How much SHOULD Blagojevich have asked for?
Rod Blagojevich has been caught exploiting something given to him by the Illinois legislature – his right to appoint the state’s next senator. But isn’t he just doing what economics orthodoxy says he should – making sure the position goes to whoever can create most value from it? Ronald Coase demonstrated that the seat will go to the person who values it most in any case – the only question is who has the property rights and therefore who will get paid for it? Now, Coase does exclude transaction costs from his analysis and there is certainly the potential for Blagojevich to incur a very high cost for this transaction. But in principle, selling the seat is not (economically) a sin. The doubtful aspect of what he has done is to appropriate the benefits of selling the seat to himself, instead of letting them be distributed to the media and electorate of Illinois via the campaigning process. But what I want to know is: how smart was Blagojevich? How much is a Senate seat worth and was he g...