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: While there is considerable disagreement about whether the Court was correct in finding that those campaign finance rules failed to prevent corruption, imposing limits on campaign financing and lobbying may be justified for another reason—promoting productive economic activity. The primary way that campaign contributions and lobbying may dampen economic growth is via a practice known as rent-seeking—the process of seeking income through special government favors rather than through productive economic activity. When firms and individuals engage in rent-seeking behavior, it has several negative effects on economic growth. Not only do people spend more time and money trying to get a bigger piece of the economic pie for themselves rather than trying to enlarge the pie, but the policies they seek are often wasteful, inefficient, or even harmful. If rent-seeking is a successful strategy for businesses or individuals, it can impose great harm on society by slowing or even stopping economic growth. 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.