A model of political corruption

Lessig takes on the model of lobbying as “legislative subsidy” developed by political scientist Richard Hall and economist Alan Deardorff as an alternative to the naive lobbying-as-bribe model. Legislators come to Washington passionate about several issues. Quickly, though, they come to depend on the economy of influence for help in advancing an agenda. They need the policy expertise, connections, public-relations machine, and all the rest that lobbyists can offer. Since this legislative subsidy is not uniformly available, the people’s representatives find themselves devoting more of their time to those aspects of their agenda that moneyed interests also support. No one is bribed, but the political process is corrupted.

That is from Matt Yglesias.


This is a plausible model of rent seeking

I always found it difficult to believe that most politicians abandoned their core values merely for a bribe that is only a small proportion of their campaign finances. Rather, they must accumulate many such donations. To do this, they gather moneyed interests which are generally in alignment with their objectives. For example, Barney Frank isn't generally considered a bankers best friend, but if he can make a deal with the devil to provide more loans for affordable housing, then its win-win.

It always amazed me why there were such large donations from groups that you would think were the natural enemies of certain politicians.

Another theory, perhaps consistent with this one, is the purchase of access. Yes, politicians gain from access to pre-packaged talking points and marketing campaigns, but the monied interests gain from having their tribal chants written into legislation. I think amendments to legislation are where you really see the marginal impact of lobbying efforts to strengthen or weaken legislation. The original bill is a threat to the monied interests, and the amendment is the quid pro quo.

This proceeds nicely to a competitive model of rent seeking. With donors limited to certain dollar amounts of hard donations, the trick is to get the most bang from access, soft dollars, and schmoozing. Social events are like the ASSA job meetings.

I admit, I never considered the posh dinners and cocktail circuit as a form of increasing ones standard of living. It was plain as day.

So maybe the Occupy Wall Street crowd needs to take a bath, put on tuxedos, and take Congressmen out to the Chart House.

'I always found it difficult to believe that most politicians abandoned their core values merely for a bribe that is only a small proportion of their campaign finances.'

And yet, no one seems to recognize the value of discrete blackmail in a surveillance society as pervasive's as the one that exists in today's U.S., the first police state built on the pursuit of profit by most of the people collecting and selling the data. Like a certain former CIA contractor who created a major software company whose database products are well distributed throughout the American economy, a man who said 'The privacy you're concerned about is largely an illusion.' A comment he can have confidence in, having been a major implementer of the very systems used to destroy privacy.

Further, most people don't realize that there is a major difference between money and power - politicians are interested in power. Of course, politicians, like any cross section of our society, can be marked by venality and thus bribed. But to acquire and keep power is something other than a simple monetary transaction - and all politicians share only one true core value, the pursuit of power, so as to be able to exercise it, and attempt to retain it.

What Occupy Wall Street needs to do is ditch incumbents and schmoozers. Replace them with politicians who are curious, passionate, and yet not single-issue fixated as to need lobbyists to get something done on that issue fast. If they want a model of such a Congressman, I know of a guy.

Comments for this post are closed

@prior approval

I'm sorry, but vagueries elude me. Which CIA contractor and which software are you talking about?

If its such a grave threat to our privacy, why be subtle in your insinuations?

I believe he's referring to Larry Ellison of Oracle.

Comments for this post are closed

Comments for this post are closed

Comments for this post are closed

Politicians and government officials are usually more savvy than to take direct bribes. Their tactics are much more subtle, but cronyism is another form of corruption that should not be discounted.

Consider what just happened in a federal court in Texas. A Dallas business owner was involved in a civil dispute and paid millions of dollars to lawyers, and when he objected to their fees, they had a “friendly” judge seize all of his property, without any notice or hearing, and essentially ordered him to be an involuntary servant to the lawyers. The business owner has been under this "servant" order for 10 months and is prohibited from owning any possessions, prohibited from working, etc... Most of his civil right have been suspended.

http://lawinjustice.com has details about this disturbing case.

Comments for this post are closed

Comments for this post are closed

Corruption exists, and it is bad. No one disputes this.

However, "influence" does not equal "corruption." Why is lobbying always assumed to be bad? A diverse bunch of people and organizations using their expertise and resources to try to shape the political process sounds like an important part of a healthy representative government to me. Not all of them are lobbying for a greenhouse gas factory that runs on baby seals.

'Corruption exists, and it is bad. No one disputes this.'

Well, OK.

