"They also found that lobbying expenditures in that industry are correlated with increased regulation, higher profits and lower entry. Unsurprisingly, they found that lobbying and regulation tended to keep out smaller companies to the benefit of larger ones."
Lobbying and legal bribery are far more prevalent in the US than in Europe.
enthusiast building company around that new thing: hey wait that doesn't make sense, this is supposed to be for everyone
that enthusiast is now lobbying. is there a specific other situation you were hoping to clamp down on that doesn't rope in the enthusiast?
The real problem with society is that we try to build static structures (laws) in an attempt to foil dynamic adversaries (humans). This simply does not work.
If lobbying was actually limited to citizens or small groups of citizens the negative impact could be reduced. Many other countries aren't impacted by regulatory capture as bad as the US.
Corporations do not elect representatives. Lobbying companies do not elect representatives.
Seems clear which needs to be got rid of.
Also, in the United States, you do not need shareholders to form a corporation. You are already a corporation in and of yourself. If you want to fund your activities via your own money, you do not technically even need any corporate body to conduct in business. Business is an individual right.
Sure! So, I'll start a software company, let's call it Maxisoft. Then, I'll start a non-profit, "the Maxisoft benefactor's mutual benefit corporation" (A non-profit producing body) who just happens to share officers with Maxisoft (after all, since we're all in business together, it makes sense that we're all friends, right).
> limits on the type and amount of spending
Why? Don't individuauls have an unlimited right to spend as much as they want seeking redress of grievances? Board members could just vote officers a higher salary and then the officers can simply use the corporation's assets (now their own via the magic of payroll) to do the same lobbying, and certainly, you cannot be against the right of an individual (in this case an officer of the corporation) from asking his/her representative for change?
> they're required to publish sources and destination of income
I fail to see how this isn't a massive breach of an individual's right to privacy, but either way, for the most part, donations to a political campaign are public.
Ultimately, IMO, your regulations fall flat, because they all get in the way of an individual right to seek redress. In every case, there is a straightforwards way around the regulation, and there is no way to stop what you are trying to stop without stripping some people of their individual right to petition their government. Thus, we ought to reject all the regulation as an unnecessary overreach.
I agree that no restriction will be perfect; however, I think that it's likely that restrictions could be crafted that are better than what we have now. For example, maybe something like:
- A non-profit can spend as much as they want on politics as long as the money comes from individuals.
- There is a restriction on how much an individual can give to any given non-profit. Or perhaps there would be restrictions on what percent of the PACs spending comes from any one person. It is illegal for non-profits to collaborate to bypass these rules (in the similar way to how it is illegal for corporations to collaborate to fix prices).
That being said, what's your solution if you are opposed to campaign finance regulations?
I mean, I agree, but money is going to buy influence whether you believe in some sense of noble politics or not. Without severely and arbitrary restricting even more rights it's impossible to get around this. Those with more money can make friends with influencers, buy advertising space, produce media, etc, at far greater rates. Even without direct lobbying, they're going to be more influential
> There is a restriction on how much an individual can give to any given non-profit. Or perhaps there would be restrictions on what percent of the PACs spending comes from any one person. It is illegal for non-profits to collaborate to bypass these rules (in the similar way to how it is illegal for corporations to collaborate to fix prices).
No there isn't. There's just taxes on contributions if you give more.
> - A non-profit can spend as much as they want on politics as long as the money comes from individuals.
I already gave a few ways around this legislation above.
So for instance, a corporation could still have their executives donate to PACs and they could create dozens of PACs in order to be able to donate more overall. However, there is a limit to how many executives and PACs they can juggle so it at least doesn't scale the way the current abuses do.
Nah, someone will just offer a service to those executives to manage their PAC contributions. But, I mean, job creation is great, so I guess that makes sense.
It’s a real problem, so let’s work on some solutions. Mercenary sock puppets should be limited, no?
Seems less reasonable to petition as a full time role, and get everyone's representative on board with unduly supporting a particular company or cause, or get undue weight because can throw $10m at the issue. That's not really representing the people any more, even if it is understandable how it happens.
Citizens banding together in a cause? Already happens, and no doubt representatives who receive 500 letters or emails that could be copies of each other are treated as less weighty than 500 individuals writing individual emails on the same cause.
Hence trying to limit opportunity for professional and full time lobbyists, the permanent presence near to government constantly trying to influence, create and ruin policy. Sure, the CEO is probably only ever going to sign rather than write, and their money will always bring extra influence. I'd hope to find a balance that keeps it transparent but minimises gaming the system with money.
