The Business of Being Informed

When taking a step back to critically evaluate the news we consume, we're usually left to wonder why it so often seems sensationalized and emotionally charged. Seldom are news stories presented that don't elicit a strong, sometimes visceral, emotional reaction. The reason behind this is best understood in the context of the principal-agent problem. 

In this scenario, the agent is the news company, and the principal is the consumer of their news. The interests of the news company are to maximize profits in the name of maximizing shareholder value. The interests of the news consumers are different; their interests are to be informed, often about American politics. Therefore, the interests of news companies and of news consumers are different, creating a principal-agent problem. What results is news companies shirking, or displaying news not for the sake of informing their viewers, but for the sake of maximizing shareholder value. In order to do so, news companies must maximize their viewership, thereby maximizing ad revenue. The best way they've found to do this is creating sensationalized and emotionally charged news that elicits strong reactions and keeps viewers entertained. As a result, American news shows have devolved into entertainment programs masquerading as sources of information. In the principal-agent context, it's plausible that this is merely the slack that exists between informative and entertaining reporting. If that's the case, as consumers, we ought not to allow such significant slack to exist.

Rocky Mountain High (On the Hill)

     My brother currently serves as a Legislative Correspondent for the House of Representatives for the office of Joe Neguse, a representative from Colorado. This immediately came to mind while reading Weingast & Marshall because Representative Neguse sits on the House Committee on Natural Resources and is the ranking member of its Federal Lands subcommittee. This is interesting because over 36% of the state of Colorado is federally owned, while the average state percentage is around 15% federally owned, meaning Colorado, and its constituents, have a particularly strong stake in federal land and natural resource policy. Looking at the other states represented on this committee, many share this characteristic. The committee is largely composed of states with substantial natural resource interests, such as Oregon, which has three of its six representatives on the committee, and Alaska, which has its sole member on the committee. This pattern is consistent with Weingast & Marshall’s argument that congressional committees are composed of “preference outliers”, as representatives from states with particularly strong natural resource interests are likely to favor distinctly different policies in that realm than the median member of the House. 

    Representative Neguse likely has an incentive to serve on this committee because he has a comparative advantage in natural resource policy given its relevance to his constituents. The opportunity cost of dedicating his time to this area is relatively low, since advocating for favorable natural resource policy is likely to benefit his reelection prospects. However, this specialization extends beyond Representative Neguse himself. My brother often speaks about how most of his office spends a significant amount of time working on policy related to natural resources. This demonstrates that comparative advantage within a particular policy area is reflected not only in representatives’ respective committee assignments, but also in how they allocate staff resources within their offices.

Slipping Over the Line

I’ve had a hard time understanding how rent-seeking could even be considered legal. Part of this confusion probably stems from growing up in a developing country. Poorer countries dont have enough information, resources, or strong institutions to keep “legal” rent-seeking clearly separate from corruption. This week, Paraguay showed me exactly why the line is so hard to see.

On November 5, President Santiago Peña resigned shortly before facing an impeachment trial, amid the crisis set off by the government’s intervention in Ueno Bank, a private bank he had been linked to. Peña had been part of the bank’s shareholder group. Soon after taking office in 2023, he named Carlos Carvallo, then Ueno’s top executive, as head of the Central Bank, the institution that regulates banks like Ueno. The bank also managed up to $850 million in public funds, according to its own figures.

Appointing an industry insider as a regulator is legal. A private bank holding public deposits is legal too. Both fit the logic of rent-seeking: a connected firm gaining an advantage through political access instead of competition. But if public money was steered to the bank because of personal ties, or if supervision was deliberately weakened, the exact same actions become corruption. Prosecutors have detained eight executives, and that’s what investigators are now trying to determine. In other words, rent-seeking and corruption use the same tools: connections, appointments, and access to public resources. In theory, the line between them is the law. In practice, what separates them isn’t the action itself, but whether a specific rule was broken and whether anyone can prove it. That depends on how strong a country’s laws and enforcement are. It also explains why, in countries with strong institutions like the U.S., rent-seeking can stay legal and out in the open, while in countries with weaker institutions, it can slip into corruption more easily

