personality, either a Roosevelt, a JFK, a Reagan, or an Obama, to overcome the institutional limitations. This is not only absurd, but dangerous.

Players in a Tullock Auction can try to reduce the sunk costs of competitive bidding by forming cartels. Monopoly, however(which would create the artificial rents) is not the solution to the sunk costs of competitive bidding for such rents. Restricting or "regulating" the bidding side of the Tullock auction, that is, advocating that Tullock Auctions be held without any bidding is patently absurd. The only thing "campaign-finance" laws accomplish is to perhaps change the rules of the bidding process,and further monopolize who gets to be the auctioneer, as these laws hugely increase the barrier of entry to running for office. "Joint Public-Private partnerships" is just legitimizing and formalizing politically-bargained monopoly cartels.

The only way to solve the problem of Tullock Auctions is to abolish them, that is, eliminate the incentives to put artificially created rents up for bid. But then again, Public Choice is not the only problem with Corporate Federalism. Bryan Caplan's "rationally irrational voter," that is voters who can externalize the cost of their stupidity or ignorance on the population as a whole, is an issue as well. A perfect example of this is the christian fundamentalist voter who supports the War on terror because Israel is central to biblical eschatology. Many of these fundamentalists now view america as being destroyed or heading toward socialist destruction under Obama. So then, what would be the point of American military supremacy, other than to protect or further the interests of a hellish socialist state? If socialism has already destroyed America, then what is this endless fear-mongering of "islamofascism about?" On the progressive side, the likes of Paul Krugman advocates imposing welfare costly regimes on the population, even if they admittedly don't work, to further an ideological agenda. Both are examples of not having to fully bear the costs of corporatizing the failures of collective action.