Interest-group Theory Of Government Research Articles

Government Spending, Shocks, and the Role of Legislature Size: Evidence from the American States

We examine the relationship between legislature size and several components of government spending using a methodology that allows us to estimate how legislature size influences the fiscal response to shocks that are common to all states. We find little evidence that states with larger than average lower or upper chambers experience a larger change in spending per capita in the presence of a shock. We do find a positive relationship between lower chamber size and the first difference of welfare spending per capita, but this increase is partially of set by a negative relationship between upper chamber size and welfare spending. These results are consistent with the interest group theory of government, which states that larger legislatures can be associated with lobbying and bargaining costs that may have offsetting effects.

Rents in property rights creation and implementation

The institution of property rights is increasingly being recognized as an essential building block of an economically prosperous society. The question that remains unanswered however, is how do we develop effective property rights institutions? The literature dealing with the development of property rights tends to be, in general, overly optimistic since there is a tendency to view the design of property rights institutions as optimizing decisions to economize on transaction costs and to facilitate new economic activities. On the other hand, since property rights define the distribution of wealth and political power in a society changes in property rights structures are likely to be influenced by more than pure efficiency considerations. Therefore, in order to achieve a balanced analysis of the evolution of property rights institutions our article introduces the state in the whole process. Following the propositions of the interest group theory of government we show an important relationship between rent seeking and state involvement in property rights creation. The state with a coercive power to establish and enforce property rights can also use that power, through the process of economic regulation, to redistribute property rights to politically influential interest groups. Herein lies the state failure in property rights creation.

The Interest-Group Theory of Government: Problems and Prospects

The Interest-Group Theory of Government: Problems and Prospects

Political Entrepreneurs and the Transfer Demanding Process: Homesteading the Unassigned District

This paper introduces the transfer-demanding entrepreneur to help bridge the gap between static equi- libria in an interest group theory of government and process theories. The transfer demanding entrepreneur acts in a creative, discontinuous fashion to organize latent demand for a particular transfer into an effective interest group. The disequilibrating, re-equilibrating transfer demanding entrepreneur provides a theoretical framework for understanding the movement between static political equilibria. This paper considers the transfer demand- ing entrepreneurship necessary to bring together the western railroads, organized labor, and potential Oklahoma colonists in the passage of white settlement and coal-lease ratification legislation in the Indian Territory.

Financing the unemployment insurance system and the interest group theory of government

responsibility for the administration of its unemployment insurance program subject to the mandate that it maintain an 'adequate' balance in its individual trust fund.1 In each state, employers pay a tax rate based on their unemployment experience, starting with some set minimum rate for relatively low unemployment firms and increasing to some set maximum rate for relatively high unemployment firms. The extent of experience rating, as measured by the spread between the minimum and maximum rates, varies substantially across the states. This paper uses the rent-seeking model of regulation to explain the pattern of unemployment insurance tax rates across the states. Unlike most observers, we recognize that government provision of unemployment insurance, even in the public interest, will have the natural and unavoidable consequences of increasing unemployment and creating cross subsidies. Hence, these results, which so many researchers have found, are not sufficient evidence to reject the public interest model or to suggest changes in the system. We identify a private interest model in which a state's dominant industry will attempt to manipulate the tax rate structure. This industry will attempt to generate greater subsidies if it is characterized by high unemployment, or to reduce the degree of unemployment subsidization if this industry is characterized by low unemployment. As predicted by the rent-seeking model of government, we find a negative relationship between the unemployment level of the state's dominant industry and the experience rating of the state's UI program.

Welfare Programs in the Rent-Seeking Society

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

Bureaucratic Structure and Congressional Control

The interest-group theory of government (Stigler [9], Peltzman [7]) has generated many valuable insights into the workings of the political process. Although subsequent contributions to this literature (McCormick and Tollison [6], for example) have extended the theory to explain a wide variety of government behavior, the discussion of the political process tends to be carried out in terms of the interests of groups within the polity that either demand or supply wealth, and those of the legislators who broker the transfers. Little attention is normally paid to the bureaucratic organizations that enforce and, indeed, often set the policies that the legislature wishes to put in place. Exceptions are Eckert [1], who discussed how the personal incentives of regulators affect policy choices as a function of the costs and rewards of serving on a commission versus being employed by a bureaucratic agency, and Ehrlich and Posner [2], who offered a useful theoretical exposition based on legislative decision costs of why Congress delegates programs and policies to bureaus. In addition, Faith, Leavens, and Tollison [3] and Weingast and Moran [10] have shown that the composition of important oversight committees influences bureaucratic policymaking initiatives.

The Executive Branch in the Interest-Group Theory of Government

As the Federalists designed it, there are two ways in which a bill can become a law in U.S. legislatures. Bills become law which obtain a simple majority in both houses of the legislature and the signature of the chief executive, or which obtain two-thirds majorities in both houses without the consent of the chief executive (in both cases bills are subject to judicial review). The economic approach to politics and regulation has made genuine progress in the analysis of various aspects of this legislative process. For example, the legislature and the independent judiciary have been the subjects of a good deal of the recent attention of scholars in this area.' The question, however, of how the agents in the legislative process are interconnected by the rules for passing laws has received only limited attention in the literature. Most particularly, and the issue of concern in this paper, the role of the executive veto in an interest-group theory of government has not been explored. Before turning to our approach of explaining vetoes as a means of enhancing the durability of legislation (by analogy to Landes and Posner's theory of the independent judiciary),2 we will review briefly the field of alternative hypotheses. A primarily theoretical approach to the veto centers around applications of the Shapley-Shubik3 index of voting power. In this approach the voting

Constitutional Change in an Interest-Group Perspective

Constitutional Change in an Interest-Group Perspective

Campaign Expenditures and Political Competition

THE theory of public choice emphasizes the role of economic assumptions in the mechanisms which generate political choices.1 In a recent contribution to this literature, Stigler has suggested that the "all-or-nothing" characterization of political competition is both unappealing and unrealistic. He is sympathetic to a basic similarity between political and economic competition, where, like the latter, the products of a political process (public policy) can be construed as ranging continuously from failure to success.2 Stigler notes that there has been a tendency to label (incorrectly) the winning of 51 per cent of legislative seats a victory and 49 per cent a defeat and argues that the success of a political party is "more or less," not all-or-none. Thus, the importance of a continuous characterization of political outcomes is that it reduces the apparent fundamental differences which have exacerbated the extent of the analogy between economic and political competition.3