Welfare Programs in the Rent-Seeking Society

Abstract

Over the past fifteen years the interest-group theory of government behavior has shown itself to be an empirically rich and powerful explanatory tool. Applications have included environmental regulation [14; 17], Federal trucking regulation [15], the output of state legislatures [12], and numerous other government programs and activities. But one important subset of government programs has been consistently neglected in the literature: meanstested transfer programs. As a group, the poor are not well organized for political lobbying; they are dispersed and consequently face high organization costs. Further, as a potential lobbying group, the poor face potentially overwhelming free-rider problems (i.e., all of the poor stand to benefit from poverty programs that some subset of the poor achieve via lobbying). For this reason, the interest group theory of government seems to offer meagre explanatory power in the case of poverty programs. Many who otherwise typically interpret governmental activity from the perspective of rent-seeking analysis make an exception when it comes to welfare programs, and argue that here ideology (mostly, egalitarian ideology) has for some unexplained reason dominated the political process. There is sometimes a reference to the imperialism of the welfare bureaucracy which benefits indirectly from any expansion of the poverty program system, and admittedly this seems to be a plausible partial explanation for the rapid recent growth of welfare spending. Finally, Tullock [19] has adopted a radical reinterpretation, arguing that the welfare state does not really transfer net wealth to the poor at all, but actually represents a thinly disguised system of net transfers to better organized middle class interest groups. The Tullock hypothesis is designed mainly to explain major patterns of government transfer spending. It represents an attempt to reinterpret the net effect of transfer spending on the wealth positions of different income groups, and does not attempt to explain specific welfare programs from an interest group perspective. While this approach has merit, an interest group analysis of specific welfare programs must concern itself with the functional consequences of particular programs and the interest groups which benefit from them, both directly and indirectly. But such an analysis should not necessarily presuppose that the poor themselves are the most important politically relevant interest group involved in the lobbying process, or even that they play a major role. Very substantial transfers to the poor, or to any other recipient group, may ultimately be the result of interest group pressure in the