Another guest post from Jim Roumasset:
The diagram in Paul Krugman's NYTimes piece provides a good starting point. The rents in the diagram are appropriable by either taxes or by auctioning permits. Since Feldstein counts the rents as costs, he is thought to be worse than Glenn Beck, at least regarding the analysis of Waxman-Markey. But does anyone believe that Martin Feldstein doesn't know the difference between excess burden and rents? It's odd that trade-economist Krugman has forgotten Anne Krueger's famous AER article on rent-seeking. Those rents are up for grabs. As much as economists may recommend appropriating the permit rents for revenue-recycling via auction, the political system has its own objectives. In the polar extreme, the rents are entirely dissipated by competitive rent-seeking -- both the Harberger Triangle and the Krueger Rectangle are costs in that case.
