I begin with the presumption that what is basically at stake in regulatory
processes is a transfer of wealth. The transfer, as Stigler points out, will rarely be in cash, but rather in the form of a regulated price, an entry
restriction, and so on. I shall ignore that detail here, and the resulting model
applies to any political wealth redistribution. A particularization to price
and entry regulation comes later. I treat the relevant political process as if
control of the relevant taxing power rests on direct voting, though this too is
meant only for simplification. Though appointment of a regulatory body
may lie effectively with a legislature, a committee thereof, or an executive,
the electorate's receptivity to these intermediaries ought to be affected by the
performance of their appointees. With Stigler, I assume that beneficiaries
pay with both votes and dollars. However, again as a simplification, I
assume that the productivity of the dollars to a politician lies in mitigation of
opposition. A more general model might make "dollars" (broadly defined to
include, for example, employment of former regulators) a source of direct as
well as indirect utility to the regulator. In this model, though, direct political
support--"votes"-is the object sought directly by the regulator. More particularly,
he seeks to maximize net votes or a majority in his favor. There is
no presumption that the marginal utility of a majority vanishes at one.
Greater majorities are assumed to imply greater security of tenure, more
logrolling possibilities, greater deference from legislative budget committees,
and so on. The crucial decision that the regulator (or would-be regulator)
must make in this model is the numerical size of the group he promises
favors, and thus implicitly the size of the group he taxes. At this stage, I
retain Stigler's presumption that the agency confers benefits on a single
victorious group, and the essential purpose of the model is to elaborate the
limits on this group's size.
I begin with the presumption that what is basically at stake in regulatory
processes is a transfer of wealth. The transfer, as Stigler points out, will rarely be in cash, but rather in the form of a regulated price, an entry
restriction, and so on. I shall ignore that detail here, and the resulting model
applies to any political wealth redistribution. A particularization to price
and entry regulation comes later. I treat the relevant political process as if
control of the relevant taxing power rests on direct voting, though this too is
meant only for simplification. Though appointment of a regulatory body
may lie effectively with a legislature, a committee thereof, or an executive,
the electorate's receptivity to these intermediaries ought to be affected by the
performance of their appointees. With Stigler, I assume that beneficiaries
pay with both votes and dollars. However, again as a simplification, I
assume that the productivity of the dollars to a politician lies in mitigation of
opposition. A more general model might make "dollars" (broadly defined to
include, for example, employment of former regulators) a source of direct as
well as indirect utility to the regulator. In this model, though, direct political
support--"votes"-is the object sought directly by the regulator. More particularly,
he seeks to maximize net votes or a majority in his favor. There is
no presumption that the marginal utility of a majority vanishes at one.
Greater majorities are assumed to imply greater security of tenure, more
logrolling possibilities, greater deference from legislative budget committees,
and so on. The crucial decision that the regulator (or would-be regulator)
must make in this model is the numerical size of the group he promises
favors, and thus implicitly the size of the group he taxes. At this stage, I
retain Stigler's presumption that the agency confers benefits on a single
victorious group, and the essential purpose of the model is to elaborate the
limits on this group's size.
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