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Legislative Choice and Special Interests

24 April, 2015 - 16:04

One alternative to having the general public vote on issues is to elect representatives who will make choices on their behalf. Public choice theory suggests that there are some difficulties with this option as well.

Suppose legislators seek to maximize the probability that they will be reelected. That requires that a legislator appeal to a majority of voters in his or her district. Suppose that each legislator can, at zero cost, learn the preferences of every voter in his or her district. Further, suppose that every voter knows, at zero cost, precisely how every government program will affect him or her.

In this imaginary world of costless information and ambitious legislators, each representative would support programs designed to appeal to a majority of voters. Organized groups would play no special role. Each legislator would already know how every voter feels about every issue, and every voter would already know how every program will affect him or her. A world of costless information would have no lobbyists, no pressure groups seeking a particular legislative agenda. No voter would be more important than any other.

Now let us drop the assumption that information is costless but retain the assumption that each legislator’s goal is to be reelected. Legislators no longer know how people in the district feel about each issue. Furthermore, voters may not be sure how particular programs will affect them. People can obtain his information, but it is costly.

In this more realistic world of costly information, special-interest groups suddenly play an important role. A legislator who does not know how elderly voters in his or her district feel about a certain issue may find a conversation with a representative of the American Association of Retired Persons (AARP) to be a useful source of information. A chat with a lobbyist for the Teamster’s Union may reveal something about the views of union members in the district. These groups also may be able to influence voter preferences through speeches and through public information and political action efforts.

A legislator in a world of costly information thus relies on special-interest groups for information and for support. To ensure his or her reelection, the legislator might try to fashion a program that appeals not to a majority of individuals but to a coalition of special-interest groups capable of delivering the support of a majority of voters. These groups are likely to demand something in exchange for their support of a particular candidate; they are likely to seek special programs to benefit their members. The role of special-interest groups is thus inevitable, given the cost of information and the desire of politicians to win elections. In the real world, it is not individual voters who count but well-organized groups that can deliver the support of voters to a candidate.

Public choice theorists argue that the inevitable importance of special-interest groups explains many choices the public sector makes. Consider, for example, the fact noted earlier in this chapter that a great many U.S. transfer payments go to groups, many of whose members are richer than the population as a whole. In the public choice perspective, the creation of a federal transfer program, even one that is intended to help poor people, will lead to competition among interest groups to be at the receiving end of the transfers. To win at this competition, a group needs money and organization—things poor people are not likely to have. In the competition for federal transfers, then, it is the nonpoor who often win.

The perception of growing power of special-interest groups in the United States has led to proposals for reform. One is the imposition of term limits, which restrict the number of terms a legislator can serve. Term limits were first established in Colorado in 1990; California and Oklahoma established term limits the same year. Subsequently, 18 other states adopted them. They have been found unconstitutional in four State Supreme Courts (Massachusetts, Oregon, Washington, and Wyoming). They have been repealed by the state legislatures of Idaho and Utah. Thus, term limits now apply in 15 states. 1

One argument for term limits from the public choice perspective is that over time, incumbent legislators establish such close relationships with interest groups that they are virtually assured reelection; limiting terms may weaken these relationships and weaken special interests. The Supreme Court ruled in 1995 that individual states could not impose term limits on members of Congress. If such limits are to prevail at the federal level, a constitutional amendment will be required.

Arguments against the term limits approach include the fact that term limits automatically remove experienced legislators who could be very effective. They also restrict voter choice.

A second type of reform effort is a proposal that campaigns for seats in Congress be federally funded. If candidates did not need to seek funding from special interests, the influence of these groups would wane.

KEY TAKEAWAYS

  1. Public interest theory examines government as an institution that seeks to maximize public well-being oret social benefit. It assumes government will seek the efficient solution to market failure problems.
  2. Public choice theory assumes that individuals engage in rent-seeking behavior by pursuing their selfinterest in their dealings with the public sector; they continue to try to maximize utility or profit.
  3. It may be rational for eligible voters to abstain from voting, according to the public choice theory.
  4. Public choice theory suggests that politicians seeking reelection will try to appeal to coalitions of special interest groups.

