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Why Giving Away 'Free Government Money' Is So Expensive

Rent seeking.  May the best lobbyist win.

The hidden cost of giving away free government money.

Dr. Michael Munger of Duke University explains why subsidies, grants and giveaways awarded by the government have substantial hidden costs in a phenomenon called rent seeking.  The "rent" is the money being offered.  When government gives money away, the people who compete for it incur costs—sometimes more money will be spent in total trying to compete for a grant than the amount of money being given away.

The end result is that governments give money to organizations with the best lobbyists, not those that provide the best services. 


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Reader Comments (5)

STUDY: 25 Of Highest Paid CEOs Earned MORE Than Their Companies Paid In Taxes, Others Spent More On Lobbying Than Taxes

Feb 14, 2013 at 2:58 PM | Registered CommenterDailyBail
Feb 14, 2013 at 2:59 PM | Registered CommenterDailyBail
Nice one DB!

Here is a bit of rent seeking on steroids...

Duplicate science: ‘funding agencies may have awarded millions and possibly billions of dollars to scientists’ for duplicate studies



Scientists may have received millions in duplicate funding

Virginia Tech scientists use text-mining software to find cases of duplicate funding

Big Data computation at the Virginia Bioinformatics Institute at Virginia Tech reveals that over the past two decades funding agencies may have awarded millions and possibly billions of dollars to scientists who submitted the same grant request multiple times — and accepted duplicate funding.

An analysis led by Harold R. Garner, a professor at Virginia Tech, not only indicates that millions in funding may have been granted and used inappropriately, it points to techniques to uncover existing instances of duplicate funding and ways to prevent it in the future. The analysis was presented in the comment section of this week’s Nature.

Submitting applications with identical or highly similar specific aims, goals, objectives, and hypotheses is allowed; however, accepting duplicate funding for the same project is not.

To estimate the extent of double-funding, Garner and his team, including programmer Lauren McIver, systematically compared 858,717 funded grant and contract summaries using text-similarity (text mining) software followed up by manual review.

These summaries were downloaded from public websites in the U.S. for the National Institutes of Health, the National Science Foundation, the Department of Energy, the Department of Defense, and Susan G. Komen for the Cure.
Feb 14, 2013 at 5:21 PM | Unregistered Commenterjohn

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