Student Self-Governance, Slack, and Ideological Shirking

From orientation and beyond, UVA students are told about one of our University's core values: student self governance. Near the close of each semester, many CIOs gear up for elections for their club leaders and revise their constitutions, and as someone with a front-row seat to the highs and lows of student self governance in action, slack and shirking are on my mind. There are some fundamental differences that impact the principal agent problem in student and CIO government. Unlike the Senate, student-representatives have far more frequent check-ins with our electorate; most roles on CIOs, Student Council, and Honor only last one academic year at most. With students vying for resume building roles, graduations forcing ends to terms, and incoming classes bringing fresh representatives, there are often MANY options for who voters can elect. The numerous options and one-year terms reduces slack, which in an ideal world minimizes the principal agent problem. Student-voters have very busy lives, and they probably are not taking much time to monitor the actions of their student-representatives, be it for their CIOs or Student Council. On top of that, the inner workings of student government is a lot murkier since there is less oversight and publicly released information about the voting patterns of our student-representatives, especially for CIOs. This lack of monitoring options and the idea of rational ignorance provides additional slack to many members of student government. 

A s CIO elections approach, I worry most about ideological shirking within CIOs, both amongst agents and their principals. as student-representatives govern their CIOs, their own ideologies, goals, and relationships can sway their decisions away from what is best for the club as a whole. A few passionate members of a executive board can reshape a club in their own vision around their values, for better or for worse. These often tight-knit groups can be full of tight relationships, and student-voters often use their friendships with potential student-representatives as a proxy for ideology, and therefore a proxy for policy and performance. Popular, but sometimes not as well qualified, agents will be elected by their principals. Problems with poor leadership within CIOs can lead to the disorganization and sometimes even the downfall of an org, largely caused by ideological voting. With more than 800 CIOs, some ideological shirking is inevitable. Luckily, UVA students are generally bright, deeply involved, and care about their impact on the community. Student self governance exposes all of us to the wonders of public choice in action at a small but meaningful scale. 

Olson Can Explain Why the Chicago Bears May Become the Hammond Bears

As an avid Chicago Bears fan, I, along with the entire city, am experiencing Olson's worst nightmare. Currently, the Bears are leveraging both Illinois and Indiana against each other in negotiations for a new stadium, despite the entire fanbase wanting to stay in Chicago. In 2021, the team purchased a 326-acre site in Arlington Heights, Illinois, and in 2022 unveiled a nearly $5 billion plan for an enclosed stadium. However, the team's infrastructure requests at the Arlington Heights site amounted to roughly $855 million in taxpayer funds. A property-tax bill the team supported passed the Illinois House 78–32 in April 2026 but ultimately failed to become law. Meanwhile, Indiana lawmakers advanced legislation clearing the way for a Bears stadium in Hammond, Indiana, giving the team additional leverage against Illinois. Illinois leaders are now preparing another proposal for the veto session beginning November 17. Taking a step back, fans who want the Bears to stay in Chicago are all anxiously awaiting the next headline and praying we don't move to Indiana. But therein lies the problem: we are largely spectators, while the Bears are actively organizing, lobbying, and negotiating to secure the best possible deal for themselves.

This situation closely follows Olson's theory that small, concentrated interest groups have a much easier time organizing around their economic interests than large, dispersed groups. The Bears have enormous financial incentives to lobby and negotiate with both states, while the potential costs of public subsidies are distributed across millions of taxpayers. Public opinion illustrates this disconnect. A 2025 University of Chicago poll found that 68% of Chicago residents considered keeping the Bears in the city important, yet 65% opposed spending any public money to accomplish that goal. In other words, while residents collectively value keeping the team, relatively few are willing to support the financial commitment necessary to pursue it. This is Olson's free-rider problem: individuals have little incentive to organize and contribute toward a collective objective when they can benefit from the outcome regardless. Meanwhile, the Bears have no collective-action problem. They have a concentrated financial interest, the resources to organize, and the ability to play two state governments against each other. Ultimately, it is the Bears who will have more influence over the stadium's future than the millions of fans and taxpayers who just like Olson, are laying awake at night.

"A message to every billionaire megadonor, every trillionaire megadonor." - Talarico

After thinking about the midterms on Tuesday, I wanted to apply our discussion of interest groups to Elon Musk. Musk is essentially an interest group by himself. As the world's richest man, he has the financial resources and political connections to pursue favorable legislation for his companies. He moved his businesses to Texas for its business friendly policies and lower costs. As Stigler 71 explains, acquiring favorable regulation requires votes and dollars, and Musk has tried to supply both. 

