Rent Seeking: Blame Everybody and Nobody
It’s no secret that there’s a lot of rent seeking in Washington: companies lobby Congress to get favors for themselves, at the expense of the rest of society (especially consumers, competing businesses, and taxpayers). The most straightforward type of case: subsidies. Just have the government directly take money from taxpayers and give it to you.
This is widely recognized as a form of corruption -- though only when it is described abstractly. When you name specific policies that result from rent-seeking, most people will indignantly defend the policies that rob them to line the pockets of special interests. E.g., we think “of course we have to subsidize farmers, because otherwise we wouldn’t have any food!” or “of course we have to license lawyers, because otherwise they’d all be incompetent!”, etc. That’s just factual confusion; if people correctly understood what the laws do and why they were created, almost everyone would oppose them. (E.g., licensing laws are just a way to increase prices. https://fakenous.net/?p=1654.)
Anyway, it occurred to me that it’s not so easy to say who is to blame for the rent-seeking laws. It’s produced by human action, and it looks like bad behavior – it’s basically theft and extortion – but everyone involved in bringing about the bad outcome has a not-completely-ridiculous excuse, and nobody seems to be in a position to do anything about the problem.
Start with the politicians. Say you’re a Congressman. There’s a special interest law up for a vote. It’s almost certainly going to pass regardless of how you vote (because very few bills turn on a single vote). But voting against it will earn the anger of an influential special interest group. Members of that group might donate money to your opponent in the next election. Now, you can afford to have a few enemies. But in general, you need a lot of money to run a successful campaign, and you’re pretty much going to need rich people to give it to you. Furthermore – this is the ironic part – the voters absolutely will not appreciate it if you take a stand against special interest legislation. Your political opponent will just run dishonest ads saying that you were trying to stick it to the farmers, or whatever, and stupid voters are going to hate you for trying to help them. So if you try to be a principled defender of the interests of your constituents (or of justice, or of liberty, or of any other value), you are going to be kicked out of office and replaced with a more unscrupulous politician. So you actually have a non-ridiculous argument that you should vote for some special interest bullshit. (Granted, some politicians are doing much more of that than they have to.)
Okay, then maybe it’s the fault of the companies who hire lobbyists. Let’s say you’re a business executive at some large company. You have to decide whether to hire lobbyists to promote your company’s interests in Washington. Your competitors are already doing this, and they’re not going to stop. So if you don’t do it, your company is just going to be disadvantaged because of your competitors’ lobbying to get laws that favor themselves at your expense. Your company is going to wind up underperforming, compared to other companies. When you try explaining to your board of directors that you refuse to hire lobbyists because such is immoral, you’re going to be fired. Then you’ll be replaced with someone who doesn’t have such “ideological” objections to maximizing profits.
Maybe it’s the fault of the board of directors, because they should choose ethical executives. But it’s not exactly their fault either, because if they don’t try to maximize shareholder value, at least reasonably competently, then they’re going to be voted out by the shareholders (if this is a publicly traded company).
Maybe it’s the fault of the shareholders, then? Again, not exactly, because the shareholders don’t know what’s going on, they don’t know how much of the company’s profits are due to some immoral source such as rent seeking. All they see is the company’s revenues, expenses, and profits. They’re just trying to pick a stock that is going to get them a return on their investment (which I bet is just what you do, if you have any stock holdings. I’ll bet you don’t research the ethics of the company you buy stock in in detail.)
The voters, then: It must be the fault of the voters who would vote someone out of office for not supporting special interest laws. They’re the ones with ultimate control, in a democracy.
Only it’s not exactly their fault either. They all know that their vote is incredibly unlikely to ever alter the outcome of any election in their lifetime. As a voter, you could decide to spend weeks and months every year researching policy issues, voting records, etc., to try to figure out which politician is marginally less bad for society. But then you know that your effort is going to be wasted when the other voters just elect whoever looks better or had slicker campaign ads anyway. It’s really not reasonable to expect you to sacrifice a large portion of your life to efforts that are almost certain to be completely wasted. So we can’t really morally blame the voters for not understanding what’s going on. (Of course, you have the option of not voting at all, as Jason Brennan would no doubt recommend. But that won’t stop the special interest laws from going through.)
There are two depressing things that you can notice about all this: One is that the bad outcome occurs without anybody being especially bad. Each of the above agents is being a little bit bad, but nothing abnormal, relative to the range of human motivations. It’s not like sociopaths are going out there and generating special interest legislation.
The other depressing thing is that nobody can do much of anything about it. If you’re a voter, you can’t do anything because there’s less than a 1 in 1 million chance of your affecting an election outcome. If you’re a politician, you can’t do anything because if you try to, the voters will just replace you with someone less scrupulous. We’re all stuck in a multi-person prisoner’s dilemma: we’re each doing the rational thing, given what everyone else is doing, but we’re all worse off than we could be if we all changed our behavior.
This is how you know you have a bad social system: even with basically normal, semi-decent people, you can get locked into bad outcomes. Is there any way of fixing this?