Representative Government and Special Interest Politics

Abstract

In any society characterized by diversity and specialization, each citizen - the butcher, the baker, the candlestick-maker - is a special interest on some dimensions of public policy and a member of the general public on many other dimensions. Each citizen enjoys being at the receiving end of special interest handouts even at the expense of inefficiencies imposed on general public. But relative to the status quo involving inefficient redistribution on most dimensions of public policy, including many dimensions on which the citizen is a member of the general public, the vast majority of citizens would surely be better off if the government did not cater to special interests at all. With this common interest in place, why do democratic societies have such a hard time ridding themselves of special interest politics?

This article argues that the driving force underlying special interest politics is an information asymmetry: each citizen has a precise idea about the special interest handouts she is receiving and a vague idea about the price she is paying, as a member of the general public, for inefficient redistribution. I explain why special interest politics are ultimately impervious to reform (though we can tame them at the margin); I examine the trade-offs inherent in reform efforts (what it costs to tame them); and I spell out why special interest politics can be a Good Thing (why we should not tame them all the way even if we could).