This year he spent at least $474 million supporting Republican candidates in the midterms. However, his preferred candidates lost several major races, including Ken Paxton's Senate race and Greg Abbott's gubernatorial race in Texas. Nearly half a billion dollars later, Musk has very little to show for it. Under Abbott, his companies received billions in tax incentives and benefited from legislation giving them advantages over other businesses. One shameless example was when Texas rewrote its corporate laws to give his Starbase operation the legal right to shut down a nearby public beach and highway. With the incoming administration promising to end preferential treatment, Musk will likely lose a large amount of money.

 Olson argues that smaller, concentrated groups have an advantage in political organization because their members have more to gain from collective action. Musk takes this idea to its extreme. He has the resources of an entire interest group without worrying about free riders or coordinating thousands of members. Yet, this election demonstrates that money alone cannot guarantee political influence. Perhaps this is enough to give Olson a little peace of mind. Even the world's richest man cannot simply buy the political outcomes he wants.

La Dolce Vita? The Economics of Italian Train Strikes

Last semester, I studied abroad in Florence, Italy. During my time there, I experienced numerous train delays due to strikes organized by unions.

It wasn't apparent then, but now I see that how Friedman's rulemaker and umpire regulates different interest groups dictates how they are able to behave significantly: Italian labor unions have significantly more influence than in the US.

 

Another factor impacting union behavior is the number of members and groups involved. There are six transport labor unions participating in strikes tomorrow for better pay and working conditions; a higher group number leads to a greater probability for an employee to find a group tailored to their individual preferences. This differs from the US, where there is on average one union that functions as the "exclusive bargaining unit" for a given workplace. In Italy, union membership comprises around 1/3 of overall workers compared to only about 10% of workers in the US.

 

The costs of the strikes can fall on several different groups, from one as large as one of the rail companies that suffers great monetary losses to one as small as study abroad students like myself whose trip was delayed.

 

Non-union members still receive contract benefits if labor unions' strikes are successful, which creates a free rider problem because people can receive the benefits union members pay for through their time striking and instead receive wages from working on the day of the strike. People can also be members of the union and do the same, but there is likely more social pressure from within the group incentivizing members to strike. 

Although the free rider problem is more prevalent in large groups, when a union engages in strikes it is more effective as group size increases. The transport unions, for instance, are more effective because they're composed of individuals working at train stations across Italy rather than a single station. The selective incentives from union membership include personal representation, discounted legal assistance, and fee reductions for tax returns.

 

No individual benefactor exists like in a privileged group to influence the contractual change that achieves the optimal amount of rent in a way a large group can in a strike.

Why Care About Corn?

The National Corn Growers Association (NCGA) is an interest group that has over 40,000 dues-paying corn growers in the U.S. and has affiliated organizations in 27 states. Their main mission from their website is “to help protect and advance corn growers’ interests.” Specifically, the organization focuses on ethanol, trade, biobased economy, farm bill, and animal agriculture among other issues. To make an impact, the organization promotes research in these areas, advocates and lobbies on behalf of corn farmers, and spreads educational content for corn producers. The cost of membership for members differs from state to state, but it typically ranges from $20-$50. Along with benefits from the organization's political efforts, members can expect to receive other selective incentives, like access to exclusive webinars and reports with insights by NCGA’s chief economist, college scholarships for children of members, and discounts at Bass Pro Shops and Cabela’s.

Currently, the organization is fighting for year-round E15, which the organization says would increase the demand for corn by ~2.4 billion bushels annually. With this increased demand, the price of corn would increase, directly benefiting all corn farmers. An estimate for the benefit of year-round E15 to a farmer who has equal parts corn and soybean is $5 per acre and the average corn farmer has 278 acres of corn, so the estimated benefit per corn/soybean farmer would be $1,390. Unlike the selective incentives mentioned earlier, these benefits would not be restricted to members of the organizations, so the benefits are available to all 500,000 total corn farmers in the United States. Based on these numbers, this means that there are a significant number of farmers who are able to free ride off of the benefits of the NCGA’s lobbying efforts, considering there are only 40,000 paying members. 

Lastly, looking at how this would impact consumers, it could actually lower fuel prices at gas stations; however, it is likely that they could see higher food prices due to the pass through from higher corn prices. It is also known that E15 provides worse mileage than alternatives which counters the benefit seen at the pump. Ultimately, the small costs are spread across many people, and they are also hard for people to see, which creates very little incentive to organize an effort against corn farmer interest groups.

