The Allocation of Talent: Implications for Growth
Landmark QJE paper arguing that when a society's most talented people become rent seekers rather than entrepreneurs, growth suffers — with cross-country evidence from law versus engineering enrollments.
Summary
Published in the Quarterly Journal of Economics 106(2), May 1991 (pp. 503–530), by Kevin M. Murphy and Robert W. Vishny (University of Chicago) and Andrei Shleifer (Harvard), this is one of the most-cited papers on the growth cost of rent-seeking. Its thesis, from the abstract: a country's most talented people organize production at scale, and "When they start firms, they innovate and foster growth, but when they become rent seekers, they only redistribute wealth and reduce growth." (Quotes on this page are verified against the working-paper version, NBER WP 3530, via Harvard's DASH repository.)
The Argument
Talented people choose the occupation where their talent pays best. Which occupation that is depends on market size, diminishing returns to scale, and — critically — how much of the rent on their talent they can keep. When the reward structure favours rent extraction (bureaucracy, army, litigation, lobbying) over enterprise, talent flows there: "When they become entrepreneurs, they improve the technology in the line of business they pursue, and as a result, productivity and income grow. In contrast, when they become rent seekers, most of their private returns come from redistribution of wealth from others and not from wealth creation." The paper cites Mandarin China, Medieval Europe, and Latin American militaries as historical cases, drawing explicitly on Tullock (1967), Krueger (1974), and Baumol (1990).
The Evidence
The empirical section uses UNESCO cross-country data on college enrollments — law as a proxy for talent allocated to rent-seeking, engineering as a proxy for talent allocated to entrepreneurship — added to Barro-style growth regressions for growth of GDP per capita, 1970–1985. Countries with more engineering students grow faster; countries with more law students grow slower. The conclusion is blunt: "Lawyers are indeed bad, and engineers good, for growth."
Read the fine print, however. In the full sample the lawyer effect is "negative and basically insignificant (t = 1.2)"; the significant negative effect appears only in the reduced sample of countries with more than 10,000 college students. The authors concede the proxies are coarse: "these are the best measures of rent seeking and entrepreneurship we could find." The result is suggestive, not definitive — treat the theory as the paper's durable contribution and the regressions as illustrative.
Why It Matters for Geoism
The paper is a mainstream, non-Georgist formalization of the claim at the heart of the Georgist critique: income from capturing existing value is not neutral redistribution but a drag on growth, because it redirects effort and talent away from production. It says nothing about land or land taxation specifically; the bridge to policy — that taxing economic rent at its source lowers the payoff to rent-seeking careers — is made by later work such as Rothschild & Scheuer (2011).
See Also
- Rent-seeking drags economic growth — the outcome page this supports
- Why Is Rent-Seeking So Costly to Growth? (MSV 1993) — the companion mechanism paper
- Baumol, Entrepreneurship: Productive, Unproductive, and Destructive
- Rent-Seeking · Optimal Taxation with Rent-Seeking
Sources
- Kevin M. Murphy, Andrei Shleifer & Robert W. Vishny (1991), "The Allocation of Talent: Implications for Growth," Quarterly Journal of Economics 106(2), 503–530. DOI · open working-paper copy via Harvard DASH — used for all quotes and findings on this page (B/C-claims; quotes verified against the NBER WP 3530 text, accessed 2026-07-10).