Rent-Seeking: the DNC and donations from lobbyists

As discussed in class, rent-seeking occurs when resources are spent to obtain rents which derive from some activity that has negative social value. The issue itself is not the rent, but the rent-seeking, as it rediverts resources and produces a deadweight loss.

Mueller briefly touches on the issue of rent-seeking as it applies to political donations, lobbying, and government representatives voting on pertinent legislation. He reviews particular studies that find a correlation between political action committee contributions, and the way congressmen vote on protectionist legislation. Mueller writes that the studies “found a positive and significant effect of the size of political contributions from the interest group, and the probability that a congressman voted in favor of the protective legislation” (351).

Incorporating funds from lobbyists and PACs has been a contentious issue for the Democratic National Convention. In 2008, Obama introduced a restriction that “banned donations from federal lobbyists and political action committees,” according to this Washington Post article. Yet in February of 2016, the DNC reversed that decision, and ended the ban on donations from lobbyists and PACs. The Wall Street Journal projected that through June, registered lobbyists alone donated $7 million to Clinton’s campaign.

Given that lobbying is an example of rent-seeking, it will be interesting to see the cumulative effects of the DNC’s decision. As businesses divert more resources toward obtaining rents, a greater social welfare cost will be imposed upon society.