Lobbying is becoming a pet topic of mine. I’ve written about incentive asymmetry – the bedfellow of lobbying – on the Ecolarge blog here and here.
An article in The Age yesterday (“What we can learn from Sony’s greatest mistake”) written by Michael Pascoe’s piqued my interest again. The article starts out on topic talking about why Sony failed to become the market leader in mass storage digital media players (iPods). But near the end it throws in a bit of a curve ball in the form of the following:
The $42 million redistribution of taxpayers’ money to a few hundred workers at Alcoa’s Victorian aluminium smelter is obscene. Those jobs are of no more intrinsic value than those that will be lost when Fairfax closes its two main printing plants, but they happen to be housed in a more politically sensitive silo – or perhaps one owed the odd favour.
This got me thinking. I wanted to know if there are any reports that look into the economic impacts of lobbying, something that tends to happen behind closed doors where it’s unseen, or in front of our faces (literally) on tv, and somewhat overlooked – but not unnoticed.
With my interest suitably piqued, I decided to do a quick search on google using the phrase “economics of lobbying in australia”. Down in fourth place (beneath my article on the Ecolarge blog that was in first place) I discovered an interesting article in The Economist about how lobbying pays. The article discusses an index created by Strategas that looks at US listed companies that lobby intensively. Strategas’ index shows that companies that have lobbied intensively have outperformed the S&P 500 index by 11 percent between 2002 and 2011. I’d say there is probably a healthy ROI in that outperformance, the Economist article points out:
The outright return on lobbying costs, according to one of the various studies that served as inspiration for the Strategas index, was $220 for each $1 spent.
But Australia can do better than that. As Jessica Irvine pointed out late last year:
The mining industry’s investment of $22 million for an advertising campaign to sway public opinion against raising an extra $60 billion in tax from highly-profitable mining companies is surely the most successful rent-seeking mission in Australian history.
That works out at $2727 for every $1 spent. Not too shabby! It certainly pays to lobby.
What I’d like to see is how much lobbying correlates with particular industries and also with other potential proxies for management ability. I’d also love to read a good report on the economics of lobbying looking at qualitative and quantitative aspects. For now I’ll keep looking. If anybody finds something, post some info in the comments below.
