The Tullock paradox: why is there so little lobbying?

by on April 4, 2006 at 7:35 am in Political Science | Permalink

Tim Harford writes:

…the economist Thomas Stratmann has estimated that just $192,000 of contributions from the American sugar industry in 1985 made the difference between winning and losing a crucial House vote that delivered more than $5 billion of subsidies over the five subsequent years.

That is one example of many.  Our government controls trillions, but lobbying expenditures are a small fraction of gdp.  One explanation, which Tim cites, is that our government is not for sale.  This is true for most major programs, such as social security.  Voters have the dominant say. 

But how about the details of smaller policies?  Why aren’t the benefits of those redistributions exhausted by lobbying expenditures?  My preferred explanation involves competition.  In principle, more than one coalition is capable of winning a political game.  If your winning coalition demands too high a bribe from interest groups, you will be undercut by another coalition able to deliver the policy for less.  Government is not a unitary agent.  This also helps explain, by the way, why democracy is stable rather than wracked by intransitive cycling.  If you just write down different voting profiles, it appears any winning coalition can be outdone by another (at least for a multi-dimensional policy space).  But if you add differential costs of organization to the mix, and make collecting the votes part of an explicit but imperfectly contestable market, you are much closer to getting a unique or near-unique outcome. 

Ideas in this post are drawn from a paper by Roger Congleton and Bob Tollison.  Here is a recent paper on the same topic.

Tim Worstall April 4, 2006 at 8:33 am

One answer is simply that politicians are cheap. Another that they are too dumb to
work out what the market will bear.

But then those are bo0th simply cheap shots.

Grant Gould April 4, 2006 at 8:51 am

I think there’s one other important factor to be kept in mind, which is that the government is basically zero-sum. For each dollar one interest group wrings out of the government, another interest group will go begging.

Since those lobbying dollars are non-refundable (imagine if lobbyists worked on commission…), in an efficient market for government dollars we would expect successful participants to pay in far less than they eventually get out; they are balanced by all the unsuccessful interests that they beat out for those dollars.

In fact, with risk-averse participants, we should expect the easily-moved parts of the the government budget to be larger than the total lobbying money expended, and far larger than the total lobbying money expended by the winners.

Of course, there’s still a big gap remaining. But it should not surprise us that individual winners in the lobbying lottery, like big sugar, paid less for their tickets than they received in prize money.

goodness_of_fit April 4, 2006 at 9:50 am

Isn’t what you (and these guys) saying basically what the Chicago school positive political theory types have been saying for years, Becker wrote “A Theory of Competition among Pressure Groups for Political Influence” in 1983. Within Poli-Sci at least I think the Chicago view has found more favor than the Virginia school view.

Thug April 4, 2006 at 10:07 am

I think the key here is the possibility of exposure, scandal, and subsequent ruin both for the offending politician and for the interests of the constituency that stepped too far over the lobbying/bribery line.

Look at the recent Abramoff scandal. This was, in monetary terms, relatively small potatoes. But it has already ruined a half dozen careers, including the one of the former, all-powerful, house majority leader.

Now imagine if such shenanigans were exposed for the billions that go to farm subsidies or (as sort of happened) the huge profits to be made from energy deregulation.

The bottom line is that while there are billions to be potentially made from lobbying, there is also the risk of losing billions if your group became publicly reviled and achieved persona non-grata in the subsidy game for years (decades?) to come.

The currently dominant approach to lobbying expenditures may in fact be conservative–I’m not enough of a quant wiz to know–but I think that it’s less conservative than your analysis would suggest, since you’re underweighting the risks of unsuccessfully overagressive lobbying.

jn April 4, 2006 at 10:41 am

The Becker paper simply assumes away the mechanics of cycling (which after all predates the Virginia school — cf. Arrow). Tullock suggests how cycling might not be so debilitating as to disallow approximately Beckerian results. There has been more formal work on this as well by Schofield and others.

S. Mukand April 4, 2006 at 12:26 pm

This “puzzle” has been addressed in this paper by Kaplan and Chamon.

http://ist-socrates.berkeley.edu/~ekaplan/jmp_final.pdf

Joe April 4, 2006 at 1:17 pm

there’s probably a lot of squeekiness in the numbers…also there are more ways than just money to influence politicos. much of what passes as policy is the product of legislative advisory panels. take a closer look at who is on the panels, what industries they represent, what the split of the boards are…sounds sinister? i think this would be a simple undertaking for economic rigor to get the data and crunch the numbers…by these results we would be able to deduce whether or not voters have the dominant say. a good place to start is the FDA advisory panels…thanks!

dsquared April 5, 2006 at 4:04 am

[Why aren't the benefits of those redistributions exhausted by lobbying expenditures? ]

How do you know they aren’t? A production function is a pretty bad way to think about industrial production, but a reallly bad way to think about other things people spend their money on.

Pat L April 5, 2006 at 4:13 pm

I wonder if publicly-traded firms giving politicians inside information in lieu of bribes could be a small piece of the puzzle? Members of congress can’t currently be prosecuted for using the information, and there is less risk to the firm in passing information versus cash. This doesn’t explain ag of course, but maybe it could help explain why ag needs to make more effort to get what they want than some corporations seem to.

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