Wednesday, July 25, 2007

Cap-and-Trade Quote of the Day

...The economic theory of regulation asks us to consider the political arena as a marketplace where favors are bought and sold. Interest groups that have the most to gain or lose will bid the highest prices for favors.

Politicians dedicated to preserving their jobs, and needing large amounts of campaign funds, auction off the favors. Under this theory, if carbon emissions are to be controlled, the politician will seek the group with the largest economic stake in the outcome (and therefore presumably the most generous with campaign funds) and favor that group.

Competing groups will attempt to outbid the winner. Usually, the smaller the group, the more each member can gain by crafting regulatory rules. The larger the group, the less likely that each individual member will have a strong reward or heavy burden as a result of the rules. So small special-interest groups usually are the most actively involved in the negotiations.
Bruce Yandle; 2001

Yandle is interim dean of Clemson University's College of Business & Behavioral Science and professor of economics emeritus at Clemson. He is also a faculty member with George Mason University's Capitol Hill Campus. He has served as executive director of the Federal Trade Commission in Washington, D.C. He was a visiting professor at the Montpellier University Law School in France and has lectured in Germany and Italy.
Bio at Clemson University