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

 

Sorry History Buffs, the Holy Roman Empire WAS Holy, Roman, and an Empire

1. Holy:
Crowned by the Pope, loyal to the Roman Catholic Church for most of its existence, the Holy Roman Empire was as Holy (from the Catholic Church in Rome’s perspective) as a medieval state comes.

2. Roman
The Western Roman Empire before the East split off:

The Carolingian Empire (Holy Roman Empire before it was made that) when Charlemagne was crowned Emperor of the Romans:

As the first guy to reunite a significant chunk of the former territory of the Western Roman Empire, the Pope (as the last surviving major official of the former Western Roman government) decided it was appropriate to crown Charlemagne the new Emperor. Also, Rome was a part of the empire (therefore, Roman).

3. Empire
There was an emperor, and multiple medieval kingdoms and kings – like Bohemia and Italy – were subordinate to the emperor. 

Next time someone pulls a “well actually” on the Holy Roman Empire, feel free to “well actually” them right back.


Charlemagne had himself crowned Roman Emperor by the same process; he went to Rome, the people of the City hailed him as Emperor, and then the Bishop of Rome placed a crown on his head. As an Emperor ruling over the city of Rome, and crowned in Rome by the Bishop of Rome according to the constitution of the Roman Empire, he surely had as much right to be called a Roman Emperor as Augustus, Hadrian, Constantine or Theodosius.
[…]
In the technical sense, the state was an Empire because that was its official name (Sacrum Imperium Romanum in Latin, Heiliges Römisches Reich in German). European diplomacy gave the Emperor formal precedence over all other secular rulers for ceremonial purposes.
The Empire was made up of several constituent kingdoms — the Kingdom of Germany, Kingdom of Italy, Kingdom of Burgundy and Kingdom of Bohemia.
https://www.quora.com/Was-the-Holy-Roman-Empire-in-any-way-holy-Roman-and-an-empire (Stephen Tempest)

Air Conditioning AND Refrigeration Were Killed by Big Icebox

Florida physician John Gorrie invented a machine in the 1840s that could create ice, which he used to cool down his office to comfort fever patients. It was simultaneously the invention of refrigeration and air conditioning, two of the most important underrated inventions in history.

He patented it in 1851… and immediately crashed and burned. He couldn’t get funding because he went head-to-head with the powerful ice lobby, which smeared him and his company until they both died. It took slow progress and a whole other way of refrigerating for the idea to recover over the next 70 years.

Image By Ebyabe (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html), CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/) or CC BY-SA 2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/2.5-2.0-1.0)%5D, via Wikimedia Commons


But the notion that humans could create ice bordered on blasphemy. In the New York Globe, one writer complained of a “crank” down in Florida “that thinks he can make ice by his machine as good as God Almighty.”
Having found both funding—from a Boston investor who remains unknown—and a manufacturing company willing to produce the contraption, Gorrie became the first person to create a commercially available refrigeration machine. But he quickly fell on hard times.
In 1851, the year Gorrie received a U.S. patent on his ice machine, his chief financial backer died. With his invention being ridiculed regularly in the press, his other investors fell by the wayside. Gorrie suspected that Frederic Tudor had spearheaded a smear campaign against him and his invention.
http://www.smithsonianmag.com/history/chilly-reception-66099329/?no-ist

 

He looked for financial support for his invention, but had trouble.
[…] “The ice business was controlled by people in places like New England, where in the winter they would chop big slabs of ice out of the water,” Ackermann says. “That’s what people would use in iceboxes to keep their stuff cold. So the ideas of some guy from Florida trying to make things cooler was not necessarily something that the bigwigs, the people who actually had the power, would want to have happen.”
Northern ice makers — who made lots of money shipping ice to the South during the summer — lobbied against Gorrie, and Northern newspapers made fun of his invention.
The patent went nowhere and he died a poor man at the age of 52.
http://www.npr.org/2011/08/03/138924245/the-long-hot-road-to-modern-air-conditioning

Toilets and Sewers Just Took Forever for People to Buy Into

The first flushing toilets were invented in the 1500s, and the first “s” shape modern ones were invented in the mid-1700s. A sewer system to connect them to, and the typical person using them instead of dumping a bucket into a cesspit, took until the mid-1800s.

It took multiple major cholera epidemics, and, more importantly, The Great Stink of London making the Parliament building smell bad, to convince London to adopt the technology. And, after that, the rest of the world.

