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The Special Interest Politics Game

Posted By Nicolas Loris On December 18, 2008 @ 1:33 pm In Economics | Comments Disabled

From the Machinery of Freedom [1]by David Friedman, Milton’s son.

Special interest politics is a simple game. A hundred people sit in a circle, each with his pocket full of pennies. A politician walks around the outside of the circle, taking a penny from each person. No one minds; who cares about a penny? When he has gotten all the way around the circle, the politician throws fifty cents down in front of one person, who is overjoyed at the unexpected windfall. The process is repeated, ending with a different person. After a hundred rounds everyone is a hundred cents poorer, fifty cents richer, and happy.”

Special interest politics, also known as rent-seeking [2], has always been a part of politics, but it’s particularly interesting in relation to companies today seeking aid from the government.

In relation to the auto bailout [3]:

“Many people are asking: Why can’t these companies go bankrupt and reorganize like everyone else? In bankruptcy court, the process allows the auto industry to negotiate with creditors, stakeholders and unions.

Well, the auto industry spent nearly $50 million lobbying Congress in the first nine months of this year while unions spent hundreds of millions to put Democrats in Washington. Those are two reasons.”

And now ethanol wants a bailout [4].

Although these aren’t all related to ethanol, alternate energy production & services spent nearly $24 million on lobbying [5]in 2008. This does not include contributions [6]to Democrats (over $1.1 million) and donations to Republicans (over $430k).

Yes, they are competing with other car company lobbyists and lobbyists from big oil, respectively. But other car companies and big oil aren’t asking for the taxpayers to bail them out. With respect to the Detroit car companies, instead of innovating and meeting consumer demands, they squandered opportunity through wasteful spending. With renewable fuels, it is evident that they simply can’t survive without special tax breaks and subsidies.

Rent-seeking is unlikely to cease in politics anytime soon. But not bailing these guys out would send a resounding message to struggling and government-dependent industries, companies that have failed to develop or change their business model, that they should focus more on economic profit and less on political profit.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2008/12/18/the-special-interest-politics-game/

URLs in this post:

[1] Machinery of Freedom : http://www.amazon.com/Machinery-Freedom-Guide-Radical-Capitalism/dp/0812690699

[2] rent-seeking: http://wps.prenhall.com/wps/media/objects/4174/4275054/gloss/Osullivan_survey_glossary.html

[3] relation to the auto bailout: http://www.denverpost.com/harsanyi/ci_11179143

[4] ethanol wants a bailout: http://www.foundry.org/2008/12/17/now-ethanol-wants-a-bailout/

[5] spent nearly $24 million on lobbying : http://www.opensecrets.org/lobby/induscode.php?lname=E1500&year=2008

[6] contributions : http://www.opensecrets.org/industries/indus.php?ind=E1500

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