Abstract
We explain why lobbying is a biologically necessary transaction cost in a democracy. We use lobbying for trade protection to illustrate because we have controls for other effects by using the Young and Magee [2] general equilibrium international trade model with 2 goods, 2 factors, 2 lobbies and 2 political parties, all maximizing in a game theoretic equilibrium. Our empirical estimates show that protectionist lobbying costs are low: 0.8 of one percent in our advanced countries and 0.2 of one percent for the US. There are political economy explanations for lobbying and corruption: money creates power and power creates money. There are biological explanations for lobbying: humans are carnivores and compete for power like animals in dominance hierarchies. Using both explanations, competitive lobbying is an equilibrium outcome. Our data focus on capital intensive exports compared to import-competing industries in 8 non-EC OECD countries in 1965 and 1986 and factor intensities of production from wage and capital earnings in 3-digit level ISIC data.
Highlights
Among the numerous advantages promised by a well-constructed Union, none deserves to be more accurately developed than its tendency to break and control the violence of factions
We use lobbying for trade protection to illustrate because we have controls for other effects by using the Young and Magee [2] general equilibrium international trade model with 2 goods, 2 factors, 2 lobbies and 2 political parties, all maximizing in a game theoretic equilibrium
Magee [4] argues that trait group selection theory is one biological metaphor that yields intuitive insights for both lobbying and political economy
Summary
Among the numerous advantages promised by a well-constructed Union, none deserves to be more accurately developed than its tendency to break and control the violence of factions. We use the Young and Magee [2] general equilibrium political economy model of endogenous protection in this paper to estimate country lobbying transactions costs. Magee [4] argues that trait group selection theory is one biological metaphor that yields intuitive insights for both lobbying and political economy This theory is about altruistic leader signal birds sitting at the top of trees that warn the rest of the flock that predators are present. Our goal in this paper is to measure the transactions costs of protectionist trade policy lobbying We find that they are low in the democracies studied and only a fraction of one percent in the US. Washington DC has 10 times more lawyers per resident than New York, the highest state in lawyers per resident
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