TRY IT!

Here is a list of possible explanations for government programs and policies. In each case, identify whether the explanation reflects the public interest theory or the public choice theory of government action.

  • “It is possible to explain much government activity by investigating the public’s demand for government services, but one should not ignore the incentives for increased supply of government services.”
  • “Through careful application of cost-benefit analysis, we can identify the amount of a public good that should be provided by the government.”
  • “The determination of what are merit or demerit goods is inherently political rather than scientific and more often than not can be traced to the efforts of groups with an ax to grind or some private motive to pursue.”
  • “While it is possible that policy makers follow some well-reasoned-out application of ability-topay or benefit-received principles, it is more credible to recognize that many of the taxes in this country reflect the fact that groups find it in their interest to organize to get tax burdens shifted to others.”
  • “It is in the public interest to correct the market failure caused by monopoly firms. Therefore, it behoovesus to do so.”

Case in Point

Public opinion polls on the eve of the election between George W. Bush and Al Gore showed the race to be a toss-up. Ordinarily, one might expect this to produce a large turnout. But barely more than half —50.7%—of registered voters went to the polls.

The 2000 election provides an illustration of the concept of rational abstention. It also illustrates another point made in the text. If an election is close, the outcome is likely to be determined in the courts.

Florida, with its 25 electoral votes, proved to be the decisive state. The winner of that state’s electoral votes would win the presidency. The outcome in that state was not determined until late November, when Florida’s Secretary of State, Republican Katherine Harris, declared George Bush the winner by a few hundred votes. Mr. Gore took the case to court. The Florida State Supreme Court ordered a recount.

The recounting process proved to be one of the most bizarre chapters in American political history.

Thousands of lawyers descended on the state. Each ballot in key counties was scrutinized in an effort to determine which candidate each voter “intended” to choose. Chads, the small pieces of paper that are removed from a punchcard ballot, turned out to be of crucial importance. “Hanging chads,” which occurred when the ballot was not thoroughly punched and which literally remained hanging from the ballot, prevented a ballot from being counted by the state’s electric counting machines. The Florida’s Supreme Court ruled that the roughly 170,000 ballots that had been discarded by the machines because they were not properly punched had to be re-examined.

As the recounting went on, other controversies arose. Pursuant to Florida law, Ms. Harris had ordered County Clerks to remove ex-felons from their registered voter lists. One clerk, seeing her own name on the list, refused to remove the names. Ms. Harris had come up with a list of 57,700 ex-felons for her “scrub list.” The precise number of voters removed is not known. Harper’s Magazine columnist Greg Palast charges that 90% of the voters on the scrub list were not, in fact, ex-felons. He notes that they were, however, black—and likely to vote Democratic—90% of ex-felons who are allowed to vote vote Democratic.

In the end, the case went to the United States Supreme Court. The Court decided, by a single vote, that Ms. Harris’s certification of the outcome would stand, and George Bush became the president-elect of the United States.

All elections have stories of irregularities. The 2000 election was certainly no exception. What made it different was that the outcome came down to the votes in a single state. The official tally in Florida had Mr. Bush with 2,912,790 and Mr. Gore with 2,912,253. What was the “real” outcome? No one will ever know.

Sources: Florida Secretary of State, John Fund, “Vote Early and…” The Wall Street Journal, December 12, 2001; Greg Palast, “The Great Florida Ex-Con Game,” Harper’s Magazine, March 1, 2002; and U. S. Supreme Court, George W. Bush et al. vs. Albert Gore, Jr. et al., December 12, 2000.

ANSWER TO TRY IT! PROBLEM

Statements (2) and (5) reflect a public interest perspective. Statements (1), (3), and (4) reflect a public choice perspective.