When a government is small, it can provide very limited benefits to special interest groups, so there is a small incentive for special interest groups to lobby the government. The successes of those that do lobby the government will cause the government to grow. This occurs because the great majority of voters and taxpayers are rationally ignorant about most government activity, making it easy to increase everybody’s taxes a small amount to provide a sizable benefit to a few. Most people do not have an incentive to investigate in detail the allocation of their tax dollars, but the special interest groups with the sizable benefit will repay the representatives with political support. Thus, special interest groups cause government growth.
The growth of government, in turn, raises the payoff available to special interest groups. With a higher payoff to special interest groups, this encourages the formation of new special interest groups to share in the payoff. A larger government can support a larger number of special interest groups. Thus, as government grows, more special interest groups form. The formation of special interest groups in turn increases the demand for special interest legislation, cause a further growth in government spending.
Randy Holcombe, An Economic Analysis of Democracy, 1985.
August 1, 2019
QotD: Small government provides little scope for special interest lobbying
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