One issue, for example, is miasma (bad airs) theory, the thought that airs created disease. By that thinking, connecting your home directly to public sewers seems like a bad idea. Add to that the problem of people still having cesspits that they connected to their new flush toilets to making poo-flooding a regular issue, and fear of the poor masses misusing or breaking them.


Sewer gas was a big problem in the nineteenth century when knowledge of how to trap the gas and prevent its return back into homes and city streets was scarce and workmanship in sewer construction often cheap and shoddy. Because of this at least one town in England, Manchester, converted from water-carriage to ‘the apparently safer and more effective dry conservancy method.’ A letter writer to the Herald argued: 
A well sewered town may be described as supplied with a system of subterranean retorts, so arranged that the fluids in passing give off the largest volume of gases, which are carefully collected, and then by means of chimney pipes (for house drains serve admirably that purpose), conducted into the very heart of the dwellings.
https://www.uow.edu.au/~sharonb/sewage/history.html#RTFToC2

 

The introduction of flushing toilets exacerbated the problem. The new toilets were gradually replacing the old chamber pots and used far more water. As a result more waste was being poured into the 200,000 cesspits that stored the capital’s sanitation. The cesspits would frequently overspill, contaminating the water supply and running human excrement into the Thames.
http://www.bbc.co.uk/london/content/articles/2008/11/12/great_stink_feature.shtml

 

By the 1840s, London faced a sanitation crisis. One summer the stench of the Thames drove Parliament to soak their curtains in lime, an experience that led to funding for a modern sewer system.
http://www.missedinhistory.com/podcasts/the-great-stink-of-1858/

China Almost Beat Europe to Being the World’s Colonial Superpower

Zheng He’s treasure fleet was world history’s largest fleet, built of the largest wooden ships ever built, far more advanced than European ships were for centuries. It set off in the late 15th century, just as Europe was taking its first colonial steps, and set up trading relationships as far as Africa.

After Zheng He died, though, conservative isolationist factions in the Imperial Court took control and slashed funding when it was decided that barbarian civilizations outside China had nothing worthwhile to offer. The whole operation was shut down, innovation into ocean navigation was stopped, ocean-going ships were made illegal, all the ships were destroyed, and all the records were destroyed.

Within a century, Europe overtook China, and ocean navigation technology was set back significantly. This was arguably the turning point where China – the dominant civilization of the medieval era (inventing gunpowder, compasses, and silk, for example) – turned inward and stopped being the center of world innovation. 

Image By User:Vmenkov (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)%5D, via Wikimedia Commons


The conservative Confucian faction now had the upper hand. In its worldview, it was improper to go abroad while one’s parents were still alive. “Barbarian” nations were seen as offering little of value to add to the prosperity already present in the Middle Kingdom.
The renovation of the massive Grand Canal in 1411 offered a quicker and safer route for transporting grain than along the coast, so the demand for oceangoing vessels plummeted.
http://www.pbs.org/wgbh/nova/ancient/ancient-chinese-explorers.html

 

The Ming court was divided into many factions, most sharply into the pro-expansionist voices led by the powerful eunuch factions that had been responsible for the policies supporting Zheng Ho’s voyages, and more traditional conservative Confucian court advisers who argued for frugality. […] By the century’s end, ships could not be built with more than two masts, and in 1525 the government ordered the destruction of all oceangoing ships. The greatest navy in history, which once had 3,500 ships (the U.S. Navy today has only 324), was gone.
http://afe.easia.columbia.edu/special/china_1000ce_mingvoyages.htm

 

The 1400s were all China’s. Or at least they could have been, had the country not suddenly turned inward. There are many theories as to why China curtailed its maritime aspirations in the mid-15th century. The simplest is that the Confucians prevailed. The imperial bureaucracy sought to contain the expansionary ambitions of its sailors and the increasing power of its merchant class: Confucian ideology venerates authority and agrarian ways, not innovation and trade. Barbarian nations were thought to offer little of value to China. 
http://content.time.com/time/world/article/0,8599,2054421,00.html

A Corrupt Patent Official Indirectly Stifled Telephone Adoption for Two Decades

Alexander Bell is famous for being the inventor of the telephone. Less known is that he invented it at the same time as a totally different guy, Elisha Gray.

However, Bell had an edge: the patent examiner owed a debt to Bell’s attorney. As soon as Gray’s patent arrived, one of Bell’s lawyers (who had been sitting on the patent for arcane international patent law reasons) was mysteriously tipped off and delivered Bell’s patent as well. Then, while Gray’s patent sat in a pile, Bell’s got timestamped immediately.

