Rent Seeking, Public Choice, Capture, Enumerated Powers, and the Constitution

January 5th, 2011

Rick Hasen posted an interesting piece on SSRN titled Lobbying, Rent Seeking, and the Constitution. Here is the abstract:

Politicians across the political spectrum, from Barack Obama to Sarah Palin and Rand Paul, routinely castigate lobbyists for engaging in supposedly corrupt activities or having unequal access to elected officials. Since attaining office President Obama has imposed unprecedented new lobbying regulations, and he is not alone: both Congress and state and local legislative bodies have done so in recent years. At the same time, federal courts, relying upon the Supreme Court’s new campaign finance decision in Citizens United v. FEC, have begun striking down lobbying regulations, including important regulations limiting campaign finance activities of lobbyists and imposing a waiting period before legislators or legislative staffers may work as lobbyists. Two courts have held such laws could not be sustained on anticorruption grounds, and they are unlikely to be sustained on political equality grounds either.

This Article advances an alternative rationale which could support some, though not all, of the recent wave of new lobbying regulations: the state’s interest in preventing the socially inefficient activity of rent-seeking. Less technically, the government’s interest is in promoting national economic welfare. Rent-seeking occurs when resources are dedicated to capturing a government benefit, rather than being put to a productive use, and lobbyists are often the key actors securing such benefits. The rent-seeking analysis focuses attention on the systemic societal costs of lobbying, rather than engaging in unjustified vilification of the vast majority of lobbyists.

Part I of this Article provides an overview of the current state of lobbying regulation and lobbying jurisprudence. Part II proposes a new anti-rent-seeking rationale for lobbying regulation. It begins by describing the political science literature on how lobbying works, as well as current statistics on the extent of lobbying on the federal level and the costs of lobbyist-driven rent-seeking on the national economy. Some of the new and proposed lobbying regulations, such as anti-bundling provisions and anti-revolving door provisions, could decrease the total amount of interest group rent-seeking. The state’s anti-rent-seeking interest must be balanced against the First Amendment costs of lobbying regulation in infringing on the right to speak and petition the government. I defend the reduction of rent-seeking as an important (even potentially compelling) state interest that justifies at least some new lobbying regulations against constitutional challenge.

Part III turns to objections and extensions of the argument. I respond to objections on both ends and means. On ends, I consider the circumstances in which the promotion of national economic efficiency can trump First Amendment rights. On means, I consider whether there is sufficient proof that lobbying regulations are sufficiently tailored to a reduction in rent-seeking and whether, because the “hydraulic” nature of money in politics, attempts to regulate lobbying so as to decrease rent-seeking will be easy to evade. Under extensions, I consider whether the anti-rent seeking rationale could be used to justify the reenactment, as suggested by Justice Stevens, of the ban on the spending of corporate treasury funds in candidate elections, as well as the recent SEC “pay-to-play” rule for investment advisers.

I have often considered the interplay between rent seeking and the Constitution. I think one of the greatest limitations on rent seeking in our Constitution is the doctrine of enumerated powers. The less Congress can do, the less there is a chance they can be captured. However, if Congress can do (just about) anything they want–as is the case under our current jurisprudence–their susceptibility to capture, and accordingly inefficient rent seeking losses, is greater.

Hasen views the elimination of rent seeking as a policy justification to limit First Amendment rights under campaign finance laws. I don’t quite know if one can use public choice rationales to limit freedom. However, enforcing the doctrine of enumerated powers comports with public choice theory and minimizes wasteful rent seeking. This would seem to be a powerful policy rationale to enforcing a more stringent enumerated powers doctrine. I’ve been thinking about this since law school. Hopefully one day I can get around to writing about it.