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: The second economic concern of rent-seeking behavior is that the policy positions sought and protected create a misallocation of government or private resources. In the case of government resources, it may be that scarce government revenue is used to create a special interest tax subsidy instead of investing in research or infrastructure that would be more beneficial to society as a whole. Private resources may also be misallocated. Without proper regulations, for example, banks may overleverage themselves if they believe that the federal government will bail them out. Finally, rent-seeking could prove so harmful to the economy that not only are resources not used in the most efficient manner possible, but they are actually idle. During a recession or its aftermath, for instance, workers are unemployed and significant capital remains on the sidelines. Indeed, some argue that the 2008 financial crisis—the effects of which we are still suffering from—was fueled by rent-seeking behavior. A paper on tariffs and monopolies by Gordon Tullock of George Mason University emphasized this idea—that both the ends and means of rent-seeking can waste resources—nearly 50 years ago. Originally, only the increased cost on consumers was recognized as a domestic economic effect of tariffs and monopolies, as they allowed domestic firms to charge a higher price than they could with unrestrained competition. This zero-sum transfer, however, looks worse when other factors are introduced.