Special-Interest Secret
May 12, 2007; Page A11
Mr. Caplan, an associate professor of economics at George Mason University, is the author of "The Myth of the Rational Voter: Why Democracies Choose Bad Policies" (Princeton University Press, 2007).
http://online.wsj.com/article_email/SB117893365787300771-lMyQjAxMDE3NzE4MjkxMzIzWj.html
Behind every policy that does more harm than good, there's a special interest that favors it anyway. The steel tariff was bad for consumers, steel-using industries and foreign steel producers, but the steel lobby still pushed for it. Farm subsidies are bad for both taxpayers and unsubsidized farmers, but in 2002 the American farm lobby got a 70% increase in government support. The minimum wage is bad for consumers, employers and low-skill workers who get priced out of their jobs, but unions are hard at work to raise it again.
When special interests talk, politicians listen and the rest of us suffer. But why do politicians listen? Social scientists' favorite explanation is that special interests pay close attention to their pet issues and the rest of us do not. So when politicians decide where to stand, the safer path is to satisfy knowledgeable insiders at the expense of the oblivious public.
This explanation is appealing, but it neglects one glaring fact. "Special-interest" legislation is popular.
Keeping foreign products out is popular. Since 1976, the Worldviews survey has always found that Americans who "sympathize more with those who want to eliminate tariffs" are seriously outnumbered by "those who think such tariffs are necessary." Handouts for farmers are popular. A 2004 PIPA-Knowledge Networks Poll found that 58% agree that "government needs to subsidize farming to make sure there will always be a good supply of food." In 2006, the Pew Research Center found that over 80% of Americans want to raise the minimum wage. It is safe to assume, then, that few people want to abolish it. These results are not isolated. It is hard to find any "special interest" policies that most Americans oppose.
Clearly, there is something very wrong with the view that the steel industry, farm lobby and labor unions thwart the will of the majority. The public does not pay close attention to politics, but that hardly seems to be the problem. The policies that prevail are basically the policies that the public approves.
No wonder special interests so often get their way. They do not have to force their policies down the public's throat, or sneak them through Congress unnoticed. To succeed, special interests only need to persuade politicians to swim with the current of public opinion.
Why would the majority favor policies that hurt the majority? There is a good reason. The majority favors these policies because the average person underestimates the social benefits of the free market, especially for international and labor markets. In a phrase, the public suffers from anti-market bias.
Economists have spent centuries explaining how markets channel greedy intentions into socially desirable results; how trade is mutually beneficial both within and between countries; how using price controls to redistribute income inflicts a lot of collateral damage. These are the lessons of every economics textbook. Contrary to the stereotype that they can't agree, economists across the political spectrum, from Paul Krugman to Greg Mankiw, see eye to eye on these basic lessons.
Unfortunately, most people resist even the most basic lessons of economics. As every introductory teacher of the subject knows, students are not blank slates. On the first day of class, they arrive with strong -- and usually misguided -- beliefs about economics. Convincing students to rethink their anti-market views is no easy task.
The principles of economics are intellectually compelling; but emotionally, they fall flat. It feels better to believe that greedy intentions imply bad consequences, that foreigners destroy our prosperity and that price controls are a harmless way to transfer income. Given these economic prejudices, we should expect policies like steel tariffs, farm subsidies and the minimum wage to be popular.
None of this means that special interests don't matter, but it does put their activities in a new light. Special interests do not have to sneak behind the majority's back; they just need to ask for the right favor in the right way. The steel lobby could have demanded a big handout from the federal government. But that would have struck many voters as welfare for the rich; steel-makers can't expect the same treatment as farmers, can they? Instead, the steel lobby took the crowd-pleasing route of blaming foreigners and asking for tariffs. Tariffs were less direct than a naked subsidy from Washington, but they enriched the steel industry without alienating the majority.
If special-interest legislation were fundamentally unpopular, public relations campaigns would be futile. They would serve only to warn taxpayers about plans to pick their pockets. Since the public shares interest groups' critique of the free market, however, there is room for persuasion. Left to its own devices, the public is unlikely to spontaneously fret about the plight of the steel industry. But a good public relations campaign can -- and often does -- change the public's mind. Once the public actively supports an interest group, even politicians who would prefer to leave the market alone find it awkward to block government intervention.
In many cases, though, a public relations campaign is overkill. Special interests can make money by maneuvering around the indifference of the majority. Even though most people are protectionists, for example, they are fuzzy about specifics. Which industries need protection? How much? Should we use tariffs, quotas or what? To most citizens, these are mere details; within broad limits, they will accept whatever happens. As far as special interests are concerned, however, these details mean the difference between feast and famine. When it is time to determine details, special interests have a lot of influence -- in large part because no one else cares enough to quibble.
In a monarchy, no one likes to blame the king for bad decisions. So instead of blaming the king himself, critics point their fingers at his wicked, incompetent and corrupt advisers. While this is a good way to keep your head, it is hard to take seriously. Kings often make bad decisions; and in any case, if his advisers are hurting the country, isn't it the king's fault for listening to them?
In a democracy, similarly, no one likes to blame the majority for bad decisions. So instead of blaming the majority, critics point their fingers at special interests. But this too is hard to take seriously. The majority often makes bad decisions; and in any case, if special interests are hurting the country, isn't it the majority's fault for listening to them?
We often ponder special-interest politics in order to solve a mystery: "Why aren't policies better?" Realizing how many bad policies are here by popular demand turns this question upside down. The real mystery is not why policies aren't better. The real mystery of politics is why policies aren't a lot worse.
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