Business, Lobbying, and the Big Picture
By Bryan Caplan
When the sugar industry lobbies for sugar tariffs, economists are quick to cry “Rent-seeking!” A concentrated interest lobbies for a concentrated benefit, paid for by a diffuse public – nothing mysterious. Strangely, though, businesses also often lobby for Big Picture policies. There’s a “business perspective” on school reform, infrastructure, environment, health care, workplace diversity, and much more.
You could say, “What’s so strange?” Businesses benefit from a disciplined workforce and top-notch infrastructure, so they naturally push for strict schools and shiny bridges. But this objection ignores the standard public goods argument. Most firms have no realistic chance of changing policy on education, infrastructure, or any other Big Picture issue; the polity is just too big. So why don’t they just free ride, hope for the best, and save their lobbying dollars for narrow issues where they are likely to change the outcome?
None of this changes the plain fact that businesses do engage in Big Picture lobbying. But it does undermine the standard rent-seeking explanation of their motives. What else could be going on?
The obvious story is that Big Picture lobbying reflects business leaders’ sincere convictions. When individuals give money to broad political causes, we usually infer a charitable motive – even if we loathe their causes. You could see a lot of business lobbying through the same lens. Firms spend money on Big Picture issues because firms are run by humans, and humans care.
Yet on reflection, there’s reason for skepticism. Firms, unlike the vast majority of individuals, have to worry about public relations. A good public image is good for profits; a bad public image is bad for profits. This is pretty obvious when firms loudly give to charity or brag about how green their products are. If they’re doing it solely out of the goodness of their corporate souls, why do they crow so loudly? The same mechanism could easily explain their Big Picture lobbying, too. Businesses lobby for schools and infrastructure because backing do-gooder causes is great public relations – even if the school and infrastructure spending is a big waste of money.
You could view this as an argument in favor of the business community’s Big Picture policies, but you shouldn’t. While firms have a clear incentive to lobby for popular Big Picture policies, many popular policies are ineffective or counter-productive. If businesses genuinely cared about good policy, they would be happy to publicly second-guess the wisdom of popular panaceas. Each firm’s profit-maximizing strategy, though, is to pander to public opinion, come what may.