The resulting monopoly and ridiculous phone rates charged by Bell limited adoption of phones by 1894 to only 250,000 phones. Bell’s company didn’t see widespread consumer adoption as a priority.

As soon as the patent expired, phone adoption expanded 12 times more in 10 years than they did in double that time under Bell. While it seems no one asked Grey how he’d do it differently, he couldn’t have been more aggressive than Bell, whose company ignored expansion in favor of low-cost city centers and refused to connect independent providers until competition forced them to. And Grey’s 70 other inventions, including one (used mostly by banks) that lets people sign things remotely, didn’t suffer from the same bottlenecking.

Imagine the U.S. during the 20th century if its communication revolution had happened 20 years earlier. Then feel free to make Alexander Bell as hated by the Internet as his contemporary, Edison.


Bell and his partners almost surely got inside information and favorable treatment from the patent examiner, who was in deep debt to Bell’s attorney. By March 1874, when Bell famously did succeed in transmitting speech and summoning his assistant Watson, his supposed invention resembled not his original patent but that of his rival Gray, who—by virtue of that time-stamp—Bell had beaten to the patent office by hours.
[quote]Bell Telephone’s monopoly stifled the growth of phone service. There were 250,000 phones in the United States when the company’s monopoly ended. Five years later, by 1899, the number was over one million—and in the following five-year intervals the numbers leaped to three million and seven million.
https://www.aclu.org/blog/free-future/how-patent-law-held-back-communications-technology

 

Service was provided by use of iron wire or on grounded circuits with a local battery power source’ 3 and was directed to customers located within a mile of the wire center. Since central offices were usually located in the center of a large urban community’s business-industrial area, residential, suburban, and rural service went largely undeveloped. Public relations were usually ignored during the patent monopoly period while the System concentrated on reaping large profits. As later assessed by the FCC, “the System’s attitude toward the public was characterized by arrogance and indifference.”
http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=3246&context=lcp

Mismanagement Killed NYC’s First Electric Car Cab Company (Over 100 Years Ago)

Around 1900, there was a giant company called “The Electric Vehicle Company,” with over 2000 electric vehicles in operation,mostly in NYC.

The company spread out into Boston, NJ, Newport, and even Chicago. While the range of the batteries was awful for America’s sprawl, they did just fine in major cities where they could operate out of hubs and swap out batteries to recharge.

Most sites out there blame gasoline and automatic starters for making electric cars less viable in the 1920s and 30s, but electric cars were already dead for 20 years at that point (since around 1900). The company was acquired by people who overvalued the company stock, expanded too rapidly to maintain to drive up the stock price, and undercut all R&D and maintenance to cut costs. The company collapsed under poor management and gave electric cars a bad name. Ford moved into gasoline cars, made the Model T, and the rest is history.

We don’t know if electric cars would’ve taken off with more investment, but the chance to find out was killed right then.


In New York the service remained profitable, but the other cities suffered from poor management and operations. The batteries were not properly cared for, nor were the drivers trained well.
[…]
Automotive historians of the 1950s have tended to see the problems as simply the gurgling death cries of an electric vehicle industry being taken out by the insurgent gasoline-powered car; they see the death of the EVC as a demonstration of the technological impracticality of the battery-powered vehicle. But contemporary historians like Gijs Mom and David Kirsch have taken the company more seriously. Kirsch sees the scheme, if not the actual company, as “the seed of an alternative transportation system for motorized road transport.”
http://www.theatlantic.com/technology/archive/2011/03/the-electric-taxi-company-you-could-have-called-in-1900/72481/

Electric Vehicle eventually issued more than $20 million in stock, with authorization for an additional $80 million in the various regional companies under its umbrella. With such intense dilution, especially for a company making modest profits, only a huge success would make public shareholders any money. Whitney and the rest, of course, had awarded themselves enormous blocks of stock, for which they had paid nothing, and they could sell at the very moment the speculative fervor that they had stoked was most intense.
[…]
The only way to make the venture succeed, then, was through continued innovation, […] just the sort of things at which Isaac Rice had proved particularly adept.
But the Whitney team did not buy into electric vehicles to laboriously improve on an emerging technology. They were interested only in the sort of rapid expansion that could lead to an equally rapid and profitable turnover.
https://books.google.com/books