Corruption and Politics

I just finished listening to a speech by Lawrence Lessig on the influence of money in politics. He is a very smart man, an eloquent speaker and if you get a chance to listen to him speak, it’s well worth your time. I especially recommend his work on copyright. However, I think his views on the role of money in politics while well informed are missing the point.

If you have never heard him on the topic, listen to his fascinating interview of Jack Abramoff, or read his Rolling Stones interview. The likes of Rod Blagojevich who actually engage in giving and receiving bribes are not a significant problem. On the other hand, there are systemic forces which push elected officials to adjust their position in order to curry favors from those who make significant campaign contributions or those who control significant independent expenditures in the wake of Citizens United. You won’t hear any argument from me on this. However, Lawrence Lessig makes the mistake to conclude that the root problem is the money in politics and that therefore the solution must focus on the money. Specifically, he wants to favor public campaign finance through the use of “democracy vouchers” and a Constitutional amendment to repeal Citizens United.

The mistake he makes is to look at the system the way it exists today, identify the mechanism that creates the bad and formulate a solution to remove that mechanism. But this is an emergent system. One must therefore ask not just what is the mechanism which creates the bad, but what is the mechanism which created the mechanism. In other words, one must look at the incentives of the players.

When I look at the Government, I see an entity with very broad powers that are controlled by very few people. It takes only 279 people (218 Congressmen, 60 Senators and the President) to exercise the tremendous power of the federal government over a population of more than 300 million people. When you look at regulatory agencies, the power is even more concentrated. The Securities and Exchange Commission which has very broad authority to regulate the financial sector is made up of 5 people. When it comes to power, federal elected officials are the 0.0001%.

Instead of thinking about what allows corruption, think of what motivates it. To the right person, influencing even a single one of those regulators or politicians has enormous value. Place yourself in the shoe of a bank manager realizing that the SEC could regulate one of your competitors out of existence. Or perhaps look through the eyes of a manufacturer who realizes a Congressional earmark can make you fabulously wealthy. There is so much to gain by influencing the government if you are the right person.

On the other hand, if you are not that person, you have very little to gain. Most members of the public have a very small stake in the fight. The costs of government tend to be very diffuse. The tax which subsidizes a manufacturer will be small on any one individual. The price increase from reduced competition will also tend to be fairly moderate. And anyways, there is a free-rider problem. We have jobs, families and lives to live. Let someone else fight the good fight. Let someone else pay enough attention to figure out what the good fight is.

So here, forget about the existing mechanisms for corruption and think about incentives. The payoff to influencing government is very high for special interests and very low for the public at large. If there is any crack in the armor, the highly motivated special interest groups will find it while it will take a very long time for us to get around to fixing that crack. By the time Lawrence Lessig gets his wish, government relations experts will have run around him a dozen time and found a million new ways to influence the most powerful men in the country.

So should we throw our hands up in the air and give up? Absolutely not. There is a way: decentralize the power. Make the friendship of a Congressman so worthless that nobody will seek it. Render the President so weak that no-one will seek to have his ear. Bring down the SEC commissioners so low that bankers won’t bother inviting them to lunch. When power becomes dispersed, we will see a true change of the way politics operates. Until then, we will just be hacking at the branches, missing the root entirely.

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5 Responses to Corruption and Politics

  1. Ghengis Khak says:

    I agree with your conclusions, but disagree with parts of your argument in that you seem to take a relatively naive view of political economy. You make it sound as though government and regulatory institutions are these noble and well intentioned groups who are simply overrun by the corrupting and powerful influence of business interests.

    Often it is more accurate to view the formation and purpose of institutions/laws precisely as vehicles for advancing the interests of the involved parties. Take, for example, the Interstate Commerce Commission, which was set up to cartelize the railroad industry after many failed attempts to cartelize without government help. Or more recently the Consumer Products Safety Improvement Act of 2008, which was used by large/established toy manufacturers to force very expensive testing procedures onto smaller toy makers.

    And on another relatively minor point, you hint that Citizens United changes the strength or character of the incentives involved in politics. How so? Any such explanations I have heard are based on cartoonish parodies of what this decision actually does.

    Maybe a detailed treatment/post of Citizens United is deserved instead of getting into it here, since it is only tangential to the point you are making in your post.

  2. PrometheeFeu says:

    I am highly suspicious of the people who are in government as a general rule. That said, if you start off with the assumption that the people in charge are the cause of the problems, you rapidly have to face the argument that we just need better people in charge. That the argument that leads people to become so enthusiastic about Obama and countless others who are seen as the new Philosopher Kings: wise and benevolent.

    My view of politics is that it doesn’t matter how benevolent, wonderful and wise people are. So in arguendo, I will grant the hypothesis that we can get someone who is a cross of Mother Teresa, Ghandi and Einstein in office. My point is that it won’t actually solve the underlying problem: the concentration of power. If you grant that officials can be influenced, (and I think it’s hard to argue the opposite) my argument stands without having to attribute to anyone the slightest malevolent intention.

