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Becker: A theory of competition among pressure groups for political influence

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Becker. 1983. A theory of competition among pressure groups for political influence. Quarterly Journal of Economics 98: 371-400.

DEMAND FOR SUBSIDIES: Sounds like Peltzman

Becker starts out sounding a lot like Peltzman, but using different terms: Political pressure groups lobby for a subsidy or against the resulting tax. These groups get their wishes according to an "influence function" that takes three factors into account: the amount of pressure exerted by those favoring a subsidy, the amount or pressure from those opposing the tax, and the relative sizes of these two groups. Collective action problems can also play a role; if the group can prevent free riding, it will be able to exert more political pressure.

EFFICIENT TRANSFERS: This is Becker's main (controversial) contribution

Once government decides to grant protection, it will tend to choose efficient (rather than less efficient) ways of redistributin income via taxes and subsidies. (To understand this easily, look at page 228 in Stevens.) Basically, here's the idea. Any protection entails deadweight losses (e.g. a decline in consumer surplus that is not re-captured in tax receipts). Depending on the elasticity of supply and demand, you might get a smaller deadweight loss from limiting production instead of guaranteeing a higher price (or vice versa). Government regulators will select the protection mechanism that entails the smaller deadweight loss.

WHAT IS CENTRAL to Becker's model is competition between interest groups, not interactions between interest groups and legislators per se. What matters is how much (lobbying) pressure each group applies; thus, each group's relative problem with free riding is what matters, not free riding itself. Each group's equilibrium level of pressure depends on the amount of pressure applied by the other group.

Y: Redistributive policy outcome (taxes vs subsidies)

X: Competition among pressure groups (their size, their interests). Relative influence is what matters.

  • Interesting finding: as a result of pressure group competition, government actually pursues more efficient redistribution policies (i.e. find the method of redistribution that minimizes deadweight loss for a given level of redistribution).