The Costs of Corruption
In his 2012 book, *[A Capitalism for the PeopleLuigi Zingales writes about the deep economic problems that arise when people are rewarded for who you know, or even, who you pay off, rather than what you know, or your ability to produce and sell better goods and services. , Costs of Corruption Luigi discusses broader consequences of corruption that distorts outcomes like who gets a job, what is purchased, and what attributes determine economic success? Some of the points made by Luigi include:
- There is an important distinction between government actions that are pro-market and those that are pro-business; the former encourages competition and provides better outcomes for consumers while the latter advantages incumbents. For example, tariffs benefit some companies while hurting consumers and other companies that depend upon imported inputs
- Pro-business policies are a result of, and encourage, “rent-seeking,” a term economists use to describe actions like lobbying for preferential treatment or other types of “political shenanigans” as Luigi describes it. Luigi argues that many aspects of the Green New Deal which included subsidies for particular industries represented a form of rent-seeking.
- Pro-business policies and rent-seeking erode trust in the economic system which is ultimately very corrosive. Luigi draws on his experiences growing up in Italy to offer some examples of the effects of this erosion of trust.