As is, lobbying is bending most governments around the world badly out of shape, and seems to have got far out of hand. Of course getting a better system, whatever it may be, through the current system is another matter entirely... :)
The other is not.
I'm still dumbfounded by the idea that corporations should enjoy any kind of right or privilege, let alone that kind of special treatment they enjoy nowadays.
The objection is that "it's too hard to define legally". Nonsense. Courts distinguish between natural and artificial legal personality all the time. Corporations are a legislative creature. People aren't.
Perhaps, but probably not. The ease of corporate veil piercing is inversely proportional to the number of involved parties.
> An incorporated association? Legally distinct and visible to a court.
which means that it is easier to sue as an entity.
> The objection is that "it's too hard to define legally". Nonsense.
I never made that argument. Stop with the strawmanning. I said that there is no way to limit the ability of companies to petition the government without simultaneously limiting the ability of individuals to do so as well. The previous regulations we had were easily bypassed.
What you said was:
> Okay, so if citizens decide to band together to petition their representatives, that isn't allowed?
Implying that these were inseparable. They are not. That enforcement is difficult and imperfect is different from whether it is possible or desirable.
Don't corporations also answer to customers? Customers will stop buying from a corporation if prices are too high or service is too poor.
The people who really need protection are the third parties who can get stuck with externalities from activities they had nothing to do with.
So we rely on lobbyists now to explain to our legislators when the "system of tubes" metaphor for the Internet breaks down. Hopefully we can get multiple competing groups in the door to prevent the advice from being too one sided but at the same time everyone presenting has an agenda. Which probably costs the taxpayer more than hiring experts would but that cost isn't obvious the way a line-item on the budget would be.
And as bad as the current system is having legislation just based on what representatives know would probably be worse.
You just showed how simple it is to switch the incentives. I'll add that taxpayers pay for the campaigns instead of corporations. Whoever wins at each level of elections gets a larger amount to campaign with. If contributions are allowed outside that, it's only individuals with a cap. It's a felony to violate these rules. Work from there.
it may be that the required amount of lobbying money necessary for a larger corp is in relative terms tiny but in absolute terms somewhat large (e.g. $15mil gets you 80% of the way there, whereas $150mil only 85%; but a smaller corp can't chalk up the $15mil required for pareto or whatever distribution)
What stats you got for ROI on aerospace R&D vs. lobbying?
Mancur Olsen, The Logic of Collective Action. Seminal economics text.
https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action
https://www.worldcat.org/title/logic-of-collective-action-pu...
Also, companies don’t need to be direct competitors to have adverse interests. For example, Google lobbied heavily on copyright issues because it wants to commoditize a downstream product input to its own services. That places Google at odds with media companies, even though the companies don’t compete directly.
In defence, Beoing and other MIC firms are generally better served by fighting for a larger pie, than over their share of it. The fight is over defence vs. nondefence (mostly social services) spending. See for example; https://www.sourcewatch.org/index.php/Boeing
And I'd asked what your data are. Got any, or do you prefer asking to answering questions?
You're the one supporting the assertion that "the value add of $1 dollar of lobbying/capture efforts goes farther than $1 in R&D or whatever after a certain point." It seems like that's the assertion that requires supporting data. My point simply is that, in the absence of data, we can look at what we would naturally expect to happen if your premise were true--prices would get bid up. The fact that lobbying prices aren't getting bid up suggests your premise is false.
You can add further layers of speculation to explain that unexpected result, but now you're really going out on a limb. I think a simpler explanation is that your premise is simply false. Lobbying has low expected ROI--that's why companies spend so little on it. (In particular, I suspect that lobbying just isn't very effective, so the expected value of a very favorable law or policy, weighted by the incremental increase in probability of that coming to pass through lobbying, is low.) That hypothesis explains the data, without resorting to additional handwaving.
2. I have to think that a lot more money and effort is expended trying to influence regulations than what shows up in the formal lobbying accounting.
One thing companies do is make sure to have major employment centers in as many states and congressional districts as possible, in order to get a good base of votes in any matters that may come up. This must cost a fair amount, but would never show up in the lobbying budget. Just as an example.
"solving the problem is half the problem"
Regulatory bodies need to take into consideration size, age, and frequency of violation by the regulated in terms of exacting punishment on new entrants.
For instance; BigFin fintech company gets caught violating Anti-Money Laundering regulations. Big fine.
