SPECIAL INTEREST GROUPS BUREAUCRACY

1. SPECIAL INTEREST GROUPS BUREAUCRACY

2. SPECIAL INTEREST GROUPS • Organizations that seek to increase government expenditures that benefit their constituents. • Differ from political parties as their leaders do not run for political office. • Seek to put pressure on political candidates, bureaucrats and voters to support issues that benefit their members. • Pressure politicians by threatening to tell their constituents to vote against them.

3. SPECIAL INTEREST GROUPS • They make contributions to politicians who support their positions • They finance advertisements against candidates who do not support their interests. • Exist to promote policies favorable to workers, particular regions, racial minorities, ethnic groups, environmental presevation and taxpayers.

4. SPECIAL INTEREST GROUPS IMPACT ON POLITICAL EQUILIBRIUM GARY BECKER MODEL OF SPECIAL-INTEREST GROUP: • Successful pressure groups succeed in manipulating taxes, govt subsidies, and govt regulations to raise well-being of their members. • Successful pressure groups must make the members of competing pressure groups worse off as an increase in govt spending for one groups increases taxes or imposes other costs, on other groups. • Increase influence of any one particular groups is assumed to decrease the influence of competing groups.

5. GARY BECKER MODELOF SPECIAL-INTEREST GROUP: • Pressure groups themselves compete for political influence by spending time, effort, and some influence on the production of political pressure • The number of members in a group and the resource spent per member determine the amount of political pressure. • The extent to which those who benefit from the special interest group's efforts try to be free riders, the effectiveness in producing pressure declines. • By spending money to reduce free riders, leaders increase pressure on political agents .

6. GARY BECKER MODELOF SPECIAL-INTEREST GROUP: • Observation from Becker’s model: • Successful special-interest groups are likely to be small relative to the portion of the population that pays taxes to support their subsidies. • The greater the number of citizens who pay taxes to support a rather large subsidy to a group with only a few members, the lower the tax per citizen relative to the subsidy per beneficiary.

7. EFFECT OF MULTIPLE MEMBERSHIP OF SPECIAL-INTEREST GROUPS • People are often members of more than one special-interest group. • Thus activities of various groups often lead to both taxes and subsidies from their constituents. • People will be equally as well off if both taxes and subsidies from each pressure group were reduced to equal amounts. • If both effects cancel each other, members of various groups will not be harmed.

8. BUREAUCRACY ANDTHE SUPPLY OF OUTPUT • Bureacracy : • influences the actual delivery of services and the efficiency with which they can be produced. • Influence the cost of producing public goods Bureaucracy influence the terms of supply of public goods and thus the political equilibrium

9. BUREAUCRACY ANDTHE SUPPLY OF OUTPUT • Efficiency of bureaucracy is difficult to measure: • Output produced is neither easily quantifiable into units nor easily soled for profits in markets. • Difficult to ensure govt bureaus produce their output at minimum possible cost. • Bureaucracy do not directly own the inputs they used for production and funding normally comes from an external source.

10. BUREACRATIC BEHAVIOUR • According to William Niskanen: • Bureaucrat seek to maximize the power associated with holding puble office • It correlates with resources that bureaucrats has under command. • Thus also related to size of the bureau’s budget. Bureaucrat seeks to maximise the size of the bureau’s budget.

11. BUREACRATIC BEHAVIOUR • Implication of Niskanen’s analysis: attempts by bureaucrats to maximise their budgets lead to a general overextension of the govt sector in excess of the efficient level of output. Refer fig 5.9

12. Figure 5.9 Bureaucracy and Efficiency A A MSC Benefit and Cost (Dollars) E B MSB Q * Output per Year TSC B TSB' TSB Benefit and Cost (Dollars) QB Q’ 0 Q * B Output per Year

13. Bureaucracy and Efficiency • Efficiency output Q* units per year (= pt E) where MSB=MSC. • Bureaucrats seek to maximise size of budget. • They argue as long as they can obtain additional funds al song as TYSB of the output exceed TSC, they will try to increase output beyond the efficient level of Q* (refer fig 5.9b) • At Q* slope of TSC = slope TSB which corresponds to MSB=MSC in fig5.9a • Bureau try to get output QB to be approved where TSB=TSC Bureaus desired output exceed the efficient amount.

14. Bureaucracy and Efficiency • 5.9a shows loss in well-being if bureau succeed in getting their desired level of output approved. • Loss in net benefit is triangular EAB. • Bureaucrats seek to attaint budget-maximising output by trying to make politician believe that that SB of their output is greater than it is in fact. • This would shift TSB curve up to TSB’ in the eyes of funding agencies as in 5.9b • Maximum output that the agency could fund would increase to Q’B.

15. BUREAUCRACY AND SIZE OF BUDGET • Bureaucrats can increase the size of their budgets in two ways: • Seek to convince governing authorities that their output needs to be increased. • Increase the amounts of input necessary to produce any given amount of output by using inefficient production techniques

16. BUREAUCRACY AND SIZE OF BUDGET • Effect of increase in resources: • loss in efficiency due to misuse of input (not due to excessive production) • Bureaucrats maximise their utility function that depends on both net benefit to their ‘sponsors’ (funding authorities) and the growth of their budget, fringe benefits, job security and reduced workload.

17. CONSTRAINTS ON BUREAUS • Behavior of bureaucrats depends on constraints they face such as adequate budgeting procedures. • Effect of constraints -restricts tendencies of bureaucrats to overexpand or produce inefficiently.