Regulation

The Power of Special Interests

Fall 2010 • Regulation

Interest groups have not always been as American as apple pie. James Madison’s Federalist No. 10 focused on factions, “a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community.” Surely such a group should be suppressed. But no; Madison believed the costs of suppression in liberty would outweigh any benefits. He argued the size of the new nation and competition among groups would preclude the dangers of a majority faction. Madison believed majorities would vote down any malign proposals by minority factions.

The public and some scholars have disagreed with Madison on the latter point. Surveys indicate the public believes “special interests” have too much influence in Washington. Economists have offered sophisticated analyses supporting a similar normative conclusion. Mancur Olson argued that the economics of organization foster policies that favor particularistic groups over the larger public. The Chicago School emphasized the likelihood that regulated industries would control their regulators. Gordon Tullock and later analysts in the Virginia School proposed that interest group efforts wasted resources by creating monopolies sanctioned by the state. Lobbying itself wasted resources in the struggle over rents. In general, the economists’ critique of interest groups suggested government failure might be more pervasive than market failure.

Political scientists have been more divided about interest groups than economists. Pluralists saw politics as a struggle among groups; the winner wrote laws legitimated by government. Pluralists tended to approve of groups as a way to represent citizens and control government. Others argued that lobbyists provided members of Congress with information vital to their re‐election efforts. Some critics of pluralism pointed out that not all interests — especially the poor — were represented in the group struggle. The struggle among groups obscured the reality of elite rule. Others argued that pluralism had replaced the rule of law made by legislatures with groups competing for the favor of administrative agencies.

Empirical analysis In Lobbying and Policy Change, Frank Baumgartner and his co‐authors offer new information about these old debates. They randomly selected 98 issues in which interest groups were involved and followed them from 1999 to 2002. The authors then identified the “sides” on each issue; a side was “a set of actors sharing a policy goal.” For the 98 issues, they found 214 sides comprising 2,221 advocates. The data collection involved the authors and dozens of student assistants. Most newspaper accounts focus on anecdotes and particular cases related to lobbying; this study offers enough data on interest groups to support valid conclusions.

Surprisingly, about 40 percent of the advocates were government officials. Some officials may decide who wins the policy struggle, but others are clearly part of the game. Citizens groups “or organizations representing an issue or cause without any direct connection to a business or profession” composed about a quarter of the sample for this study. Such groups were often major players on issues. Trade associations and individual businesses accounted for just over one‐third, while trade unions made up six percent of the sample.

Most Washington stories emphasize the victories of individual groups or industries. Baumgartner and his colleagues find that coalitions matter a lot; interests “rarely lobby alone.” The urge to association arises from the nature of things: policies have multiple consequences for diverse constituencies. These coalitions comprise strange bedfellows in search of common outcomes. Businesses and citizens groups are not always on opposite sides of an issue. Although businesses have more resources than citizens groups, they oppose each other depending on the issue. Business is not an interest group or a unified force.

Baumgartner and his group are not naïve. Business groups in these data do have more resources in money and lobbyists. Yet their analyses find these resources have little relation to policy outcomes, either for individual groups or for coalitions. They consider several measures of financial power, including campaign contributions and lobbying outlays. This finding counters the expectations of most people, but campaign finance scholars have long found little relation between donations and congressional actions. Baumgartner’s group offers the broadest and best support for that established literature. They do note that while money does not lead to victory or even offer much influence, it does assure a place in the Washington game. The issues of the poor, they argue, are absent from the congressional agenda.

Power of the status quo Baumgartner et al. found for most of these issues that not much happened during the time period they observed. If lobbyists are supposed to foster change, “they are a surprisingly ineffectual lot.” The power of the status quo informs almost every page of Lobbying and Policy Change. Groups that defend the policy status quo usually have an easy time. Often they need not even mobilize in response to active challenges.

The status quo persists for several reasons. Policymakers have limited attention and hear many arguments favoring changes. Demand for change quickly outstrips supply. Many issues have been fought over for many years; the sides in these struggles are familiar with all the arguments on all sides, creating a gridlock of advocacy as well as lobbying. Defenders of the status quo do well by arguing change will bring uncertain results largely because losses loom larger than gains to policymakers. Policymakers in this study seem to accord the current order a presumption of continuity absent overwhelming evidence of the need for change.