SmallFin fintech gets caught: slap on the wrist, thou shalt make a remediation plan, and here are the milestones you have to meet.
SmallFin continues doing business, but is on the regulators radar.
SmallFin caught again? Fine.
Now. Let's say SmallFin dissolves, but the key players move and incorporate as YetAnotherSmallFin (different Corp, mostly same people). Get caught? Regulators should look at the people who have been dinged before, and should know better, and regulation should be less forgiving based on that.
The fact is, a great deal gets hidden under "the Corporate Veil" that probably shouldn't be so easily divested from by those looking to abuse the system.
A regulator should by and large be a constructive guiding hand; not just ssmern as something to be worked around in the process of finding new and interesting ways to do shady things.
The catch here is you need to be able to attract high quality people to run the regulator, and I really have no solution for that.
"Excessive" and "less" are not synonyms for "bad" and "good".
This isn't about quantity, it's about quality.
One of the big problems is that regulations are immortal. They get passed and never repealed. This causes two problems. First, they don't go away even if they're bad. Second, they accumulate. That's especially problematic for bad regulations, but it's even a problem for good regulations. If you have a boat with five tons of idle carrying capacity and you decree that it carry four tons of the king's freight, all is well and there is a net benefit produced. But if you decree that it carry eight tons of the king's freight, it sinks.
So if you want to add new rules, you need to find some old ones to take back out. And you should be uniquely careful what you add to begin with, because every one has an opportunity cost, and even bad rules are sticky.
https://en.wikipedia.org/wiki/Sunset_provision
Though yes, that is a legitimate issue.
Other forms of legislative garbage collection carry high costs and side effects.
Some people think that can be fixed, get money out of politics and then good regulation can exist in the long run. Others do not think that's possible, so it's better to remove the power from government altogether, because over time it will always be bought.
Saying that if something is bad, you should try to make it good is just restating the problem.
My goal was to highlight an exceedingly tired and bogus argument.
To us from school (B), the school (A) thoughts are hopelessly naive, but it's impossible to convince anyone of our wisdom who hasn't found it on their own, and it just comes across as infuriating "you'll understand when you're older" condescension.
And so life goes on :)
The solution is to change/improve the system that is creating the regulations. There will almost definitely be new regulations involved in doing this.
I don't see how a system that creates excessive regulation can be expected to constructively par down that regulation without significant changes to that system.
Little company Uber flaunt the law until it becomes big company Uber that can afford its own lobbiests.
I think Uber is interesting in that they actually did offer a superior technological solution to a social problem (driver and rider safety and trust), which is usually doesn't work since social problems are messy. I think this is why their "ask for forgiveness, not permission" strategy paid off in most markets - the people wanted them to win.
Get rid of congressional elections, move to a method of selecting representatives that selects a representative sample of the population such as a lottery among registered voters.
Let's say I'm Boeing and I pay a lobbying firm 15M USD - what happens next? Where does the money go?
They may also start a PR campaign for your case.
https://statescoop.com/nationwide-lobbying-push-for-contract...
The team of in-house and outside lobbyists do a number of things including monitoring legislation, writing internal position papers laying out the company’s arguments for and against legislation, briefing execs on changing rules, organizing visits from execs, and participating in strategy sessions with trade associations.
Most importantly they try to exert influence. The most direct way is through meeting with congressional staff and regulators. These meetings are fairly easy to come by — anyone can call a Congressional office and request a meeting on an issue(and more citizens should!), but in most instances you will get shunted to a low level staffer who politely listens to your plea and takes notes. But, in the case of Big Business, that $3 million you spend in consultants brings with it some very deep rolodexes. They can get meetings with Chiefs of Staff, Chief Counsels, and sometimes directly with members of Congress so you can go to a Senate office and have a deep discussion about a specific piece of legislation. You can articulate how the legislation will impact your business, the economy at large, or the Senator’s constituents. You can propose new legislative language. Your team of lawyers can show the underpaid, overworked staffer all the loopholes he’s unknowingly introducing. You can propose a “carve out” to protect some special group (e.g. “Companies that spend $X in R&D should be exempt from provision Y”).
There are many other ways in which lobbyists try to get the ear of Congress, but the above encapsulates a significant portion of the spend you see in lobbying disclosure reports.
> They can get meetings with Chiefs of Staff, Chief Counsels, and sometimes directly with members of Congress so you can go to a Senate office
But how? Is it simply that the lobbyists make plain who they are representing and the government people involved know a lot of tax dollars are potentially at stake, or is it something more skullduggerous?
