Strength in Numbers

Gunnar Trumbull

• Publisher: Harvard University Press
• Year: 2012
• ISBN:
  9780674071773
• Topic: Politica e relazioni internazionali
• Subtopic: Politica pubblica

Many consumers feel powerless in the face of big industry's interests. And the dominant view of economic regulators (influenced by Mancur Olson's book The Logic of Collective Action, published in 1965) agrees with them. According to this view, diffuse interests like those of consumers are too difficult to organize and too weak to influence public policy, which is determined by the concentrated interests of industrial-strength players. Gunnar Trumbull makes the case that this view represents a misreading of both the historical record and the core logic of interest representation. Weak interests, he reveals, quite often emerge the victors in policy battles.Based on a cross-national set of empirical case studies focused on the consumer, retail, credit, pharmaceutical, and agricultural sectors, Strength in Numbers develops an alternative model of interest representation. The central challenge in influencing public policy, Trumbull argues, is not organization but legitimation. How do diffuse consumer groups convince legislators that their aims are more legitimate than industry's? By forging unlikely alliances among the main actors in the process: activists, industry, and regulators. Trumbull explains how these "legitimacy coalitions" form around narratives that tie their agenda to a broader public interest, such as expanded access to goods or protection against harm. Successful legitimizing tactics explain why industry has been less powerful than is commonly thought in shaping agricultural policy in Europe and pharmaceutical policy in the United States. In both instances, weak interests carried the day.

CHAPTER 1

The Political Power of Weak Interests

CONVENTIONAL WISDOM and a deep tradition of academic research hold that concentrated interests dominate public policy. Through a combination of industry lobbying, campaign finance, direct interaction with compliant government agencies, and informal ties to elected officials, industry is said to dictate the outcome of national regulatory policy. Diffuse interests, by contrast, go underrepresented. The problem they face is one of coordination. Whereas a small number of companies may easily coordinate their lobbying efforts through industry associations, vast numbers of consumers face significant barriers to organizing to defend themselves. On this account, any new regulation that imposes concentrated costs and diffuse benefits should face strong, consistent opposition. Yet diffuse interests have historically nearly always found representation in public policy. Across the advanced democracies, diffuse groups like retirees, patients, and consumers enjoy strong protections—protections that were opposed by industry. In cases in which diffuse interests have failed to find representation, this was frequently because they lost to other diffuse interests. Even the most convincing cases of industry influence—in sectors such as pharmaceuticals and agriculture—reveal clear limitations on industry’s ability to influence public policy. Given the organizational challenges facing diffuse interests, and the easy coordination enjoyed by concentrated interests, the question arises as to why companies have not been more successful in achieving their desired legislative and regulatory outcomes. How have diffuse interests come to be so consistently and strongly represented in policy?

The idea that industry gets the public policy it wants represents a fundamental misreading both of the historical record of group mobilization, and of the core logic of interest representation. Historically, even the most challengingly diffuse interests have managed to mobilize to pursue their common interests. And the most concentrated business interests have failed to forestall restrictive regulations. The emphasis that researchers have placed on coordination is heavily overstated. The problem is that the challenge in influencing public policy is not primarily one of coordination. Despite clear challenges, groups with shared interests do manage to organize; when they do not, other actors step in to advocate on their behalf.

The core challenge in shaping new regulatory policy is the need to make that policy appear legitimate. In certain cases, the requirement of legitimacy inverts the logic of collective action embraced by advocates of coordination models of public policy influence. On the one hand, diffuse interests may actually benefit from the organizational challenges they face. Given the real difficulties of organizing, groups that do manage to mobilize an activist membership enjoy a heightened (but not unlimited) degree of policy legitimacy. Successful mobilization serves as a signal that the policies being advocated represent real underlying interests that are deeply held. On the other hand, concentrated interests with easy access to policymakers are viewed with suspicion, and the policies they advocate necessarily attract critical scrutiny. To achieve their policy goals, concentrated interests must either attempt to obscure their influence, or, more commonly, present their preferences as representing broader societal interests. This need to link their narrow interest to a related diffuse interest provides more than just a fig leaf for raw economic interest: it places significant constraints on the discretion that even powerful economic actors enjoy in influencing public policy.

In the United States, where the coordination theory of regulation first took hold, views about the influence of concentrated interests on public policy have left their imprint on the regulatory culture. For the political Left, the threat of business influence has been used to justify keeping industry as far as possible from regulators. For the political Right, the idea that policy was subject to industry capture was used to justify a broadly deregulatory view of government. Even in areas in which regulation might otherwise be warranted—areas like competition policy and product safety—the reality of business influence served as a warning that even legitimate interventions would inevitably be hijacked to fulfill narrow interests. The result was a regulatory culture that oscillated between deregulatory intuitions punctuated by periods of recrimination against industry for the consequences resulting from failures of regulation.

Collective Action and Policy Influence

Mancur Olson’s 1965 The Logic of Collective Action launched a generation of research into the challenges of economic organization. His critique of earlier scholars of interest group pluralism was not new. Two years earlier, historian Gabriel Kolko had published an account of Progressive-Era reforms—rail, food, and banking regulation—that reinterpreted these reforms as the product of “business control over politics.”1 But Olson’s bold theoretical framing became the rallying point for a generation of new theories of regulation.2 From Mancur Olson and George Stigler to James Q. Wilson, our most noted—and most heavily cited—theorists of organization and regulation have argued that diffuse interests are therefore weak interests. The logic of their case was based on the problem of free riders. When the benefits of organization cannot be excluded from the general public, individuals will have insufficient incentives to support a collective lobbying effort. The larger the number of individuals in a group, the harder the group will be to organize, and the more potential supporters will have an interest free riding. This coordination problem makes organizing diffuse interests a harder job than organizing concentrated interests. Olson and the many regulation theorists who followed him saw in this coordination problem an explanation for the neo-Marxist insight that the concentrated interests of a few could outweigh the diffuse interests of the many.

Olson’s emphasis on coordination was not the only explanation for industry dominance of public policy. In Politics and Markets, Charles Lindblom attributed industry influence to the economic weight of industry. Because government relied on business for tax revenue, business always exerted an implicit holdup threat.3 James Q. Wilson emphasized the size of the relative costs and benefits in motivating political influence. For him, what mattered about large constituencies was that the costs or benefits of regulation were spread thin.4 But it was the coordination theory presented by Olson that would eventually dominate interest group theory in economics, political science, and sociology. Economist George Stigler took the argument to its logical conclusion, writing in his 1971 article “The Theory of Economic Regulation”: “As a rule, regulation is acquired by industry and is designed and operated primarily for its benefit.”5 Stigler’s idea of concentrated interest influence would be formalized in the work of Sam Peltzman, another Chicago-trained economist who was later appointed director of the Stigler Center at the University of Chicago.6

In political science, Russell Hardin’s Collective Action elaborated Olson’s insights in game-theoretic terms.7 For Hardin, the challenge of coordination presented a prisoner’s dilemma for individual actors, in which only irrational actors would contribute to providing collective goods. This coordination-based approach to the study of regulation is often described as the Chicago School of regulation, although it found its strongest exponents in the field of public choice centered in the so-called Virginia School, including members of the economics departments at George Mason University and the Universities of Maryland and Virginia.8

Almost immediately after they emerged, these theories began to face empirical and theoretical challenges. Empirically, there was increasingly strong evidence even in the United States that diffuse interests in fact did often manage to find representation in public policy. Consumers were benefiting from progressive trade liberalization and regulatory protections.9 Competition policy was breaking apart concentrated producers with monopoly pricing power. Modern retailing was giving rural consumers access to an extraordinary variety of products at low prices. Small shareholders were enjoying legal protections against manipulation by powerful blockholders.10 In fact, while Mancur Olson was writing his influential The Logic of Collective Action, three other authors were publishing books that would ignite the very sorts of collective movements about which Olson was so pessimistic: Ralph Nader’s Unsafe at Any Speed (1965), Betty Friedan’s The Feminine Mystique (1963), and Rachel Carson’s Silent Spring (1962). The new social movements of the 1960s and 1970s for which these books became touchstones brought together a variety of diffuse groups that shared common social and progressive causes.

Advocates for the coordination model of interest representation responded by attributing noneconomic reasoning to the advocates of successful diffuse interests. Russell Hardin, who made an extensive study of the Sierra Club, attributed its success to “extra-rational motivations” of club members. Similarly, Terry Moe found that individuals who participated in representative associations understood poorly the costs and benefits of membership.11 James Q. Wilson offered a similar analysis that focused on the motivations of regulators who advocated for diffuse interests. He focused on the role of policy entrepreneurship, a mode of policymaking in which “economic interests … are either not apparent or … are not of decisive importance.”12 On his account, policy entrepreneurs relied on cultural or educational backgrounds, rather than strictly economic criteria, for setting regulation. Wilson’s idea of policy entrepreneurs would by the 1980s come to be widely embraced as a way to make the efflorescence of public interest legislation compatible with the Olsonian idea of interest coordination.13

Elsewhere in political science, various studies were finding that coordination might be far easier than Olson had supposed. Robert Axelrod found signs of decentralized coordination in iterated formal games.14 Joseph Grieco and Kenneth Oye theorized that strategic trading would generate trade liberalization in the absence of formal transnational agreements.15 Eleanor Ostrom discovered informal strategies of public goods provision in the absences of centralized solutions.16 Each of these authors suggested that coordination was possible even in the absence of formal legal and political institutions. This finding posed a problem for the Olson thesis. If coordination was possible in the absence of formal political institutions, should it not also be possible in the densely institutionalized setting of advanced capitalist democracies? Research into neocorporatist institutions in Europe seemed to confirm this idea.17 What mattered in interest representation was not the diffuseness of the interest, but the institutions through which those interests were translated into public policy.

In retrospect, the evidence for systematic regulatory capture by concentrated interests was remarkably uneven. The issue is not only that diffuse interests have managed to organize effectively, but also that concentrated interests have not been able to dominate the policy process in the way that Olson and Stigler foresaw. To be sure, concentrated interests did lobby and achieve victories in public policy. The surprise is how relatively rarely that led to outcomes that directly undercut more diffuse economic interests.18 Particularly challenging for the Olson view of policymaking was the move to industry deregulation that began in the United States in the late 1970s. If concentrated industry set regulatory policy, then regulation should be designed to increase the rents to incumbents in regulated sectors. But if that was true, then the small number of incumbent firms should have tried and succeeded in blocking deregulation.19 This posed a dilemma for Olson and Stigler: either regulated firms did not get regulation that they wanted, and hence were not hurt by deregulation, or they benefited from regulation and should have fought to retain it. Researchers whose analysis was more closely engaged with managerial practice recognized that industry did not see the state as an amenable ally. David Vogel, for example, found that the American managerial class perceived that public policy was out of its control.20 Research into lobbying and campaign contributions reinforced this view. Studies of lobbying by U.S. companies found that they invested a surprisingly small amount of funds to influence public policy given the potentially large benefits of regulatory manipulation.21 One reason was that concentrated interests that exercised excessive influence against the broader public interest could quickly become the target of media contagion that would engender a broad public outcry.22 Faced with the risk of public and policy retribution, narrow industry interests understood that they must ration their efforts to manipulate public policy.

If the influence of concentrated interests has been weak, the influence of diffuse interests has been one of the unheralded political trends of the postwar period. These interests—including environmentalists, women’s groups, consumer groups, retired people, patient groups, gun owners, and any number of other diffuse groups—have defied the organizational obstacles theorized by Olson. Despite their large and diffuse constituencies, these groups mobilized around shared pragmatic interests and succeeded in having those interests transcribed into public policy. Since Olson’s 1965 Logic of Collective Action, the voices of diffuse interests have driven the creation of countless new areas of policy and vast new government bureaucracies to administer those policies.

Diffuse Pragmatic Interests

For any issue of public policy affecting a large, diffuse group of shared interests, activation on that issue depends on a combination of individuals’ perceptions about the potential benefits of acting, assessed both collectively and individually. The process involves a two-stage calculation. First, it must be determined whether a particular outcome, given the costs and benefits of achieving that outcome, is in the group’s interest. This first stage is a pre-strategic assessment. Individuals are asked to assume for a moment that everyone could be compelled to pursue a project collectively, with no free riders. With perfect coordination, would the benefits of the project outweigh the costs? If so, the second stage is an evaluation of the project in terms of strategic interaction at the individual level. Here the expectation is that no individual would accept to undertake a project in which each individual also had an interest to free ride on the public benefit supported by others. In such instances, the project is unlikely to be achieved in the absence of coordination. The exception, adumbrated by hegemonic stability theory, includes cases in which the advantages to the individual are so great that free riders are grudgingly accepted. Thus individual actors may have two reasons to shy away from providing public goods. They may impose a higher cost collectively than the collective benefits they provide, meaning that they are, in a narrow economic sense, not really public goods. Or they are subject to free-rider problems, meaning that no individual has an interest in pursuing a collective outcome that would nonetheless improve the situation of all. For Chicago School regulation theorists, the failure of diffuse interests rested on the second, strategic assessment.

This emphasis is wrong on both empirically and theoretical grounds. Diffuse interests have typically failed to find representation in public policy not due to a failure of coordination, but because of a lack of perceived common interest. This has been especially true of idealistic movements that did not address pragmatic group concerns. Once pragmatic group concerns became recognized, diffuse actors could and did mob...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Dedication
• Contents
• 1. The Political Power of Weak Interests
• 2. Three Worlds of Consumer Protection
• 3. Consumer Mobilization in Postwar France
• 4. Interest Group Coalitions and Institutional Structures
• 5. Policy Narratives and Diffuse Interest Representation
• 6. The Limits of Regulatory Capture
• 7. The Limits of Lobbying
• 8. Coalitions and Collective Action
• Notes
• Acknowledgments
• Index