The Persistence of the Penny

Soon, the days of making wishes in fountains, "take a penny, leave a penny" dishes, and the many idioms involving pennies will come to an end. This is all because as of November 12th of 2025, new pennies are no longer being minted. The stat that it costs over 3 cents to make each penny had been thrown around for nearly a decade before the penny began to meet its demise. This is because of one corporation's lobbying efforts: Artazn, a zinc company, was the supplier of the blank coins that would be minted into all of the pennies in circulation. This Tennessee based company maintained a chokehold on the penny, and on the legislators that allowed it to continue to be minted, by spending nearly $3 million since 2006 on the lobbying firm Americans for Common Cents. Since Artazn was a privileged group, it recognized the value of protecting its revenue stream and wasn't bogged down by the free rider problem or need selective incentives. Given how niche of an issue this was, it was enough to prolong the creation of pennies by nearly two decades.

It seems like Olson would not have been pro penny. The benefits were very concentrated for this pressure group: since 2008, the U.S. Treasury has paid the company more than $1.3 billion since 2008 to produce the blank coins. Meanwhile, in 2024 alone, the net loss for taxpayers was $85.3 million, which is a pretty penny! But since the costs were distributed across hundreds of millions of taxpayers, it only cost about each American one quarter annually. Taxpayers were the latent group in this case, since no one calls a congress member over 25 cents a year. Even the people most prone to penny pinching probably would not have thought twice about how printing pennies hurts their pocketbook.

It's the Economy, Stupid!

 How did Richard Nixon go from a staunch opponent of wage and price controls in July, 1971 to reversing his position just a few weeks later? The answer is relatively simple: he wanted to ensure his reelection the following November. Pres. Nixon was advised by his treasury secretary, John Connally, to impose these economic controls in order to demonstrate to the public that he was serious about curbing inflation. The imposition of price and wage controls can be characterized as political signaling to voters, not necessarily a policy initiative in the public’s best interest. Richard Nixon never once believed that these controls would actually fix inflation in the long run. To convince Nixon of their value, Sec. Connally and other proponents argued for the “cosmetic” effects of a freeze on prices and wages. In other words, Connally emphasized the perception of these policies as opposed to their genuine effectiveness. Additionally, because Nixon could only serve four more years in the Oval Office (assuming a victory next November), the long term effects of price and wage controls were weighed negatively against the desire to win the upcoming election. 

Nixon’s decision to impose these controls is a clear-cut example of a politician forming policy in order to win elections instead of the reverse. The question we should ask ourselves is if Nixon is unique or if all politicians use policy as a means of winning elections. As our old pal Milton Friedman put it, “Nixon had the capacity of rising above principle if politics demanded it.” Is this a fault of Nixon’s character, or is this a fault of the incentive structure embedded within American politics? The answer is likely both, but we would need a second blog post to answer this question in more detail. 

Corn and Garlic: Two Peas in a Pod

    Becker’s model of competition among pressure groups says that groups spend resources to maximize the benefit of those in their group, and the policy outcome depends on how effective each group's spending is. Like corn farmers in the U.S. , garlic is a clear example of pressure groups. The U.S. has had an antidumping order on Chinese garlic since 1994, and in 2018 a rancher named Ken Christopher, one of the last three commercial garlic producers in the country, traveled to Washington to ask that garlic be included in new tariffs. His reasoning was that the tariffs were happening anyway, so why not garlic. His lobbying was successful, and after a 10% tariff began in September 2018, his domestic sales rose 15% in the last quarter of the year, and the tariff went up to 25% in May 2019.

    As Becker predicted, pressure groups began to compete against each other and Garlic didn’t go unchallenged. McCormick, a huge seasoning company, argued against it before the International Trade Commission. McCormick pushed back and said its recipes depend on Chinese garlic, which it does not consider substitutable for the American kind. A small group of growers with a large stake faces a firm that bears the cost, and both spend on lobbying. Consumers, who saw a box of garlic go from $20 to $40, are left bearing unnecessary burden. McCormick and Chrispother are spending resources on things other than production causing dead weight loss.

You Really Should Be Tipping.

    I have been working in the service industry for about 2 years, and the other day I was working at Wing Wednesday as a server at Asado. After someone tipped me a fun $0.97, I started thinking about tipping culture in the US and how it relates to our discussion about pressure groups and lobbying.

