Limits to public intervention: government failures - Problem inherent in representative government - Rent seeking: diffuse and concentrated interests
3 important questions on Limits to public intervention: government failures - Problem inherent in representative government - Rent seeking: diffuse and concentrated interests
In a world where most people pay little attention to their representatives, the politically active few have an opportunity to wield influence disproportionate to their number. So who is likely to become politically active? In general, private self-interest plays an important role in motivating political participation. The greater the expected net benefit one expects to reap from some political activity, the more likely that one will undertake the activity. As a result pf differences in the concentration of benefits and costs, James Q Wilson prospers four categories of political competition:
- Interest group politics: where both costs and benefits are concentrated
- Entrepreneurial politics: where benefits are widely diffused but costs are concentrated
- Client politics: where benefits are concentrated but costs are widely diffused
- Majoritarian politics: where both benefits and costs are widely diffused
The bias created by concentrated benefits and diffuse costs, Wilson's client politics, fosters the adoption of policies for which total costs exceeds total benefits. Concentrated economic benefits and diffuse economic costs often arise when governments intervene in markets. The interventions generally create economic benefits in the form of rent-payments to owners of resources above those that the resources could command in any alternative use. Lobbying for such interventions is called:
Rent seeking
A transitional gains trap occurs when:
A farmer who sells land after the introduction of the price supports and therefore, captures all the rent. Attempts to regain efficiency and reduce government expenditures through elimination of the price supports will force many of the current owners into bankruptcy.
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