Abstract
We analyze a simple stochastic environment in which policy makers can be threatened by “nasty” interest groups. In the absence of these groups, the policy maker’s desire for reelection guarantees that good policies are implemented for every realization of the shock. When pressure groups can harass the policy maker, good policies will be chosen for only a subset of states of nature. Hence, honest and able leaders might implement bad policies, and needed reforms could be delayed. In order to make good policies more likely, the public will want to increase the cost of exerting pressure for “nasty groups” and provide rents to those in power. This last result can be used to explain the existence of political parties. They play a role resembling that of the supervisor in the literature on collusion in hierarchical agency. A rational public may also choose to ignore negative media reports on a politician’s personal life and, in general, elect “strong” political leaders. The prevalence of coercive methods of infl...
Highlights
A fundamental insight of the literature on capture is that policies that do not make much sense in economic terms may be playing a political role
This suggests that, when it comes to influencing politicians, pressure groups have a whole range of actions available to them that lie between giving them money and killing them
In contrast to the traditional approach in the interest group literature started by Stigler (1971) and Peltzman (1976), groups in our model are “nasty” in the sense that they can threaten to punish policy makers who refuse to do them favors
Summary
A fundamental insight of the literature on capture is that policies that do not make much sense in economic terms may be playing a political role. In virtually every model that we know of, politicians voluntarily trade policies for money, either for themselves (bribes) or for the party (campaign contributions). The assumption that interest groups influence policy only by offering money to politicians seems too restrictive and appears to leave out a wide range of empirical phenomena. Politicians are subject to costly legal harassment. This suggests that, when it comes to influencing politicians, pressure groups have a whole range of actions available to them that lie between giving them money and killing them. The activities of groups as modeled in the literature up to now (i.e., as bribe providers) always tend to increase the returns for politicians to being in office.
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