Mark Gritter (markgritter) wrote,
Mark Gritter

Economic argument about corruption

The author argues that the U.S. government is not particularly corrupt because the amount of money spent influencing its decisions ($2 billion reported spent by lobbyists) is so small relative to the level of government spending and the impact of government decisions. He argues that, for example, that it is implausible that a mere $192,000 in contributions made the difference in passing a $5 billion sugar subsidy. In a competitive market we would expect the price of government decisions to be more commensurate with the size of the outcome (since there are industries that would prefer cheaper sugar and oppose the subsidy.)

I think there are a few flaws with this line of reasoning, although I find it strangely appealing.

One is that money spent on politics is money that can't be invested in less risky ventures. A $10 million lobbying budget may return nothing at all. Politicians may be more like heavily discounted junk bonds than a competitive influence marketplace.

The market isn't free of bias. Just because Senator X is willing to take Industry Y's money and do them favors doesn't mean they're willing to take more money from Industry Z to do the opposite. A good politician stays bought. The market isn't particularly liquid, either.

But, I think the core of the argument, that lobbying is really only influencing a small portion of government expenditures, has some basis in truth.
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