    Groups like the National Restaurant Association lobby heavily to keep the “tip credit” system intact. They spend millions of dollars in political efforts to maintain the policies that set the federal and state sub-minimum wage for tipped employees. The National Restaurant Association’s lobbying efforts are very successful, with wins in 2023 that stopped legislation in 23 states from overturning the tip wage policy. However, according to Olson, larger groups are often unsuccessful when it comes to applying political pressure because of the free rider problem. Where the National Restaurant Association differs is their implementation of selective incentives in the form of membership benefits. By becoming a member of the group, members are given exclusive access to a team of regulatory experts/lawyers, economic research on the restaurant industry, and member discounts on products and health care. With these selective benefits and a massive eligible base in the nation’s second-largest private sector employer, the National Restaurant Association secures a large amount of funding. They use these resources to out-pressure less organized labor groups and effectively influence governments to maintain sub-minimum wage levels of around $2/hour (that really gets taxed out). So, unless you can out-lobby the NRA, please think twice before you decide not to tip after dining in a restaurant that provides table service.

Daylight Savings Time

Every year, on the first Sunday of November and the second Sunday of March, the clock is either set back or set forward by an hour. According to polls in 2025, only 12% of Americans actually support daylight savings while 54% of Americans are ready to end the practice entirely. So why hasn't Congress done anything? 

Olson's logic of collective action helps explain this. Ending the clock change is a collective good; people benefit regardless of whether they contributed. Because each person's share of the benefit is so small, no individual has an incentive to bear the cost of organizing and would rather free ride off of everyone else. The group is also so large that not everyone agrees on how to end daylight savings: should the time be Standard Time or Daylight Saving Time? These complications make this a latent group, where no individual can affect what will happen.

On the other hand, Olson argues that smaller groups have lower organizing costs and larger benefits per member. This is why they are more successful in overcoming the free-rider problem and achieving their collective goal. For example, the candy industry lobbied to extend daylight savings to November, believing an extra hour of daylight would bring in more revenue. While for a candy company, an extra hour of daylight is an extra hour of revenue, for most Americans, it is a minor inconvenience that is not worth the cost of lobbying.

If Americans really want to end daylight savings, they would need to find a selective incentive to get organized so that they can actually achieve their goal. 

Rent Seeking in the NFL

Rent seeking behavior is common practice for large corporations with lobbying power. Although this occurs regularly in the political space, firms also compete for the right to display their logos on NFL uniforms. Nike, Adidas, and Under Armor are the official footwear providers of the league. Although other companies are licensed produce cleats that can be worn in NFL games, they are prohibited from displaying their logos. 

A new company called Caddix designs and manufactures cleats for high level athletes with patented SmartStuds technology. The cleats are supposed to reduce non-contact lower body injuries. NFL quarterback Caleb Williams believes in the technology so much that he has been fined over $30,000 across two games for wearing the cleats without covering the logo. Caleb Williams does not have a partnership with Caddix. 

This three-corporation cleat oligopoly dominates the NFL cleat market share, boxing out competition and impeding innovation. This imposes a clear external cost on players, exemplified by Caleb Williams who would rather pay $30,000 than wear nike cleats.

Trains in Spain: More Than Bad Luck?

On January 18, an Iryo train derailed near Adamuz, and an oncoming Renfe train crashed into it, killing 45 people. On October 28, a Renfe train hit the back of a stopped Iryo train in Toledo, killing 69. Accidents happen, but two deadly crashes in one year, on the same Madrid–Andalusia line, are hard to dismiss as bad luck. Both came only a few years after Spain ended Renfe’s monopoly and let private rivals like Ouigo and Iryo onto the tracks. Since then, much of Spanish rail's resources have gone into fighting over the market rather than improving it. Ouigo was accused of “price dumping,” the new entrants filed complaints claiming Renfe has unfair advantages, and Adif was accused of spending on new lines instead of maintaining existing ones.

The rent-seeking model we have seen in class can help explain what is likely happening. When the state controls something valuable, firms spend real resources trying to win or protect it, and those resources produce nothing. In Spain, the state owns Renfe (the largest operator), controls the tracks, and decides both who gets access and where to build new lines. Therefore, there is strong incentive to invest in lobbying, legal complaints, and visible new projects that bring political rewards. There is little incentive to invest in maintenance that voters never see. Although the crashes are still under investigation and no accusation can be directly made, the rent-seeking lens suggests that when effort goes into capturing rents instead of running a safe network, the costs eventually appear somewhere, and in Spain they may have appeared on the tracks.

