On the form of special interest legislation

Abstract

In this paper, we have examined the form of special interest benefits as determined by the interaction between interest groups and political parties. We concluded that the party is interested in granting benefits with long expected lives, since in this way the amount which can be appropriated by the party is increased. However, it is often true that long lived benefits have high deadweight losses; this explains the inefficient form in which subsidies are often granted. The theory developed here has several other implications. First, there should be a hierarachy of benefits granted to groups. Second, there is no presumption of consistency in benefit granting legislation, since benefits are sold on a piecemeal basis. Third, one law can benefit several groups, including certain customers of the industry. Fourth, regulatory commissions can themselves become an interest group. Fifth, pressure groups could be formed by political organizations. Sixth, benefits, once granted, should be repealed less often in a two party democracy than in a multiparty democracy. Finally, shorter lived benefits would be favored by politicians or parties which had safer tenure. Our model also has certain implications for optimal term of office of elected officials. In a recent article, Posner (1974) has argued that the current theory of regulation does not predict that expensive (inefficient) methods of conferring benefits would be used; and he argues that the current theory is generally lacking in testable implications. This paper has provided an extension of the current theory, which predicts the form of benefits and does have refutable implications. Copyright Center for Study of Public Choice Virginia Polytechnic Institute and State University 1975