The bigger the gubmnt budget, the greater is the incentive for various vested interests to use scarce resources for lobbying. This is doubly inefficient:
- Lobbying itself is a diversion of scarce resources away from production, trying to effect a redistribution of the output instead.
- Lobbying tends to be a negative sum game. The more some interests spend on lobbying, the more their rivals must spend to counter those efforts. The effect is that even more scarce resources are diverted away from production and into redistribution attempts.
Lobbying is effective because people, including politicians, respond to incentives. But the problem is not lobbying per se. The problem is that big gubmnt, with its big budgets, creates more of an incentive for special interests to engage in lobbying. From this [via MA]:
For all intents and purposes, big government in Washington has created a niche market for insiders who learn the specialized skill of transferring money from those who earned it to those with political pull. It's the same across the Western world...
Washington is rich because government is big and the beneficiaries of this system are enjoying their status as America’s new gilded class. It’s even gotten to the point where children and other family members also put their hands in the cookie jar.
The column continues with numerous examples of how relatives of politicians are able to use their connections to enhance their own wealth.
The solution? Smaller gubmnt. That would reduce the payoffs to lobbying and hence reduce the extent of cronyism.