What Made the Wave Blue?

Tuesday’s midterm elections resulted in what many are calling a “blue wave.” Nearly every county in the nation saw Democratic candidates receive a higher share of the vote than in 2024. This resulted in several major seat flips from Republican to Democrat in traditionally red states, like Texas, Kansas, South Carolina, and Ohio. As we learned when discussing the median voter theorem, whichever party wins the middle voter wins the election. So, in the span of two years, did the median voter across the entire nation truly shift from more conservative to more liberal? I argue no. I believe the preferences of the median voter did not change that profoundly in the span of two years, but instead, the Republican Party increasingly alienated voters through extreme right-wing rhetoric and behavior, and the Democrats positioned themselves as a more moderate alternative. 

As we have also learned in this class, rational ignorance is a significant barrier to voters’ understanding of policy and elections. Since voters have relatively little incentive to research every policy and candidate, they likely rely on more visible and obvious signals about who to support. This means that not only did the Republican Party become more extreme ideologically, but it did so in ways that were seen and felt by everyday citizens. For example, Vivek Ramaswamy’s offensive attack ad during his Ohio gubernatorial campaign received bipartisan backlash and compelled many middle-ground voters to vote for his Democratic opponent, and Ken Paxton’s corruption controversies drove Texans’ support of James Talarico. In general, President Trump’s frequent association with billionaires undermined the Republican Party’s image as an advocate for “ordinary” Americans. Simultaneously, Democrats worked tirelessly to appeal to moderate voters. James Talarico underscored his seminary education and Christian faith, while other Democrats appealed to the relatable issues of affordability rather than ambitious progressive ideas. While some of these examples highlight candidate behavior and rhetoric as opposed to policy positions, I believe they signaled to voters what they could expect out of each party, and moderates felt that Democrats were more in tune with their priorities. 

Back to School: PTAs and Olson's "Theory of Groups"

In Olson’s “Theory of Groups and Organizations” chapter he concludes that in order for a group to voluntarily take action and achieve the optimal level of a collective good (T*), the marginal cost of the collective good must be shared in the same proportion as the marginal benefits. If the marginal costs are distributed unevenly, the result will be suboptimal, as some group members will have marginal costs higher than the marginal benefits, and thus will be incentivized not to contribute. 

We can see an example of these group dynamics in parent-teacher associations or PTAs, assuming that the group's collective good (T) is an improved educational experience for their children. The marginal costs and benefits are distributed unevenly, since the marginal costs to some parents of attending PTA meetings or volunteering at school events might be higher than others and the percieved marginal benefit of the PTA's work may vary. Thus the optimal level (T*) will not be achieved.

However, some amount of the collective good will be provided voluntarily, resulting in what Olson calls "the exploitation of the great by the small" as some group members individually value the collective good so highly that they are willing to disproportionately pay the costs. This dynamic is common in smaller groups, such as PTAs (or UVA clubs). Although any parent at the school can join, it is usually only a small but passionate group of parents who become really involved in the organization, as they determine that the benefits of participation are worth the costs of time and effort. Other parents then have an incentive to free-ride or not volunteer because they know that their children will enjoy the benefits regardless.

No Selective Incentives, no integrated Lou's List

During Tuesday's lecture, Professor Coppock mentioned that UVA faculty leadership had historically been terrified to even acknowledge Lou's List, despite its popularity among students and faculty. UVA finally adopted it last Fall, but as an official university service, it somehow is not as good as the version Lou operated by himself. This made me wonder why large institutions use unpopular internal systems when better alternatives exist. A boring explanation is that UVA maintains over 100 functional specialists to manage its compliance requirements, and the specialists recommend generic safe enterprise software like Oracle Peoplesoft.

A far more interesting explanation is Olson's theory of collective action. He argues that small organized groups have an advantage over larger groups because their members have stronger incentives to pursue a common interest. Larger groups, by contrast, struggle to organize due to the free rider problem, unless they offer selective incentives to encourage participation. Oracle has millions of dollars at stake in securing institutional contracts, giving it a strong incentive to lobby for government technology spending. Students and faculty, despite being far more numerous, are classified as a latent group because while they have vast collective power, they also have little individual incentive to organize around university software decisions, despite the inconvenience each member faces.

