TITLE:
Lobbying Is a Biologically Necessary Transaction Cost in a Democracy
AUTHORS:
Stephen P. Magee, Kwang-Yeol Yoo
KEYWORDS:
Tariffs, Lobbying, Democracy, Dominance Hierarchies, Biological Metaphors, Rent Seeking
JOURNAL NAME:
Modern Economy,
Vol.10 No.6,
June
30,
2019
ABSTRACT: We explain why lobbying is a biologically necessary transaction
cost in a democracy. We use lobbying for trade protection to illustrate because
we have controls for other effects by using the Young and Magee [2] general
equilibrium international trade model with 2 goods, 2 factors, 2 lobbies and 2
political parties, all maximizing in a game theoretic equilibrium. Our
empirical estimates show that protectionist lobbying costs are low: 0.8 of one
percent in our advanced countries and 0.2 of one percent for the US. There are
political economy explanations for lobbying and corruption: money creates power
and power creates money. There are biological explanations for lobbying: humans
are carnivores and compete for power like animals in dominance hierarchies.
Using both explanations, competitive lobbying is an equilibrium outcome. Our
data focus on capital intensive exports compared to import-competing industries in 8 non-EC OECD countries in 1965 and
1986 and factor intensities of production from wage and capital earnings in 3-digit
level ISIC data.