'Why is lobbying always assumed to be bad?'
Mainly because in the K Street version, to quote someone from a related field of endeavor, no lobbyist would even get out of bed for less than $10,000.

The essential connection between corruption and lobbying should be quite plain from that perspective. Lobbying is a business, and the business is influence. But it is the business part that comes first on K Street - those rents don't pay themselves, you know. Nor do the lunches, the conferences, the think tanks, the astroturfing, the well placed PR releases, etc.

Comments for this post are closed

How do you define corruption?

Comments for this post are closed

Comments for this post are closed

Let's say you have a profitable business that is profitable because it is fulfilling a utility unmet by competitors. This company will have a lot of money to leverage politicians to keep the industry open or to close it off. Voters need to be able to tell the difference.

Comments for this post are closed

It's amazing that someone like Tyler that claims to be a public choice scholar ignores the ultimate cause of the lobbying-as-bribe problem --that is, the high value of attaining and retaining power. I suggest to focus on how to reduce this value rather than on what fraudulent clowns and their mercenary media are willing to do to finance their pursuit of power.

^ Troll

Comments for this post are closed

Comments for this post are closed

I disagree.

There are three objective functions for economics, going as far back as least the French Revolution (and probably back into the distance mists of history). These are liberty (freedom or libertarianism today); fraternite (community, to Hayek; social conservativism); and equality (socialism and its variants). Equality and community are not "considerations", they are the very purposes of government to some (read anything by Menzie Chinn!).

Thus, a politician faces not only one objective function (as does a businessman), but three. These objective functions cannot be reconciled with traditional analytics, because their very purposes are at odds. Egalitarians place a high premium on preventing suffering in the short term; liberals on maximizing of wealth and income over the long-term. The policy prescriptions at any given time will not be the same.

Politics is then the clash of these value systems which are largely driven by taste rather than analytics. That's why we all argue about and follow politics. Because we are evolutionarily designed to do so, and we are designed to do so because the conflicts cannot be resolved through analytics!

Now, in Washington, these values must adjust to create coherent policy. But there's a problem--it's a principal-agent problem. If the principal allows the agent to choose from competing and incompatible objective functions, then the agent loses control over the principal. (I learned this from bitter experience consulting for state-owned companies in Hungary.) Thus, a typical democracy does not insure good governance! It has not tied the agents to a single objective function! And we see that in the statistics. Note the preference of democracies to run deficits. They almost all do, in good times and bad--and that's not Kenysianism, that's political expedience! The current incentive structure of politics allows this.

How does the principal regain control over the agent? By tying them to a single objective function. That's an incentive system, of which I write frequently in blogs like this. The most basic component of such a system would be, of course, liberal (fiscally conservative) notions of maximizing GDP growth subject to fiscal balance. But, of course, over time, such a system would come to include socially conservative and egalitarian components. But it would be a single objective function. So for example, a component of politicians' incentive pay would come from economic growth, a part from fiscal balance, and a component from changes in the Gini coefficient. (Think of the arguments on blogs like this!)

In this world, the argument is over the composition of the single objective function (equivalent to the development of corporate strategy and related bonus plans). However, once's that done, all the politicians are paid for achieving these goals. Thus, the argument is then consolidated into a single package, and more removed from the implementation phase (ie, legislation). That's how we make progress. It is not a tweak on democracy, it's an entirely new approach for governance.

Of course, this sounds so innovative here. But as always, Singapore has already successfully implemented policies that here are not yet even on the radar.

Comments for this post are closed

Steven, I think there is implicit in your second-to-last paragraph the assumption that the politicians are motivated by their own financial compensation. I think that's a theoretical assumption that won't work ITRW, because I think many politicians are motivated largely by their own personal theories of "what's right and wrong," about which they do not agree with each other.

In other words, "they can't be bought," which is a good thing, but "they are stubborn," which frequently becomes "they are totally inflexible," which isn't a good thing.

Comments for this post are closed

And yet someone like Yglesias is willing to give politicians more power to sell. I am sure he will never understand this problem.

Comments for this post are closed

Even monied interests have legitimate concerns regarding their rights, their interests, and general welfare. To dismiss these concerns and the manner in which they are expressed solely because they make a profit from them is, well, un-American.

Exxon has just as much a right to speak to legislators about laws as the ACLU.

Non-profits aren't without substantial monetary benefits and political power.

Comments for this post are closed

Comments for this post are closed