$15M is a lot of money, so Boeing obviously feels it's worth it; maybe I'm being too cynical, but I just can't see how unless there is something underhand afoot.
You might pay them $1M to do research on a particular policy that is beneficial/detrimental to your business. That same firm will then put together a polish presentation or proposed language for legislation and get it in front of politicians where it makes a difference.
It's certainly not "Google hired this firm for $1M and they have $900K in donations to a politicians election fund". That's illegal.
A good example (that another poster mentioned) are organizations like the ACLU. They raise money and use it to lobby the government to get pro-ACLU laws written.
At best, lobbying is bribery with a facade of conversation. At worst it's extortion. The corruption is baked in either way.
Lobbying is very similar to legal work, and often is done by lawyers. Highly trained professionals take often very complicated domain issues and distill them into terms politicians and their staff can understand. (Typically, the politician, as a matter of ideology, already supports the position the company is espousing. The purpose of the lobbying then is to arm the politician with data and legal arguments to support that position and counter the data and arguments offered by the opposition.) Producing a single document can cost tens if not hundreds of thousands of dollars.
> They found that the higher the volume of new regulation in an industry -- measured by analyzing the text of the Code of Federal Regulation -- the less new entry is driven by high Q.
Where Q "represents the ratio of a company’s market value to the book value of the company's assets."
Many industries become more capital intensive as they grow, and higher capital thresholds for effective market entry make market entry harder. Additionally, as industries grow, the scale of their externalities grows, requiring regulation.
The aggregation of capital in public capital markets supports this (Value of equities up, # of market participants down).
The fact that the legislature has been gridlocked for years also doesn't support the hypothesis that regulatory action is the causal root of the lack of competition in the 2000s.
None of that stuff is actually strongly correlated. Whether an industry's capital costs increase disproportionately with scale has little to do with whether that industry has significant externalities requiring more regulation as it grows. You can find major examples of every combination of those things.
Moreover, if the increased capital costs are a result of increased regulatory compliance costs, that's not actually disproving the original point either.
> The aggregation of capital in public capital markets supports this (Value of equities up, # of market participants down).
That would be expected regardless because the lower amount of competition would be expected to result in higher profits and higher valuations regardless of the cause.
> The fact that the legislature has been gridlocked for years also doesn't support the hypothesis that regulatory action is the causal root of the lack of competition in the 2000s
Whatever gridlock existed hasn't stopped them adding some 40,000 plus new pages to the CFR in that time.
California has been legislating significantly without issue during all of the federal gridlock.
You're seeing this happen before your very eyes with companies like Google and Facebook. Their lobbying expenditures have exploded as a response to increased treats of regulation.
Interestingly each new rule (e.g., a new road traffic regulation) only acts as yet another avenue to collect money.
I suppose lobbying is a legalised form of bribe so the passage you quoted makes perfect sense.
Equally nuts is the special interest group that Upcodes is battling. They draft regulations and then _charge_ the public to access the regulations that they’ve lobbied lawmakers to adopt claiming some sort of IP right over the law.
https://www.opensecrets.org/news/2019/06/virginia-thomas-ext...
In the US, two political parties control nearly all activity down to the county and city level. If you are in politics already you pretty much have to have permission to seek higher offices. If you are not you have to get past both parties even the one you wish to be part of. There is a reason why at the Congressional level reelection is almost a sure thing with most people losing their seat from retirement!
So lets look at the national level, where CU and CFR bells are rung the most. Incumbent politicians have unlimited access to the media and to a point even use of the postal service. That is one hell of an advantage to an outsider to surmount. Then thrown in all the PACs they have friends and family in, all of which are protected by wonderfully named laws to protect the integrity of elections but really do only two things, protect incumbents and provide a legal means to make their friends and families rich.
So lets drop back to CU and the 1A. The 1A says nothing about whose speech rights may not be infringed, it says speech may not be infringed. The CU ruling made it clear that it wasn't some fictional body having freedom of speech, it was the right of the people in any organizational form they choose will always have the right to free speech wherever they go.
That is why you must resist all attempts to reform campaign financing. The established parties already have it all wrapped up and are merely feeding you nice market tested lies to prevent anyone from breaking their duopoly.
Open the door to silencing one voluntary grouping of the public from entering politics by any means and you allow for any future grouping which is a threat to the established parties to be blocked as well.
Why should people be okay with unlimited expenditures by corporations and special interest groups?
Having your government's influence be heavily skewed towards companies or even any non inclusive group of individuals seems like a huge problem. I understand that there is a balance to be struck but the current one seems way off to me.
