1. Introduction
One way to think about legislators is in terms of the interest-group theory of government and the demand and "supply" of legislation (McCormick and Tollison, 1981). Keep in mind that the use of "interest-group" as a modifier in this context is not meant to be pejorative. Individual citizens can want or demand laws for any reason — e.g., the law makes the world a better place, the law promotes the production of a public good, and so forth — but they will generally act in some group context to obtain the passage of a desired law or the defeat of an undesired law. A basic principle underlies the demand for legislation. The principle is that groups who can organize for less than one dollar in order to obtain one dollar of benefits from legislation will be effective demanders of legislative output.
In the interest-group theory, the supply of legislation is an inverse demand curve. Those who "supply" wealth transfers are individuals who do not find it cost effective to resist having their wealth taken away. In other words, it costs them more than one dollar to resist having one dollar taken away. This concept of a supply curve of legislation or regulation suggests that the costs of political activity to some individuals exceed the potential gains (or avoided losses). The supply of legislation is, therefore, grounded in the unorganized or relatively less-organized members of society. It should be kept in mind that "supply" in this discussion differs from standard usage in economics; it implies coercion and not willingness.
Who runs this supply-demand process? The individuals who monitor the supply-demand process are legislators, bureaucrats, and other political actors. These individuals may be conceived of as brokers of legislation, and they essentially act like brokers in a private context — they pair demanders and suppliers of legislation. That is, they seek to pair those who want a law or a transfer the most with those who object the least. In the usual logic of the interest-group theory, brokers will concentrate on legal arrangements that benefit well-organized and concentrated groups for whom the pro rata benefits are high at the expense of diffuse interests, each of which is taxed a little bit to fund the transfer or legislation. By efficiently pairing demanders and suppliers of legislation, the political brokers establish an equilibrium in the market for legislation. In return, these brokers extract an economic return for their services in the form of votes, campaign contributions, and future job offers.
Legislators are at the heart of the study of legislation and legislative processes, and the remainder of this entry focuses on certain aspects of their behavior. Also, depending on the particular structure of the legislature (total size, number of committees, voting rules, and so on), the brokerage process will operate at different levels of "costs." (Crain, 1979). Stricter voting rules, for example, raise the cost to legislators of finding diffuse minorities to "supply" taxes and transfers. In effect, a legislative production function will impact on the rate of passage of legislation. This production function undergirds the process by which legislation is supplied and is itself an integral part of the study of legislators.
2. Broker Preferences
The public choice literature contains a great deal of discussion about the degree to which ideology affects the voting behavior of elected representatives. In simple terms, does the politician exercise his or her personal value judgments in voting, as opposed to voting strictly in terms of constituents’ interests? The answer is obviously yes to some degree, and the debate in the literature is over the degree.
The general form of the debate goes as follows. A model of representative voting behavior is specified, including constituent interest and ideological measures (such as the Americans for Democratic Action voting ratings). If the ideological measures prove to have a statistically significant impact in the test, ideology is held to influence the behavior of politicians at the margin (Kau and Rubin, 1979). Sam Peltzman (1985) challenged this conclusion with the argument that the inclusion of better measures of the "economic" variables affecting voting behavior in the models that are being tested would reduce the statistical significance of the ideological variables.
The whole issue is mired in difficulties. A simple example suffices to illustrate. Representative A is from an oil district and yet votes "no" on an oil import fee bill. Did the representative express his ideological preferences in this case? Because his voting "no" in exchange for votes on other issues is entirely probable, it is not at all clear that he voted "no" on ideological grounds. Vote trading or logrolling obscures the role of ideological voting on single issues. Many post offices and dams are built on such principles, and, in some cases, the post office or the dam generates more local political benefits for the representative than the oil import fee.
On the broader scale of voting across all issues, it seems reasonable to predict that ideology plays an economically rational role in such behavior. Nelson and Silberberg (1987) put the matter nicely. Narrowly focused bills where the final destination and distribution of funds are well known make ideological voting more costly; hence, less is observed. More general bills where effects are unknown or unpredictable make ideological voting less costly; hence, more such behavior is observed. Ideological voting obeys the law of demand — more is observed where engaging in such behavior is cheaper. Nelson and Silberberg (1987) presented evidence from voting on defense appropriations bills to suggest that this approach to ideology and voting is a useful one.
The issue, then, is not whether ideology matters at all to political behavior, but how much and under what conditions.
3. Seniority
Legislators are not homogeneous, which means that their influence is not homogeneous either. They will differ in their natural abilities as politicians, and they will differ in terms of their institutional status in the legislature. A measurable way in which representatives are different is in their length of service or tenure in the legislature. Seniority leads to heterogeneous political influence. Seniority assumes this role because rank and influence in the legislature (e.g., committee assignments) increase with legislator tenure. For example, agenda control opportunities will be provided by seniority (through committee chairmanships) where cycles exist.
The reasons for this conclusion are mostly a priori at present, but nonetheless convincing (Stigler, 1976). The legislature is organized, in many dimensions, like a prototype labor union with a strong form of monopoly power. The increase of legislator influence over political outcomes as a function of seniority is just one part of the union analogy, but it suffices to illustrate the basic point. To predict policy outcomes such as the economic impact of government programs across representative districts, one must control for seniority and related differences of legislators; all representatives are not created equal.
4. Committees
Economists have produced a significant amount of work on legislative committees. One body of literature, pioneered by Kenneth Shepsle (1978), focuses on the role of committees in determining "structure-induced equilibria." In other words, rather than cycling about endlessly as predicted by Arrow (1951), legislatures actually reach decisions and produce laws. In Shepsle’s approach, outcomes are induced, indeed predicted and controlled, by the structural characteristics of the legislature, including committees, committee assignments, and so forth.
