Title: How Campaign Contributions and Lobbying Can Lead to Inefficient Economic Policy - Center for American Progress
Headings: How Campaign Contributions and Lobbying Can Lead to Inefficient Economic Policy
How Campaign Contributions and Lobbying Can Lead to Inefficient Economic Policy
Rent-seeking
A modern example: Tesla Motors
Campaign finance, lobbying, and influence
Campaign contributions lead to policy outcomes
Lobbying leads to policy outcomes
Conclusion

Content: As Nobel Prize-winning economist Joseph Stiglitz explains, rent-seeking not only wastes tax dollars on unnecessary or inefficient projects—redistributing money from one part of society to the rent-seekers—but it is a “centripetal force” that hollows out the economy because “the rewards of rent seeking become so outsize that more and more energy is directed toward it, at the expense of everything else.” While it is impossible to quantify the economic harm done by rent-seeking to the American economy, this issue brief reviews the literature and finds that the harm is likely quite significant. Certainly, not all money in politics is spent for the purpose of capturing private favors, but there is evidence that at least a significant percentage of it is. Most Americans do not make campaign contributions or lobby politicians. Rather, the vast majority of money spent on these activities comes from wealthy citizens and business interest groups. Moreover, studies find that businesses with the most to gain from favorable public policy engage in the most political activity. Even worse, research indicates that campaign contributions and lobbying often help shape policy outcomes, which suggests that rent-seeking efforts are often successful. While disagreement exists about how much influence campaign contributions and lobbying have, money in politics seems to be most effective in shaping the outcomes of issues that are less visible and less ideological, exactly the type of special favors one would expect rent-seeking to target. Furthermore, there have been several findings that show a clear relationship between specific instances of lobbying or campaign contributions and government favors. To take just a few examples: