Visible Hands: Talk Lobby to Me 💰
Campaign finance gets a lot of attention; but lobbying is 10x+ the size.
We spoke to Professor Gregory Martin, a professor of political economy at Stanford Graduate School of Business, about lobbying and why it matters. His research focuses on political marketplaces, including the market for political news, the political media consulting industry, and the allocation of grant funding by legislatures.
VH: How have you seen lobbying evolve over recent years?
Gregory Martin: The last decade or so, the volume of lobbying has increased quite a bit. Firms have increased their lobbying budgets, though it’s a bit hard to measure. We have these rules about disclosure and it’s not clear how well they’re actually enforced. You have to register as a lobbyist if you’re doing that work. Firms are supposed to report what they spend,who they talk to, and who their clients are. But there’s not much enforcement. It’s hard to say if the industry’s grown, but it does look like from the data that there’s growth in the past decade. It’s a hard industry to get good data because it’s vague and a lot of it goes on in-house.
Another interesting fact: lobbying is super concentrated. The biggest firms do a huge fraction of the lobbying effort. The total expenditure is accounted for by a small number of firms.
VH: How would you define lobbying?
GM: The classic definition is a person employed by a lobbying firm has a meeting with a legislator or someone in an executive agency and talks about a problem their client is facing. Then many companies also have policies teams that make policy briefs, come with white papers and that kind of thing. That’s not counted as lobbying but supports lobbying efforts. And there’s people working in-house who don’t register as lobbyists and don’t show up in databases of lobbying disclosures.
VH: What’s the difference between lobbying and campaign contributions?
GM: In terms of dollars, lobbying is 10 times higher than campaign contributions. On that metric, lobbying is more important. The evidence is that lobbying is more effective. This is a bias from measurement - campaign contributions are really well measured. If a company gives more than $200 to a campaign, they have to report it.
Campaign contributions are easy to measure and so I think people focus on them, but I’d say it’s not as important as lobbying. The consensus in the field is campaign contributions are capped at a pretty low level so it’s not an amount that’s likely to swing a race, even a state legislative race.
VH: Why do politicians listen to lobbyists?
GM: Information is valuable. If you think about the issues a congressperson has to deal with, they have to make decisions on legislation covering hundreds of issues they basically know nothing about. For instance, if they don’t know anything about Facebook data structures and they’re regulating them, they really need information. One way to do it is by listening to different sides of the same issue.
VH: Is in-house lobbying incentivized by not being disclosed?
GM: ⅔, roughly, I think is done in-house. If you’re not doing enough of it to hire someone to do it full-time, it makes more sense to outsource to another lobbying firm. The other consideration has to do with the firm itself. You could see an out of house firm padding their hours. That’s one reason to bring things in-house to get rid of the agency problem.
VH: How can the government effectively regulate social media companies that know more about their data than the government?
GM: That’s the challenge the government faces; firms have information the government doesn’t know. Like user data that Facebook has and the government doesn’t know. They have more information about how data is collected/structured. That gives Facebook an advantage and that’s true really in any industry. There are people who come out of industry who work for the government and thus have a sense of how things work. But there’s always advantages the firms have.
Many of these suggestions came from Professor Martin; thank you!
As a citizen:
The best counter to lobbying is to build up alternative sources of expertise. While politically popular, strict term limits in legislatures can be a way to handicap the legislators from developing independent expertise.
The salary scale for congressional staff hasn’t moved up at the same rate as lobbying salaries have; relative to their expertise, staffers are underpaid, leading there to be an incentive for them to switch over to lobbying. Increasing staffers’ salaries can help hedge against influence.
The turnover between industry and government is higher in some areas than others. The SEC has high turnover and it’s hard to retain people who know what they’re doing. The incentive to leave and work in the private sector is high in that industry. The possibility of the revolving door affects the effectiveness of certain agencies. If you’re an environmental scientist, the EPA is an attractive place to work, so it’s easier to retain people there. We wrote more about the revolving door and political appointments in this issue.
The Revolving Door Project, a project of the Center for Economic and Policy Research (economic policy think-tank), scrutinizes executive branch appointees to ensure they use their office to serve the broad public interest.
As a consumer:
Check out Lee Drutman’s book The Business of America is Lobbying or check out a related talk here.
As an investor:
Investors can push for greater transparency when it comes to lobbying disclosures. Lobbying can pose reputational risks to a firm if it stands against a company’s stated values.
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Please invite any friends, roommates, coworkers, armchair activists, and congressional staffers to join the movement. See ya next Thursday!