English Seventeenth Century Colonial Expansion as a Form of Rent-Seeking

Abstract

The central purpose of this dissertation is to apply a rent-seeking analysis to seventeenth century colonial policies in England. The dissertation is an extension of the rent-seeking model which Robert Ekelund and Robert Tollison developed and applied to English domestic trade policy in Mercantilism as a Rent-Seeking Society (1981). I contrast this new perspective with historians’ traditional view of mercantilism, which emphasizes self-sufficiency and wealth accumulation. England’s colonial policy in the seventeenth century, while frequently paralleling such actions as would be inspired by traditional mercantilist ideas, were actually intended to maximize revenues through the regulation of markets, regardless of whether colonial production freed Britain from dependency on imports from other European nations. Developments in the tobacco industry show that when the paths of mercantilism and revenue maximization diverged, the crown selected a course that contradicted the tenets of mercantilism in favor of policies designed to maximize revenues. I also show that while the colonial policies were designed to capture rents from regulated markets, opportunistic behavior on the part of groups of agents within the regulated markets (as well as within the government) caused the dissipation of contrived rents. This opportunistic behavior was made possible by the crown’s inability to properly enforce market regulations. Throughout the seventeenth century, England’s colonial policies evolved to correct the enforcement problems and allow the crown to capture a greater share of the available rents. I follow the development of England’s colonial policies and analyze the effect of policy changes on the behavior economic agents attempting to capture the contrived rents for themselves. In modern society we still see many of the unintended consequences of economic regulation which troubled the English government in the seventeenth century.