10 May 2008

Special Interests

Fixed Carbon asks:
What is the distinction between the "people" and the subset of them that form a "special interest." It seems that this discussion could benefit from some serious discussion of ethics. Rhetoric?
When I use those words, I refer to the literature of collective action, which examines how easy it is for a small group to coordinate itself against a larger group. If, for example, corn farmers want to get a law passed that helps them (e.g., ethanol), they can lobby/bribe the Congress for a subsidy that costs the average citizen $5/year more but delivers concentrated benefits to the corn farmers (the corn industry, actually) of $50,000/person/year. In this case the special interests (farmers) take advantage of everyone else (the people).
Note these additional features: Most collective actions reduce overall welfare (the size of the pie) in the course of delivering a bigger chunk of the pie to the smaller group. Second, collective action is much easier when special interests need only convince a single authority (i.e., politicians) to change the distribution of goodies. Lobbying market participants (e.g., grocery stores to raise the price of corn to consumers) is far harder than politicians because there are too many stores to convince and competition gives the stores an incentive to defect from any agreements to raise prices to consumers. (The defecting store can increase market share by dropping the price.)

Bottom Line: Special interests have existed forever. The only "solution" to them is to transfer decision-making from small groups (e.g., politicians) susceptible to special interest lobbying to disaggregated groups that are harder to lobby (e.g., market participants).

2 comments:

  1. Thanks. I learned a lot from your answer. Gotta read this stuff on collective action. It should complement the stuff that Im just getting into regarding common pool resources. regards, Don

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  2. Don -- collective action stuff definitely applies to common pool resources. For the most-famous treatment, read Olson, M. (1971). The Logic of Collective Action. Harvard University Press. Anyone can read it in three hours.

    For a good discussion of common pool resources (and how collective action can overcome the tragedy of the commons), read Ostrom, E., Gardner, R., and Walker, J. (1994). Rules, Games, and Common-Pool Resources. Ann Arbor Books. This one will take a day or so, but it covers the subject from front to back.

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