The Politics of Persuasion

The Politics of Persuasion

Should Lobbying be Regulated in the EU?

Urs S. Brandt and Gert T. Svendsen

The EU is at a crossroads. Should it choose the path towards protectionism or the path towards free trade? This book convincingly argues that lobbying regulation will be a decisive first step towards fulfilling the European dream of free trade, in accordance with the original purpose of the Treaty of Rome. Without the regulation of lobbyists to try and prevent undue political persuasion, there is a greater risk of abuse in the form of corruption, subsidies and trade barriers, which will come at the expense of consumers, tax payers and competitiveness.

Chapter 7: Alignment of incentives

Urs S. Brandt and Gert T. Svendsen

Subjects: economics and finance, public choice theory, politics and public policy, european politics and policy, public choice, regulation and governance

Abstract

Chapter 7 gave two examples on how strategic signalling and the alignment of incentives may be used in lobbying efforts. First, it extended the political economy idea developed by Ackerman and Hassler (1981) which suggested that a coalition of environmentalists and industrialists successfully lobbied the United States Congress. Stricter technology-based standards for new emitting sources than for existing sources was the resulting policy outcome serving the common interest of the coalition, because it offered both a barrier to entry for new firms and improved environmental quality. We focused on the case of international climate negotiations and the promotion of wind-based energy and suggested that one reason for the European Union’s (EU) eagerness to push forward ambitious reduction target levels (and thereby promote new green industries) could be a similar coalition between industrialists and environmentalists. Such a strategy can be seen in the context of the ‘Bootleggers and Baptists’ theory, where the Baptists (in our case the environmentalists) demand changes in behaviour on moral grounds. In contrast, the Bootleggers (the producers of renewable energy), who profit from the regulation, keep a low profile. The heavy subsidization of renewable energy sources, such as wind energy, could be viewed as a successful policy outcome for the coalition of industrialists and environmentalists, offering both market protection and improved environmental quality. Second, in the fishing industry, fishermen traditionally have incentives to lobby and signal too many fish in the sea in order to have access to a high short-term catch level and subsidies, whereas marine biologists have incentives to lobby and signal too few fish in the sea. Marine biologists have an incentive to maximize their budgets both for altruistic reasons (to restore fish stocks) and for private reasons (by increasing demand for their services). We analysed the outcome of a game where the biologists and the fishermen are informed about the true stock size, while the decision-maker is not. The model showed that interest groups traditionally perceived as opponents may have mutual interests. Solving the current deadlock in the EU fishery negotiations highlights the need to reveal the true incentives that motivate stakeholders, such as the symbiosis and alignment of interests identified here.

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