Lobbying And Vote Buying (Social Planner, Partial FF, Lobbying And Buying Supermajority Model) - Harder Flashcards
(39 cards)
Last time we studied voting behaviour (turnout)
How else can voting process be influenced (2) (topics of this)
Lobbying
Vote buying
Lobby:
A group attempting to influence vote by influencing parties or voters
Thurber estimations on US lobbying:
How many people does it involve
How much is lobbying spending annually
100,000+ lobbyists
9bn annual spend
UK’s view on lobbying
They find lobbying legitimate and necessary part of democratic process, however needs regulation
UK lobbying annual spend and employment
14,000 people employed
1.7bn annually by 2007
(100k+, 9bn US)
Statistic on revolving door
In US 34 of top 50 lobbyists have previously worked in gov
Expertise/experience vs connections view on why those who already worked in gov are influential
B) empirical work is small, but which view is more supported
Expertise: lobbyists use experience to influence
Connections: lobbyists use who they know and their networks
B) connections view i.e networks are more valuable
Fons-Rosen Revolving door study
Looked at lobbyist revenue after their connection leaves office
If lose revenue: supports connection view, since value was tied to their connection, not necessarily their skill!
If revenue constant after connection leaves; supports expertise
Finding
24% fall in revenue after connection leaves!
And even larger effects if connection was more senior!
Supports connection view - not about skill
Caveat
It doesn’t mean expertise doesn’t matter - since variation only comes from changes in connections
Bertrand further study finds
Evidence for both expertise and connections - but connections more important
Theory of Special interests politics -
shows how lobbying influences policy
What are special interest policies?
Policy that provides benefits to small well-defined groups (hence the name special interest), costs to large unorganised groups
E.g local public good funded by central taxation
3 cases to understand impact of a lobby
Social optimum of a utilitarian government
Partial fiscal federalism (centrally financed public good)
Lobbying
Lobbying model set up:
3 groups of citizens with equal income
Total population a=1 and groups a1 a2 a3
a1+a2+a3=1 and y1=y2=y3 = y >1
All citizens consume private good Ci and a local public good. 3 local public goods for each of the groups gi
What is utility function
Ui = Ci + ln(gi)
First case:
Social optimum of utilitarian government; recall what they do
B) maximisation problem
C) find indirect utility function, then differentiate to find intuitive result
Maximise utility of whole society
Max U= a1U1 + a2U2 + a3U3
Subject to budget constraint
a1 (g1+C1) + a2 (g2+C2) + a3 (g3+C3) <=y
(budget constraint is just MaxU subbed in U <=y
C)
Then FOC to get g1=g2=g3=1
Result: g1=g2=g3=1 meaning
Under social utilitarian gov,
Each citizen gets same amount of public good, independent of the size of group they’re in
2nd case: partial fiscal federalism
What happens to gi (public good) now
Public good gi quantity decided by each group separately, but funded centrally through tax rate t
I.e decided locally but financed publicly by common tax)
Budget constraint for partial fiscal federalism
B) sub into Ci expression
C) then get indirect utility function (v) by using Ci
a1g1 + a2g2 + a3g3 = ty
(ty is revenue gov receive)
B) Ci = y - ty
Then sub ty from above in
Ci = y - (a1g1 + a2g2 + a3g3)
C) essentially the same, just add the ln(gi)
v= y - (a1g1 + a2g2 + a3g3) + ln(g)
(so steps are aggregate pooling formula but = ty, then sub into Ci= y - ty, then let = V and add ln(g)
Then FIC to find g’1 i.e the quantity of public good chosen - final expression
B) Is it > or less than case 1 utilitarian social plannerj
g’1 = 1/a₁ > 1
B) Partial fiscal federalism gets More quantity than the utilitarian social planner (g’1 > g)
So g’1>g i.e when decided locally but financed publicly (by common tax) , we spend more than optimal on the public good
Why?
Individuals do not fully internalise cost of pubic goods, and smaller groups spend more and internalise even less.
MAINLY REMEMBER THIS FOR COMPARISON GOOD:
Proof by aggregate pooling comparison (aggregate pooling is total
g* = a1g1 + a2g2 + a3g3)
Social optimum g1=g2=g3 =1 so aggregate provision g* is
g* = a1g1 + a2g2 + a3g3 = 1
Partial fiscal federalism g’1 = 1/a₁ so aggregate provision g’* is
g’* = a1(1/a₁) + a2(1/a₂) + a3(1/a₃) = 3
3>1 !!! Classic common pool problem; groups overspend when burden is fully on themselves i.e financed publicly
Final case: lobbying
Now assume group 1 is a lobby.
They chooses contributiom, dependent on policy outcome i.e how much public good they get
How do we express contribution
B) Utility of group 1 from policy (public good)
C) Difference between the 2 is known as
C1(g1) as contribution is a function/dependent on the outcome i.e how much g1 they get!
B) U1(g1) (utility from public good)
C)
the reservation utility
b1 = U1(g1) - C1(g1)
Politician have an objective function. What does it include (2)
Give expressions for them too
Social welfare α (0<a<1)
Lobby contributions 1-a
I.e care about society, but also can be influenced by contributions from lobby…
So what is the objective function of the politician
B) key finding of g’’1 g’’2 g’’3
D) important: intuition;
W(g1,g2,g3) = αU + (1-α)a1C1(g1)
Social utiltiy + utility from group 1’s lobbyist contributions a1C1(g1)
B)
g’’1>1
G”2 <1
G”3 <1
All <1 except the lobbying group, who receive more than optimal while other groups receive less
