Thursday, July 10, 2008

Legal corruption

Now that the presidential campaign in the US is getting really serious, and other congressional races are starting to get some interest, once more the talk is about money. Not the money that good policies could generate, but rather that money that candidates manages to raise.

While I can understand that for some trades it is useful to be a good money raiser (charities, religious organizations, i.e., organizations that have little to offer but good feelings), I fail to see how this would help in running a country. The government can finance itself by mandatory taxation, there is no need to coax people into paying. But what is worse is that contributors are expecting, and getting, influence on policy decisions.

Not only is this practice tolerated by the law, it is openly discussed in the US as something that is normal. Yes, this is normal from an economic point of view: one is willing to pay to change a policy as much as the benefit from this policy change. But it is inefficient, for two main reasons: 1) the private optimum may not coincide with the social optimum; 2) the bidding between two lobbyists for opposing may expend huge resources when they outbid each other as each bid is a sunk cost once spent.

It is well known that resources spent on corruption are taken away from productive uses. Political contributions are just the same. They are legal in the US, but that does not make them good.


Anonymous said...

But, the legal ability of Congress to take money away from productive uses to spend it as they wish is OPTIMAL?

Anonymous said...

PRS: As long as the use taxes to improve social welfare, I am fine with it.