Yet, when the status quo falters, it is “not uncommon for a significant change to sweep aside years of equilibrium.” For example, the sulfur content allowed in gasoline changed little over many years. Clinton’s Environmental Protection Agency then reduced the standard by 90 percent, requiring new refinery equipment that bankrupted many small refineries in the West. Older theories suggested the cognitive limits of policymakers fostered incremental change. Those theories do not explain what Baumgartner found: pervasive stasis and occasional large changes. The catastrophic possibilities of the latter encourage businesses to keep their lobbying operations going even after years of gridlock.

Baumgartner’s book does not support popular prejudices. It finds few special interest demons perverting politics for their narrow ends. Most people who follow politics often bemoan the gridlock Baumgartner sees as endemic to American politics. Baumgartner offers no normative evaluation of the power of the status quo. The book’s analysis indicates that complexity and multidimensionality of issues, combined with limited knowledge, preclude most change in policies.

Constitution vs. Progressivism In The Case for Gridlock, Marcus Ethridge describes other virtues of this stasis. Ethridge contrasts American constitutionalism with its Progressive critics. The former made it difficult to legislate as a way to control government. The latter denounced gridlock and looked for ways to circumvent the constitutional design. Progressives hoped for a politics of expertise in which men of science molded society from Washington bureaus. The rule of experts would be in service to the public good, where gridlock was said to advance only selfish interests.

Baumgartner’s rather benign view of interest groups contravenes Ethridge’s emphasis on rent seeking.

Ethridge argues, in contrast, that interest groups have more influence over policies made in administrative agencies. Organization counts, and the general public is unorganized. Inevitably, interest groups seek and obtain privileges from agencies staffed with Progressive expertise. The Progressive effort to circumvent gridlock to attain the common good actually serves special interests. Progressives realized the gap between their aspirations and reality and sought successive reforms in administrative law and procedures to mend this failure of representation. Ethridge shows how these reforms have failed.

Interest group focus For Ethridge, the Framers designed the U.S. Constitution to foster struggle within Congress and between the branches of government. This design fosters gridlock as Progressives believed, but gridlock becomes virtue by complicating rent‐seeking. Power divided among factions, not unified in expert hands, serves the public good as well as is humanly possible. Baumgartner’s analysis supports Ethridge’s conclusion. Baumgartner’s picture of gridlock suggests the constraints on powerful interests imposed by divided government.

Yet Baumgartner’s rather benign view of interest groups contravenes Ethridge’s emphasis on rent seeking. The two may be talking about two different arenas of politics. Baumgartner’s sample of interest groups focused on Congress, although perhaps half of their issues involved an agency official. Ethridge emphasizes the damage done in administrative venues. Certainly more data‐intensive research should be done on administrative venues. Perhaps such arenas do not attract the broad “sides” in struggle that Baumgartner found. If not, and if powerful groups dominate agencies, Ethridge’s call for a return to the Constitutional Principle (and gridlock) looks all the more convincing.

These books have different strengths. Baumgartner and his colleagues have collected more and better data on interest groups than we have had before. This foundation lends credibility to their analysis and conclusions. Ethridge offers a good analysis of an overlooked topic — administrative law — and its importance for public policy. Both books persuasively challenge what most people believe about politics. For that reason, both deserve readers concerned about the origins and consequences of regulation in the United States.

Readings

“Economic Models of Interest Groups: An Introductory Survey,” by William C. Mitchell and Michael C. Munger. American Journal of Political Science, Vol. 35, No. 2 (May 1991).
Gaining Access: Congress and the Farm Lobby 1919–1981, by John Mark Hansen. University of Chicago Press, 1991.
Mobilizing Interest Groups in America: Patrons, Professions, and Social Movements, by Jack L. Walker. University of Michigan Press, 1991.
The End of Liberalism: The Second Republic of the United States, second ed., by Theodore J. Lowi. W.W. Norton, 1979.
The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities, by Mancur Olson. Yale University Press, 1982.
“The Welfare Costs of Tariffs, Monopolies, and Theft,” by Gordon Tullock. Western Economic Journal, Vol. 5, No. 3 (1967).