How can lobbyists influence government decisions

An important caveat of this waste is that it is irrelevant whether or not the rent-seeker achieves the sought-after policy goal. What triggers this waste is the fact that time, effort, and resources were diverted away from producing goods or rendering services that others are willing to pay for and instead used to influence policy for private gain.

The second economic concern of rent-seeking behavior is that the policy positions sought and protected create a misallocation of government or private resources. In the case of government resources, it may be that scarce government revenue is used to create a special interest tax subsidy instead of investing in research or infrastructure that would be more beneficial to society as a whole.

Private resources may also be misallocated. Without proper regulations, for example, banks may overleverage themselves if they believe that the federal government will bail them out. Finally, rent-seeking could prove so harmful to the economy that not only are resources not used in the most efficient manner possible, but they are actually idle.

During a recession or its aftermath, for instance, workers are unemployed and significant capital remains on the sidelines. Indeed, some argue that the financial crisis—the effects of which we are still suffering from—was fueled by rent-seeking behavior. A paper on tariffs and monopolies by Gordon Tullock of George Mason University emphasized this idea—that both the ends and means of rent-seeking can waste resources—nearly 50 years ago. Originally, only the increased cost on consumers was recognized as a domestic economic effect of tariffs and monopolies, as they allowed domestic firms to charge a higher price than they could with unrestrained competition.

This zero-sum transfer, however, looks worse when other factors are introduced. First, the government must incur administrative costs to assure compliance. In the case of tariffs, customs agents need to be hired to administer the tariff and the U. Coast Guard must protect against smuggling. Furthermore, tariffs do not come about without significant pressure from U.

In the end, a zero-sum transfer from consumers to businesses becomes a negative-sum transfer after both the government and U. This has occurred through car dealers and their lobbyists seeking to enact or strengthen state laws that require cars to be sold through dealerships rather than directly from manufacturers. Car dealers claim that these regulations allow for easier comparison shopping and protect consumers in ways that a car manufacturer would not.

Unfortunately for Tesla, their business model does not currently include independent car dealers. Instead, Tesla sells cars directly to customers, cutting out an intermediary that the company believes will not sell their cars as effectively. Incumbent car dealers, through their lobbying efforts, are both protecting their place in the car market and raising the costs of a new competitor.

For a new firm such as Tesla to enter a market, it would either have to go through an incumbent dealership that it does not trust to sell its cars—considering the profits dealerships make offering service of gas vehicles—or it would have to support new franchises, which would involve a significant cost for Tesla. Commentators have argued that the behavior of incumbent car dealers constitutes rent-seeking that hurts consumers and solidifies inefficiencies in the car market.

A well-functioning economy counts on new firms to enter a market and, through innovation, either offer a better product or a lower price, forcing older firms to compete to match them on one of those fronts.

No matter who wins the competition, consumers come away with a better outcome than they had prior to the new entrant. By engaging in rent-seeking and raising costs for potential rivals, however, firms are able to capture a larger share of the market—not by offering a better or cheaper product, but by preventing the entrant from doing so. With fewer competing firms, car dealers are able to protect a larger share of their profit—not through innovation, but by denying consumers a better alternative, which hurts the economy.

Given the negative effect that rent-seeking can have on economic growth, examining the relationship between some of the primary vehicles of rent-seeking—campaign contributions and lobbying—and legislative outcomes offers a glimpse into the success of rent-seeking business strategies. The mere presence of money spent seeking rents—rather than trying to productively increase profits—has a significant economic cost in its own right.

This huge sum was raised from a very small percentage of U. Unsurprisingly, most of these contributions come from Americans who can most afford them. And these figures underestimate the total amount of money in politics, as some types of spending are not required to be disclosed and a considerable amount is spent on campaigns and lobbying at the state and local levels.

While not all money in politics constitutes rent-seeking, lobbying by business groups and trade associations dominates the field and gives rise to the suspicion surrounding rent-seeking. Many trade associations or groups of like-minded entities pool resources to engage lobbyists because on their own they would be either ineffective or incapable of influencing outcomes. Through information shared, they keep the process balanced. Very often, opposing sides will hire lobbyists to represent their positions on a given issue or piece of legislation when both sides want their perspectives heard and all ramifications considered.

These competing factions working to elevate awareness of impact, need and effects of legislation are the heart of good government. Lobbyists, who can articulate the most compelling case to the widest possible audience, typically prevail.

In this way, government maintains balance through robust discussion and adequate representation of interests. Share on Facebook Share. Share on Twitter Tweet. Share on LinkedIn Share. Corporations are one of the least credible sources of information for the public. What they need, therefore, are authentic, seemingly independent people to carry their message for them. One nuclear lobbyist admitted it spread messages "via third-party opinion because the public would be suspicious if we started ramming pro-nuclear messages down their throats".

That's it in a nutshell. The tobacco companies are pioneers of this technique. Their recent campaign against plain packaging has seen them fund newsagents to push the economic case against the policy and encourage trading standards officers to lobby their MPs. British American Tobacco also currently funds the Common Sense Alliance , which is fronted by two ex-policemen and campaigns against "irrational" regulation.

Philip Morris is similarly paying an ex-Met police officer, Will O'Reilly , to front a media campaign linking plain packaging to tobacco smuggling. Some thinktanks will provide companies with a lobbying package: a media-friendly report, a Westminster event, ear-time with politicians. In the mid-noughties, a lobbyist for Standard Life Healthcare, now part of PruHealth, worried about how they could get more people to buy private cover without being seen to undermine the NHS.

The solution: "Get some of the thinktanks to say it, so it's not just us calling for reform, it's outside commentators This has lobbied for more "insurance-based private funding" in the health service. The BBC has also come under repeated recent criticism for inviting commentators from the leading neo-liberal thinktank, the Institute of Economic Affairs IEA , to talk about its opposition to the plain packaging of cigarettes, without disclosing the Institute's tobacco funding. Leaked documents from Philip Morris also reveal the thinktank is one of its "media messengers" in its anti- plain-packaging campaign.

Companies faced with a development that has drawn the ire of a local community will often engage lobbyists to run a public consultation exercise. Again, not as benign as it sounds. For some in the business, community consultation — anything from running focus groups, exhibitions, planning exercises and public meetings — is a means of flushing out opposition and providing a managed channel through which would-be opponents can voice concerns.

Opportunities to influence the outcome, whether it is preventing an out-of-town supermarket or protecting local health services, are almost always nil.

Residents in Barne Barton in Plymouth were asked in what they thought about a metre, PFI-financed incinerator being sited in their neighbourhood, just 62 metres from the nearest house. Although more than 5, people objected, the waste company's planning application was waved through.

That's community consultation. Lobbyists see their battles with opposition activists as "guerilla warfare". They want government to listen to their message, but ignore counter arguments coming from campaigners, such as environmentalists, who have long been the bane of commercial lobbyists. So, they need to deal with the "antis". Lobbyists have developed a sliding scale of tactics to neutralise such a threat.

Monitoring of opposition groups is common: one lobbyist from agency Edelman talks of the need for "degree monitoring" of the internet, complete with online "listening posts Rebuttal campaigns are frequently employed: "exhausting, but crucial," says Westbourne.

Lobbyists have also long employed divide-and-rule tactics. United States Senate. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads.

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