17.4.15

WHEN YOU HAVE ELIMINATED THE IMPOSSIBLE.

Philip Wallach of Brookings reviews a book that misses a principal dimension of America's Lobbying Addiction.
And yet it is hard to say that corporations, writ large, are really winners from this arrangement. Certainly, their interests are respectfully considered in every corner of the policymaking process in a way that regular people’s are not. But [Business of America author Lee] Drutman paints a portrait of an arms race that has primarily benefited the arms manufacturers. There is so much lobbying that it is difficult to understand which efforts are really efficacious or worthwhile, and that creates a vicious principal-agent problem in which the lobbyists’ ability to exploit their clients’ uncertainty is nearly limitless. To the extent firms try to solve this by insisting on pursuing measurable impacts, they end up seeking highly particularistic, outcomes—which in turn exponentially expands the field for lobbying, as sector-wide interest group advocacy takes a back seat to firm-specific, intra-sector competition.

It seems clear that we need the lobbyist version of the old lawyer joke: that town is too small for one lawyer to make a living, but it could probably support two and offer a fine living to three. As Drutman puts it, lobbying begets lobbying. This is because it is harder to cut through the noise created by all the other lobbyists; because the fixed costs of launching a policy shop are already sunk; and because figuring out ways in which the government should reorient its policies is inexhaustible. And Drutman provides convincing data to show that the ratchet only goes one way: there has never been a significant draw-down in aggregate troops, and even at the firm level attrition is unusual.
Of course not. Simplest case: a public policy generates a rent of R that will accrue to exactly one winner.  It is worth R - ε to cut through that noise.  Duh.

But the ever-expanding regulatory state, or nanny state, or Good Government for the General Good, or the Easter Bunny, creates all sorts of overlapping and offsetting rents.
How did we get to this point? Drutman lays out the history, with the 1970s as the watershed. Previously in the habit of taking policymakers’ sympathies for granted, corporations found themselves under attack by Naderites pushing new social regulation and slowly but surely figured out how to mobilize their resources to fight back. Over the last four decades, they have just kept going and going. Drutman thinks this occurs almost entirely on the strength of its own momentum, for the reasons described above, and not because corporations are reacting to the rise of any countervailing forces, especially since lobbying expenditures for unions and public interest groups are so pitiful compared to those for corporations (something like $1 spent for every $34 spent by corporations). Though the momentum story is convincing, it seems to me that Drutman doesn’t really look in the right places to understand the growing power of the anti-corporate forces that corporations must reckon with. The power of the trial bar, the muckraking electronic media, and the ambitions of the regulatory state have all grown enormously alongside the corporate lobbying Borg, and that hardly seems like a coincidence. To give just one example, Drutman notes that tobacco companies had the biggest growth in their lobbying expenditures from 1981 to 2004. Whatever you think of the merits of the arguments made on their behalf, this mobilization seems quite unsurprising; they were truly fighting an existential threat.
Mr Wallach calls out Mr Drutman for neglecting the radical reform that might just work.
Remarkably, Drutman doesn’t show any sympathy in his book for another avenue of reform: massive simplification of our policy structures in a way that diminishes lobbyists’ value. Just as countries locked in an arms race may need to actually enter into a pact to destroy stockpiled weapons, it seems there is a natural role for reformers to play in calling for a sweeping away of the detritus that has accumulated in our policy environment. That wouldn’t end the influence game, by any means, but, like the Tax Reform of 1986, it would at least encourage a return to some first principles, so that incumbency would no longer mean unassailability. I wish Drutman had been more willing to channel the energy of those who react to the picture he paints by saying “to hell with it all”; on the right issues, that battle cry of diffuse interests can be decisive, even if it has a tendency to exhaust itself in ineffectual ranting if it is not focused by some political entrepreneur.
The simplest way to reduce the rent seeking might be to generate fewer rents in the first place.

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