    Citizens United deserves its own discussion. I am hesitant to discuss the case because I have no formal legal training. That said, it is also a decision whose reasoning is so thoroughly misunderstood that I will probably find it hard to restrain myself. What I was speaking about here is simply that Citizens United opened another avenue to influence politicians that had previously been closed: Independent expenditures of a certain form within 90 days of an election.

    • Ghengis Khak says:

      Setting aside Citizens United, I can’t find much disagreement here.

      That you just need “the right people” in charge is not what I am saying. What I am actually saying is that many of the mechanisms of government are often not robust to getting the wrong person in charge. Instead of being an argument that you always need to have the right people in charge, it is an argument that institutions with a lack of robustness in this fashion are broken because it is extremely unlikely that the right people will ever be in charge.

      Put simply, having the selfless philosopher king in charge is unlikely to occur because the nature of such institutions is to draw those which will derive the most benefit from them – and this will be people who are precisely not the selfless philosopher king.

  3. jemacd says:

    One aspect of the fix we are in is that Congress has strong positive feed backs for spending, and little negative feedback. Making little changes around the margins will not correct the tendency of Congress to spend more and more. We must change the motivations that drive congressional spending.

    The current tax and budget system rewards high spending members of the legislature that vote for more spending than low spenders. The high spending members achieve positive press by supporting new spending, the approval of their political contributors, and “bring home the bacon”. This increase in spending is paid for with increased taxes by all citizens, not just the local district and contributors that put the representative in office. This lack of linkage between spending by a representative and the district tax rate rewards high spending representative’s districts, and other representative’s districts unfairly suffer the high tax rate with less of the high spending benefits.

    This imbalance could be corrected with a tax system in which the personal and corporate tax rates would adjust such that districts of high spender representatives would pay a higher rate than an average district.

    The legislative record of votes on spending bills would provide the required spending information. This would require that all spending bills be passed by recorded vote, not with a voice vote. It would also require that the all of the government spending be subjected to an annual vote, or at least every two years so as to match the election cycle. To fully capture spending, votes to approve tax deductions, refunds or any other changes to the tax code resulting in a reduced tax due to the treasury should also be included in the representatives total spending. The sum of each representatives voting would provide their total spending, and the average of all the members numbers would provide an average spend per representative.

    If a member’s vote record matched the average, the tax rate for the district would remain unchanged at 100% of the stated tax rate. If a member voted for 50% more spending than average, the district tax rate would be changed from 100% of the stated rate to 150% of the stated rate. With the US Congress, the district rate would need to reflect the House representative and both senators. Districts that value high government spending would be willing to pay a higher tax rate and send high spending members to Congress. Districts that value lower tax rates over higher government spending could send members that reflect their wishes.

    The district representative adjustments would reset each tax year, and the adjustment for each House and Senate member would be clear and separate line in the tax form. The rate would be based on the average for the representative for the years from the last election cycle. The tax rates would be computed on the votes for spending from October to the next years September, and announced on the second week of October, so as to be known to the voters prior to the elections.

    This proposal if adopted should change the motivations of our representatives, making them more sensitive to high levels of spending.

    I am just trying to get what I think is a valuable alternative idea injected into the mix as the discussion of how to balance the budget evolves. The question is would taxing districts of higher spending representatives at a higher rate have the effect of reducing spending? If it would work, what advantages would it have over other policies? The US constitution has been amended many times. It is not easy, but can be done. A balanced budget amendment is what some see as a solution. Would this be a superior alternative? I do not know, but if the concept is made public, considered, challenged, and compared to other plans in open debate, we will know. If this idea of proportional taxation never sees the light of day, it will have no impact.
    I took a look at the US constitution. The sections on tax and equal protection are

    Article 1, Section. 8. Powers of Congress
    The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

    Hum, they forgot to say tax in the second half. Does that mean that taxes do not have to be uniform? If taxes have to be uniform, then our current income tax with multiple rates and deductions would clearly be in violation. Is the current federal income tax unconstitutional?

    Amendment 14 Equal protection
    1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
    The states have to allow equal protection to every citizen. But the states already have tax codes that tax incomes at different rates, and deductions for some activities and not others. Are the current state taxes unconstitutional?
    Amendment 16 Income tax
    The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration

    So, incomes can be taxed. We have to avoid apportionment or the use of census counts. To my non-lawyer eye, it does not say everyone has to pay the same rate. But wait, ever one already does not pay the same rate. We charge higher rates at higher incomes, deduct home mortgage interest but not other interest, and so on. Why not set rates based on districts representatives spending votes?

    Setting the tax rate of a district in proportion to the spending of the represenative would alter the feedbacks, an likely be a restraint on the high spending members of Congress.

    This is written from the perspective of US national government. It could also be applied to state government, or any governmental unit worldwide with local district representation.

  4. Steven says:

    I was looking for an actual suggestion for a solution at the end of all that – ‘make them weaker’ is a little vague. I agree with the premise – instead of making lobbying difficult, we need to make it useless.

    How about this: many many more representatives and senators. If congress is made up of 2 thousand people then 2 things will happen. 1) we will likely see the emergence of new political parties which will limit the power of the current two and 2) the cost of buying enough votes to accomplish something will be extremely prohibitive.

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