Maybe if our students and faculty had a better selective incentive to rally behind, Lou's List would have been integrated into UVA's official services sooner, and without the issues present in Hoos' List. Unfortunately, the better course registration experience apparently was not a strong enough incentive on its own.

The Industries Most "Interest-ed" in Congress

 The crypto and banking lobbies have been at odds for months. Last year, the House of Representatives passed the CLARITY Act, which would “clarify” the federal regulatory structure for cryptocurrencies. Among other provisions, the bill would permit crypto exchanges to give holders of stablecoins (i.e., a type of cryptocurrency pegged in value to real currencies) interest to attract customers, threatening the market share of banks that accept and pay interest on deposits. As such, the banking industry opposes any bill that permits exchanges from paying interest on stablecoin, and has mounted a semi-effective campaign to stall CLARITY before it passes in the Senate.

Perhaps the efficacy of these lobbying efforts can be explained from an Olsonian perspective. The young, fragmented crypto industry operates as a privileged group, where several dominant firms (e.g., Coinbase, Binance; the “benefactors” in this case) have vastly outspent other firms on congressional lobbying endeavors. These firms have had a more pronounced role in the legislative process, but are inhibited by the free riding of smaller firms, and will thus achieve T < T*. On the other hand, the banking industry operates as an intermediate group. Although some banks (e.g., JPMorgan-Chase, Bank of America, etc.) have a significant, noticeable impact in DC, community or local banks often have an outsized, also noticeable voice in the legislative process, given their role in representatives’ constituencies. The communication and coordination channels of banks have existed for centuries, and each bank has the incentive to reduce non-bank competitors from entering the market. As such, cohesion can be more easily achieved in the banking industry and the cost of organizing is diminished, despite the massive number of banks in the United States. It appears the banking lobby has emerged victorious on this issue, since interest payments on stablecoin have been restricted in recent Senate versions of CLARITY. Although Olson predicts smaller groups will be more effective in general, this issue reveals that the underlying thread is simply the capacity to coordinate effectively.

Rent-Seeking Across Party Lines

In high school, I worked at a garage door company that is the dominant firm in the Rhode Island market, which also has a few smaller competitors that service mostly smaller jobs. For the purposes of this blog post I'll call it ABC Garage Doors. ABC regularly makes political contributions, mainly to gubernatorial races in the hope for benefits like favorable labor rules, lower taxes, and increased access to government contracts. These favorable benefits can be thought of as the transfer of wealth Peltzman describes and the money spent doing so as rent-seeking.

Interestingly, ABC often contributes to both Republicans and Democrats, often within the same race. In Peltzman's model, K is defined as any spending by beneficiaries "in campaign funds, lobbying, and so on" to win support and reduce opposition. Giving to both candidates seems less about spending money to reduce opposition and more about purchasing political access regardless of who wins.

RI regulations prohibit corporations from donating so ABC's owner donates himself. Although it is required for campaigns to publicly report any donations exceeding $200, there is likely less negative press on ABC than larger corporations (which often fund through PACs), so the owner supports both candidates publicly and attends both parties' campaign events.

From ABC's perspective, this strategy is rational because it reduces the risk of backing the losing candidate and preserves relationships with whoever holds office. However, resources spent rent seeking could otherwise be used productively. Contributing to candidates with diametrically opposed positions also raises questions about whether these donations reflect genuine political preferences or primarily an attempt to secure favorable treatment.

How Large AI Companies are Protecting Their Own Profit

A recent Reuters article, highlights an interesting contradiction within the artificial intelligence (AI) industry. OpenAI President Greg Brockman donated $25 million to a political group "Leading the Future" who spends millions of dollars to support congressional candidates who oppose regulations that “unduly constrain or delay AI development” in the US. This is particularly interesting because Brockman has also publicly supported AI safety measures and government oversight. Meanwhile, Leading the Future supports establishing a national regulatory framework that would prevent individual states from implementing their own AI restrictions. This situation poses an important question: are large AI companies such as OpenAI genuinely interested in responsible regulation, or are they more interested in ensuring that regulation works in their favor?

