The Economics of Special Interest Politics: The Case of the Tariff

Study is given to the interaction of politicians and special interest lobbies. A model, applied to the setting of tariffs, indicates the equilibrium levels of redistributive policies such as subsidies, tariffs, taxes, and regulatory decisions. By contributing to political campaigns, special interest lobbies generate economic returns, such as revenue generated from higher tariffs for import-competing industries through higher product prices. Lobbies try to maximize net economic returns. Emphasis is placed on Olson's discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns. Politicians weigh the unfavorable association with a lobby against the favorable effects of special interest money. Equilibrium tariff positions are determined for each politician in a political campaign.