Interpreting Keyston Pipeline From Stigler's Perspective

Last Sunday, the republican senators in office discuss that they expect the 114^th congress. Senator Shelley Moore Capito specifically mentioned that she would like the white house move on “Keystone pipeline, tax reform, a transportation bill". Among these three policies, Keystone pipe is a particular sensitive issue because it hurts farmer’s interest but benefits U.S oil industry. The biggest U.S beneficiary from carrying out Keystone pipeline project will be the giant oil company Exxon. There were many pressures in the imposed by the democrats on president Obama for him to not pass this project. However, with the victory of Republican Party over Democratic Party during the mid-term elections, president Obama now might face higher pressure from both parties than he had ever before.

This case illustrates Stigler’s argument for government intervention. In his point of view, different industry group captures government policy in order to establish barrier of entries, and therefore maximize their profit in the long run. The fact that the biggest beneficiary of building keystone pipeline is Exxon means that oil industry is seeking for the approval of this policy. They might have already incurred the cost to support campaign for a U.S senate candidate who happens to be a republican. Consequently, the republican senator Shelly Moore Capito wants this project to be approved. In other words, the republican policy makers are captured by the interest of the oil industry.