A Lesson in Rent-Seeking: In Two Parts

Rent-seeking is the economists’ term for the economically inefficient use of the political system by special interests to win subsidies (or favorable regulations) that help those special interests secure higher profits. Here’s how it’s worked for one group in North Carolina. In a Pulitzer Prize-winning series in 1995, the Raleigh News-Observer showed how the hog farming industry, led by one Wendell H. Murphy a former state senator whose hog farm at the time was the biggest in the nation, donated hundreds of thousands to state and federal law makers of both parties to win favorable treatment of the state’s then-growing hog industry.

The Pork PAC and individual hog producers gave candidates for the N.C. General Assembly at least $57,309 in 1993-94. Given the size of the industry, that’s a lot.

$60,000 is also a lot because state races tend to be low budget affairs. Favorable treatment came in the form of exemptions from state sale taxes for hog and poultry farms and certain exemptions for hog farms from environmental regulations. (Whatever one thinks of the efficacy of environmental regulations, one should be concerned about special exemptions doled out to favored industries.) But hog farms have their special problems, and the rapid growth of them in the 1990s drew attention to one. Hog Waste Although dated, the News Observer series on hog water describes some of the problems. The hog industry has its answer to this problem. And, of course, it involves more subsidies to the hog industry. First, in exchange for “voluntarily” switching to more environmentally friendly waste disposal systems, hog farmers will receive state subsidies. And the state is looking at the conversion of methane from hog waste into energy in a dubious scheme that involves a $2 million state subsidy.