I just attended the first plenary talk at my favorite annual economics meetings: those of the Association for Private Enterprise Education. It was on “Political Capitalism” by my friend Randy Holcombe of Florida State University.
In the talk he applied public choice to understanding how various rules and regulations get set. So far, so good.
But then he tried to link it up the top 1%/bottom 99% dichotomy. He sees the interest groups that succeed in getting their way as being in the top 1%.
In Q&A, I didn’t ask a question, but made a statement. I pointed out that two of the most powerful lobbies in Washington are the National Education Association and the American Association of Retired Persons and that few of their members are in the top 1%. I noted that I come from coastal California, where many of my fellow homeowners show up to oppose virtually any new home getting built–and often succeed in preventing it or slowing it down by years. I pointed out that most of these fellow homeowners are not in the top 1% and that I’m closer to the top 1% than many of them are: I’m guessing I’m in about the top 7 or 8%. So, I concluded, if you stick with the 1%/99% dichotomy, you’re going to miss a lot.
Randy answered that the rank and file members of the NEA and of the AARP don’t have much power: It’s the heads of these organizations, he said, that have power and they are in the top 1%. I responded that if they went strongly against the wishes of their rank and file members, they would not be in those positions for long.
READER COMMENTS
Alan Goldhammer
Apr 2 2018 at 3:31pm
David writes,
I disagree with the first and agree with the second. The NEA has little impact in Washington because the stakes are too small relative to where their rank and file work. Look at what went on in West Virginia and now is happening in Oklahoma, Kentucky and some other states. This is where the action is as far as the NEA and its rival the AFT. The lobbies that are big in Washington DC are those that can facilitate large campaign contributions to members of Congress.
AARP (disclosure, I’m a member) has very modest membership dues and makes most of its operating money as an insurance re-seller. It’s power comes from being able to mobilize a lot of senior citizens on very few big ticket issues.
Mark Z
Apr 2 2018 at 6:08pm
I think the NEA and AFT enjoy much more power at the state level than the federal one, as education is still primarily a state issue. Alan mentions the AARP’s ability to mobilize senior citizens; I would add that a big reason for this is senior citizens have a lot more free time, being retired, than younger people do, to volunteer and such; and are disproportionately wealthy (from a lifetime of saving) and, inasmuch as lobbying is an investment, they are far more likely to see short run returns on theirs, in the form of obtaining/retaining their social security and medicare benefits.
I think discussing politics in terms of class percentiles is fairly meaningless in general, not even just at the 1% vs. 99% level. The most imposing class-based lobby in the US isn’t the 1%; it’s the “middle class.” Director’s Law does a pretty good job of explaining a lot of public policy in the US. Maybe because the middle class has the dual advantage of having a lot of money, unlike the poor, and a lot of votes, unlike the rich.
John Alcorn
Apr 2 2018 at 9:14pm
I attended Dr. Holcombe’s stimulating, wide-ranging lecture. Although the lecture was full of insights, a key empirical premise seems shaky.
Dr. Holcombe combined “the theory of elites,” public-choice economics, and the theory of transactions costs to cast the 1% as an insider class that flourishes through regulatory capture. He argued that the 1% have an advantage in lobbying because they have concentrated interests and relatively low transactions costs.
What is shaky? The most successful people in the 1% achieved great wealth by creating value through technological innovation and entrepreneurship, largely outside the political establishment. Think Apple, Amazon, Google, etc.
Perhaps there is a tendency for these outsiders to become insiders, as they turn to lobbying to defend their positions (partly because government targets them). But it seems that new outsiders can still emerge through value-creation.
Methodological individualism is more reliable than class analysis in the social sciences.
Comments are closed.