The One Economic Principle that Explains the Power of Lobbyists

Pay attention to politics at all, and you’ll come across the term “special interests” to describe lobbyists: the idea that a small minority of the population control Washington and politics in general.

There’s some truth to that idea. And it comes from an economic principle called “concentrated benefits and diffuse costs.” Say there’s a law that will take a dollar from a million people and give it to one person. How hard would you fight to save that dollar?  Would you fly to Washington D.C., hire a lawyer or lobbyist, and go to Congressional hearings for it? The person receiving the million dollars certainly would.

This simple concept explains why a small group of elites with time and money can often out-lobby millions of people, even in a democracy.

Image By Martin Falbisoner (Own work) [CC BY-SA 3.0
(http://creativecommons.org/licenses/by-sa/3.0)%5D, via Wikimedia Commons


“One reason for this lobbying imbalance was identified by the political scientist James Q. Wilson more than 30 years ago. He noted that many policies tend to concentrate benefits and costs on companies, while dispersing benefits and costs among citizens. The former motivates political action; the latter does not. This makes it much easier for a company like Citigroup to spend $5.3 million a year in lobbying expenditures but much harder for Citigroup customers to organize to, say, reduce fees.”
The Washington Post 

 

Many members explained their “no” votes by saying they were unwilling to sacrifice the subsidies to airports in their districts. “It’s that old problem of concentrated benefits with diffuse costs. The benefits are lavished on a few select communities, and the costs are diffused across the entire tax base,” McClintock said afterward. The beneficiaries, he said, are the only ones who care enough to fight.
The CATO Institute

 

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