We Have Signs

From Robert Samuelson at The Washington Post, A Scarcity of Economic Growth

excerpt:

The causes of the productivity collapse are unclear. Some economists say that productivity isn’t measured properly — Internet benefits are allegedly undercounted. Other economists contend that U.S. technology and innovation are lagging. Still others argue that weak business investment after the Great Recession explains lackluster growth.

To this list should be added another plausible candidate: the dead weight losses created by special interest groups, as explained by the late Mancur Olson (1932-1998).

Although an economist, Olson revolutionized thinking about the political power of interest groups. Until Olson, conventional wisdom held that large groups were more powerful than small groups in pursuing their self-interest — say, a government subsidy, tax preference or a protective tariff. Bigness conveyed power.

Just the opposite, Olson said in his 1965 book “The Logic of Collective Action.” With so many people in the large group, the benefits of collective action were often spread so thinly that no individual had much of an incentive to become politically active. The tendency was to “let George do it,” but George had no incentive either. By contrast, the members of smaller groups often could see the benefits of their collective action directly. They were motivated to organize and to pursue their self-interest aggressively.

“An increase in the payoffs from lobbying . . . as compared with the payoffs from production, means more resources are devoted to politics and cartel activity and fewer resources are devoted to production,” he wrote. “This in turn influences [a society’s] attitudes and culture.”

The dilemma for democracies is clear. Voters expect governments to cater to their needs and wants — and one person’s special interest is another’s way of life or moral crusade. But if governments cater too aggressively to interest groups, they may undermine (or have already done so) the gains in productivity and economic growth that voters also expect.

HKO

This fear of special interest groups was referred to by the founders as “factions” and they structured the government to reduce the influence of factions as much as they did to protect individual liberty.

Progressives found the original constitutional structures too inhibiting and outdated, and were concerned about the influence of corporations, and successfully sought to removes some of the checks and balances to allow more federal power.  In doing so – they created a structure that encouraged a greater number of smaller factions (and some not so small) which may have turned out to be more inhibiting.

From Robert Heinlein:

Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

This is known as “bad luck.”

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