A second major issue in the literature is the control by the legislative committee over its relevant bureaucratic dominion. William Niskanen’s (1971) theory of bureaucracy set the stage for this debate. Niskanen argued that because of its superior information, a bureau had greater bargaining power with regard to its budget than did the bureau’s oversight committee. Subsequent work on the economic theory of bureaucracy has been largely in this tradition. However, Barry Weingast and Mark Moran (1983) offered an alternative principal-agent theory, which predicts that the oversight committee (the principal) has most of the relevant bargaining power, including the ability to remove or to hamper the career of the bureau head (the agent). They tested this theory with data concerning the Federal Trade Commission (FTC), and found supporting evidence.
The issue raised in this debate is an important one. Are government bureaus out of control or are they merely docile agents following the commands of voters as expressed through their elected representatives on the relevant committees? The Weingast approach suggests that political incentives should be compatible as between the legislature and the bureaucrat. The legislator observes a particular political trade off in the election. Imposing that trade off on his bureaucratic agent is in the legislator’s interest. In this approach bureaucracy is not out of control but is closely monitored and controlled by Congress.
Committees have other functions and roles than those discussed here. But in the economic theory of legislation, their role is seen as promoting the passage of legislation. They are engines for finding out what laws people want and who will pay for them, conducting preliminary votes, screening and controlling bureaucratic appointments, and so on.
5. The Compensation of Legislators
McCormick and Tollison (1978) examine the issue of legislator pay. With regard to the legal pay of legislators, they analyzed the legislature as analogous to a union or wage cartel. In some states legislator pay is set by the state constitution; in others it is set by the legislature. The latter case amounts to a very strong form of wage-setting power because few, if any, substitutes for legislator services exist in a given state. McCormick and Tollison found that legislator wages in the "union" states (wages set by the legislatures) are much higher (100-200%) than in the "non-union" states (wages set by the state constitutions), all else the same.
Not all legislator pay is above the table. Outside-the-legislature pay comes in a variety of legal, quasi-legal, and illegal forms. McCormick and Tollison (1981) developed a theory of outside legislator pay that is based upon the occupational composition of a legislature. Imagine the following scenario: an auctioneer starts to call out legislator wages to elicit a labor supply curve for legislators. The first group to volunteer to run for and to serve in the legislature is composed of lawyers. They are the most effective at combining service in the legislature with making outside income. The lawyer who is also a legislator has a particular appeal for certain potential clients: in effect, the derived demand for the services of a lawyer qua legislator is more inelastic than the derived demand for plain old lawyers. Thus, low pay results in a greater number of lawyers in the legislature. As legislator pay rises, businesspeople will sign up next for legislative service. They sign up for the same reason as lawyers, only they are not as proficient as lawyers at earning outside income. Finally, at high levels of legislator pay, people are drawn to run for office who are attracted by the high level of pay per se because they are not adept at combining legislative service with procuring outside income (farmers).
McCormick and Tollison tested this theory using data on the occupational composition of state legislatures and found its implications strongly supported. Lawyers and business-types dominate low-pay legislatures; farmers dominate high pay legislatures.
6. Legislators as Rent-extractors
Fred McChesney (1997) recently expanded the concept of the politician’s role in the interest-group theory of government in a sensible and significant way. He stressed that in the traditional interest-group theory, the role of the politician is to create rents and returns that interest groups in turn compete to capture. In this case the politician is a passive broker. McChesney went on to argue that the politician cannot only create rents, he can also extract them. Individuals and firms in the economy develop specific and expropriable capital in certain lines of endeavor. Politicians can force side payments from these individuals by threatening them with taxes and/or regulation designed to expropriate their specific capital.
Building on this insight, McChesney developed a very interesting theory of rent extraction by politicians: legislators introduce a bill that threatens an industry’s return on capital unless the industry contributes to their legislative campaigns. His theory provides insights into a range of government gestures in the direction of industry: for example, committee investigations and hearings, political speeches mapping out new legislative proposals, and governmental commissions to study "problems."
7. Campaign Spending
The literature on campaign spending can be easily summarized — campaign spending is a means of entry into politics. A challenger’s advertising expenditures perform the important function of introducing the unknown candidate to the electorate; the incumbent’s cannot do much more than remind his constituency of his virtues. The empirical literature that examines the impact of campaign spending shows that the advertising elasticity of challenger spending with respect to votes is larger than that for incumbent spending (Grier, 1987). The moral of this body of work is simple — campaign spending laws are incumbent protection laws. As such, campaign finance legislative can be seen as an effort by legislators to impose entry barriers into politics.
Of course, not all incumbents support campaign finance limits. If they did so, surely such limits would be in place. Powerful, senior members of the Congress, including almost all committee chairmen, are opposed to campaign finance reform, whatever their public stances on this issue, because such reforms would weaken the protection that they receive from high levels of committee-based campaign funding.
Ironically, and fortunately, their self-serving opposition to campaign finance reform, in the long term, serves to enhance the competitive nature of the democratic political process and to weaken the very monopoly privileges that they seek to reinforce.
8. Concluding Remarks
An approach based on an economic theory of legislation none offers rich scientific and empirical opportunities to study legislatures. This is by no means the only approach to study legislatures, but it is provocative to think of the legislature as an institution guided by mostly private interests. After all, no man is safe when the legislature is in session.
