Since the publication of a number of articles concerning efficient rent-seeking both political scientists and economists have been interested in discovering how firms make rent-seeking investments and in developing a model of that process. In addition, several writers have been interested in the question of why politicians and bureaucrats in the United States do not capture more of the benefits or rents that they provide through their policy decisions (see Tullock, 1989). In this article I attempt to move toward explaining lobbying or rent-seeking investments by examining the questions, “How do firms decide how much to spend on campaign contributions?” and “Do these decisions reflect any underlying models of decision making?”
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- 1.Obviously this is not the beginning of contributions by corporations to political campaigns. Corporations and their senior officers have given money in significant amounts to congresspersons since the beginning of the republic.Google Scholar
- 2.Firms may attempt to overcome the free rider problem by instructing their trade associations to make the contributions on behalf of the entire industry.Google Scholar
- 3.This is, I believe, a quite reasonable example. If one were to study the 1986 tax “reform” legislation it is quite obvious that there was a bidding war among competing lobbyists for the retention of tax loopholes. For a journalistic account of this bidding game see Birnbaum and Murray (1987).Google Scholar
- 4.This statement accepts Tullock’s (1989) definition of rent-seeking is a behavior with a negative social impact.Google Scholar
- 5.This conclusion is similar to that reaches by Denzau and Munger (1986) who argued that a legislator who is maximizing his reelection chances will be more likely to receive contributions from interest groups whose interests are congruent with those of the legislator’s constituency.Google Scholar