This is closely connected to George Stigler's theory of economic regulation, which argues that industries use government regulation to advance their own economic interests rather than the public interest. In this case, large AI companies have an incentive to influence the regulatory environment in ways that protect their existing market positions and limit competition. For example, companies like OpenAI have the financial and political resources to navigate complex federal regulations, while smaller AI startups would struggle to compete if compliance become too expensive. At the same time, established companies may oppose regulations that restrict their own operations or slow their ability to bring products to market, especially with many of them wanting to go public in the near future. By influencing which regulations are implemented, and at what level of government, these companies can potentially create barriers to entry, reduce competition, and preserve their market share.

To add, In Tullock's terms, this is classic rent-seeking: using financial and political resources that could have been used somewhere else to secure advantageous regulation rather than competing solely through innovation and better products.

Can Antitrust Be Captured? Stigler's Theory and the Sherman Antitrust Act

Stigler 71 tells us that regulation exists because firms want it to. Firms can use regulation to maximize profits, so they bid on regulation and draft it alongside lawmakers in an attempt to do so. For more typical forms of regulation like the Telecommunications Act of 1996, it's easy to pick out the benefits for firms. Most often, regulation allows them a legal outlet to restrict entry and monopolize a market, meaning they can produce where MR=MC. This is where the firm produces in their dream, ideal world. But how, then, do we reconcile the Sherman Antitrust Act of 1890, which seems antithetical to firms' efforts to produce where MR=MC, with the theory of regulatory capture? Stigler would likely argue that it can be reconciled through its enforcement.

According to Stigler's framework, it's not just in drafting and passing new laws that regulation can be captured--so, too, can it be captured through enforcement. In the context of the Sherman Antitrust Act, the enforcement of antitrust law can be influenced by the very businesses it seeks to regulate. This may occur in several different ways. For one, businesses could influence the industries or companies which receive the most legal scrutiny. Second, it may come through regulatory exceptions and favorable interpretations of the law. Lastly, it could also come through businesses using antitrust law as a strategic weapon to disadvantage their competitors. Stigler would say that this doesn't necessarily make the act ineffective; rather, he would challenge whether the act automatically advances public interest.

Is Big Pharma On Your Side?

In my internship last summer, I worked for a pharmaceutical company’s lobbying team that gave money to both Democrat and Republican Members of Congress. The company signed these checks with the hope that members would vote in their interest. While I, of course, believe that the company I work for acts in the public’s best interest, critics of pharmaceutical companies generally view their lobbying unfavorably. However, Congressmen of both parties met with our team over the summer, which Peltzman would assume was an attempt to maximize the votes they will eventually receive. In these meetings, I observed my team educating and convincing members that certain policies (like the Clear Labels Act) would not only harm company profits by raising production costs, but also harm consumers. In this way, the company tried to align members' incentives with our own profit-maximizing incentives. We argued that a vote-maximizing politician should side with our interests because the bill would harm consumers.

In Peltzman’s model, f is the probability that a beneficiary of a policy supports the politician. Our lobbying meetings were intended to persuade legislators that voting in our favor would increase the likelihood that their constituents would support them electorally. I argue that this case was not necessarily a case of capture by special interests or rent-seeking, since the intended outcome had positive social value. Instead, some lobbying efforts can be seen as instances of experts educating politicians on issues that affect their constituents in ways they may not realize. Assuming this information is accurate and unbiased (likely somewhat unrealistic to assume), the resources devoted to the cause are not wasteful. While our company is clearly motivated by profits, our interests are compatible with the interests of consumers (at least in this case). My experience demonstrates how, in the Peltzman model, politicians balance competing interests, but do not always have to make trade-offs between business and consumer interests. 

Whether You Vote Is Public Information

I recently saw an ad in Virginia with the following statement: "Who you vote for is private information, but whether you vote is public information." I thought that 'voting' and 'public information' being used in the same sentence was a little off putting, but if we think about this like an economist, it is easy to understand why this was the intended reaction of the ad. 

We should all be familiar with Johnson's theory on rational abstention. As a quick refresher, the marginal benefit of an individual vote affecting the election is infinitesimally small and is outweighed by almost any cost, such as time spent going to the polls. Therefore, abstention is rational. However, millions of people still vote. They vote not to change the election, but to avoid the social pressures, embarrassment, or informal costs associated with abstention. 

This ad implies that whether or not you cast a ballot matters to other people, and thus there exists a real cost to abstention. If you follow this link here, you can order a list of everyone who voted in Virginia. Interesting, right? You could use this list to shame people for not voting. 

This ad is a brilliant and economically sound way to increase voter turnout, helping to mitigate the damaging effects of abstention.