Lobbying: a great (the greatest?) investment

In a striking infographic, the United Republic shows why lobbying is so pervasive: it's an unbelievably effective form of spending (for now I'm linking to the NYTimes hosted version of the infographic as most of United Republic's pages, including the infographic, are 404'ing on me).

As the NYTimes article notes, the ROI on lobbying dwarfs that of any investment an ordinary citizen might hope to capture.

According to statistics United Republic assembled, the prescription drug industry spent $116 million lobbying for legislation to prevent Medicare from bargaining down drug prices — legislation that enabled drug companies to make an additional $90 billion annually. That amounts to an extraordinary 77,500 percent return on investment. Oil companies, in turn, had a return on investment of 5,900 percent, and multinational companies, 22,000 percent.

You're not feeling as hot about those shares of Apple or Google you've held for a few years now, are you?

In fact, the ROI on lobbying is so astronomically high that Tyler Cowen wonders why politician's don't demand larger bribes from lobbyists, or why companies don't spend more on lobbying. This disparity between the cost of lobbying and its returns is known as Tullock paradox. It's ironic, isn't it, to ask why government isn't more corrupt than it already is?

In Government's End, Jonathan Rauch predicted this would be the logical wall any democratic government would run into: demosclerosis, or the inability of a democratic government to deal with our deep problems because motivated lobbyists spend billions fighting for and maintaining the status quo. In such a situation, only marginal incremental change is possible.

If you've ever worked in a large corporation you may also recognize that inertia that comes from entrenched groups defending their turf.

It would be wonderful if we could simplify our tax code, but the prevalence of lobbying makes it unlikely. So many of the odd tax loopholes and shelters and rules are there specifically because some narrow interest group fought to get them into the tax code.

In fact, my variant of the Tullock paradox is why corporations like Apple still have to shelter foreign income from domestic taxes at all. You'd think they'd have lobbied their way to ways to get that income back home without the IRS laying their hands on much of it at all.