AEN: Back to Buchanan: you have praised his work on cost theory.
DILORENZO: I’ve heard him say over and over again that his most important book was Cost and Choice (1969). I agree with him. This is really a classic in the Austrian literature, demonstrating that the only coherent way to understand cost is as a subjective notion. This theory is really at the root of his very best work in public finance, of which there is a lot. The Public Choice School has done a great service in reviving the old-fashioned study of political economy. But it is fundamentally based on the neoclassical model. It would be even better if it were based on the Austrian approach.
The rent-seeking idea began by focusing on the costs of lobbying for special favors, particularly protectionism. Rent-seeking was seen as a form of looting. There’s a similarity here with the classical idea that there are two ways to acquire wealth: through trade or through theft. But then the idea of rent-seeking went off the deep end. It became a synonym for any expenditure incompatible with perfect competition, and the old distinctions were lost entirely. Companies were said to be seeking rents and “wasting” resources through advertising and product development.