GLOBE

The Nature of Lobbying

by Steven Suranovic ©1997-2004

Trade 105-2  

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We can define lobbying as the activity wherein individual citizens voice their opinion to the government officials about government policy actions. It is essentially an information transmission process. By writing letters and speaking with officials, individuals inform the government about their preferences for various policy options under consideration. We can distinguish two types of lobbying: casual lobbying and professional lobbying.

Casual lobbying occurs when a person uses their leisure time to petition or inform government officials of their point of view. Examples of casual lobbying are when people express their opinions at a town meeting or when they write letters to their Congress members. In these cases, there is no opportunity cost for the economy in terms of lost output, although there is a cost to the individual because of the foregone leisure time. Casual lobbying, then, poses few economic costs except to the individual engaging in the activity.

Professional lobbying occurs when an individual or company is hired by someone to advocate a point of view before the government. An example is a law firm hired by the steel industry to help win an antidumping petition. In this case, the law firm will present arguments to government officials to try to affect a policy outcome. The law firm's fee will come from the extra revenue expected by the steel industry if they win the petition. Since in this case the law firm is paid to provide lobbying services, there is an opportunity cost represented by the foregone output that could have been produced had the lawyers engaged in an alternative productive activity. When lawyers spend time lobbying, they can't spend time writing software programs, or designing buildings, or building refrigerators, etc. (This poses the question: what would lawyers do if they weren't lawyering?) The lawyers' actions with this type of lobbying is essentially redistributive in nature, since the lawyers' income will derive from the losses that will accrue to others in the event that the lobbying effort is successful. If the lobbying effort is not successful the lawyer will still be paid, only this time the losses will accrue to the firm that hired the lobbyist. For this reason, lobbying is often called rent-seeking because the fees paid to the lobbyists come from a pool of funds (rents) that arise when the lobbying activity is successful. Another name given to professional lobbying in the economics literature is a "Directly UnProductive Activity", or DUP.

Lobbying is a necessity for the democratic system to work. Somehow information about preferences and desires must be transmitted from citizens to the government officials who make policy decisions. Since everyone is free to petition the government, lobbying is the way in which government officials can learn about the desires of their constituents. Those who care most about an issue will be more likely to voice their opinion. The extent of the lobbying efforts may also inform the government about the intensity of the preferences as well.


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International Trade Theory and Policy Lecture Notes: ©1997-2004 Steven M. Suranovic
Last Updated on 3/3/01