Review of Industrial Organization 16: 427–431, 2000.
Money for Nothing: Politicians, Rent Extraction, and Political Extortion.FredS.
McChesney. Cambridge, Mass.: Harvard University Press, 1997, xi + 216 pages,
In 1987 Fred McChesney published an article in the Journal of Legal Studies in
which he sought to ﬁll in the missing pieces of George Stigler’s (1971) “economic
theory of regulation”. Stigler’s paper had suggested that in some cases regulated
industries might be willing collaborators in their own regulation, as through the
political process they created and protected a cartel that guaranteed industry proﬁts.
McChesney suggested an alternative scenario: rather than politicians accepting
money (campaign contributions, honoraria, and so on) in return for creating fa-
vorable conditions for industry, the same politicians could threaten industry with
harm unless money were supplied, in which case the harm disappeared. Some
simple microeconomic analysis was presented to show what rents might be avail-
able for extraction under such a strategy, and some anecdotes were presented for
This book takes that article as its “foundation”, building upon that foundation
with more detailed microeconomic analysis, more anecdotes, and two empirical
exercises (one original to the book) purporting to support the existence of this rent-
extraction strategy by politicians. Unfortunately, this is a book strictly for those
who are already members of the congregation. Those who accept the premise of
what McChesney calls “the Virginia school of political economy” that all govern-
ment actions are for sale, that any positive theories of regulation or taxation are
naive exercises because all regulation and taxation are simply redistributions made
by politicians to the highest bidder, will ﬁnd their beliefs conﬁrmed. However,
those who are curious as to whether such a premise describes the world accurately,
whether this body of theory is superior to others as a matter of social scientiﬁc
investigation, will be disappointed. The theory itself is cobbled together carelessly
and is unpersuasive, while the empirical exercises are of a quality that would be
returned to a ﬁrst-year graduate student for substantial revisions. All in all, this is
a poor piece of work.
Consider ﬁrst the theory itself. McChesney posits that “a politician ...may
...makehisdemandsonprivateparties, not by promising beneﬁts, but by threaten-