> Then thrown in all the PACs they have friends and family in, all of which are protected by wonderfully named laws to protect the integrity of elections but really do only two things, protect incumbents and provide a legal means to make their friends and families rich.
Isn't the ability of PACs to hand out so much money a consequence of Citizens United?
This isn't a very good example because the health insurance market is dysfunctional for reasons independent of this and Medicare is the government, so "negotiating prices" really just means dictating prices.
We already see this with Medicare in areas other than prescription drugs, where Medicare will set payouts below cost. Then many providers won't accept it (harming patients by reducing choice) and others, not wanting to turn away sick patients, will see them at a loss but then have to recover the money by charging more to patients with private insurance or paying out of pocket (harming them and reducing access to care due to higher prices).
> The latter is a regulation that does nothing to deter new companies from entering the pharmaceutical industry
Even if all it did was exactly what you expect it to (cause lower prescription drug prices), low margins are exactly what will deter new companies from entering a market. They can't recover their startup costs (which incumbents paid years ago), so they don't bother. With price controls that lower amount of competition may not raise prices, but you would certainly expect it to impact the amount of new R&D happening.
http://voices.washingtonpost.com/ezra-klein/2009/07/does_med...
The way health insurance should ideally work for non-emergency care is that the insurance pays the amount charged by the lowest cost provider, but the patient can choose any provider they like and pay the difference themselves.
Then if one provider has bigger rooms or is less of a commute or has better ratings on some ratings service, the patient is the one deciding whether or not the benefit is worth the additional cost, instead of some functionary who is neither the patient nor the recipient of the bill.
None of that happens in the current healthcare market where we pay over double all other modern nations, nor does it happen in the many other nations that effectively control medical costs via setting a schedule of prices for drugs and medical procedures.
The check on cost in this case would be the patient, because outside of any other reason to choose one provider over the other, they would choose the least expensive one and save money. Which gives every provider the incentive to either be the least expensive one or provide tangibly more benefit to justify a higher price.
Yes, for it to work it would have to be combined with some functioning price transparency, but so let's do that then.
And the last isn't actually required. If patients can discern no meaningful difference between providers then they'll just choose the least expensive one, leading to price competition as intended. Though you can imagine that repeat patients will still have good knowledge of how big the patient rooms are, how soft the beds are, how much time they find themselves spending in the waiting room, how far the office is from their house, etc.
> None of that happens in the current healthcare market where we pay over double all other modern nations, nor does it happen in the many other nations that effectively control medical costs via setting a schedule of prices for drugs and medical procedures.
Nobody thinks the current US healthcare market is cost efficient. The existing regulatory environment is bad and promotes a lack of competition. But why is the only solution price controls, instead of fixing the bad rules that impair competition?
The problem with Medicare is that they don’t pay for ineffective treatment. This makes it slightly more difficult for medical networks to charge for higher margin procedures.
I think the data on what hospitals, insurance companies, and drug companies call the "cost" shows it's over-inflated BS. If they're lying and price-gouging, then whoever is charging them should demand payouts below their "costs" if they can't force them to do a reasonable profit above actual costs. Quick article off the top of Google with examples of the "costs" at hospitals:
https://www.foxbusiness.com/features/outrageous-e-r-hospital...
It's certainly the case that some of the underlying costs are higher than they ought to be. The problem is you can't fix that by lowering payouts across the board -- if certain medical devices are too expensive because of a lack of competition, the hospital can't lower the price the other company charges (or they'd have done it regardless). Nor can they reduce regulatory compliance costs when they still have to comply with the same regulations. So they have to cut something else instead. Which isn't what you want when the something else was a cost effective method of improving patient outcomes.
There isn't a "make it cost less" button that can magically lower prices across the board. Some things already have reasonable margins. To reduce costs without killing people you have to specifically target the waste (and its causes, which in many cases are high compliance costs, barriers to entry and a lack of competition).
The limitation in patent durations would disallow corporations milking old inventions and would incentivise them to keep innovating. It would also allow more competition, because the formulas end up in the public domain quicker, enabling actual market efficiency through improving production processes and so on. Parallels could be drawn to the entertainment and software sectors.
Stimulating the lowest market price would counteract predatory tenfold price hikes by allowing competitors to produce a generic variant at reasonable prices and outcompeting the bad behaviour.
The current regulatory framework incentivises big conglomarates to be anti-consumer because that's where the money lies. At the end of the day, we're talking about people's health.