Academic journal article Agenda: A Journal of Policy Analysis and Reform

Log Rolling as an Explanation of Distortions All Round: A Model À la Buchanan and Tullock

Academic journal article Agenda: A Journal of Policy Analysis and Reform

Log Rolling as an Explanation of Distortions All Round: A Model À la Buchanan and Tullock

Article excerpt

Introduction

Since at least the time of Adam Smith, economists have been alive to the vision of a relatively small number of 'special interests' benefiting themselves at the expense of the public weal. But distortions are today so endemic, it is tempting to say that every interest manages to secure that status of special interest, and receives some 'distortion' in its favour. But, however credible this scenario of 'universal distortions' may be, can it be provided a rigorous and well-articulated modelling in terms of maximising choices, under a specified institutional structure? Can Public Choice suggest such a modelling? Can, in particular, the Public Choice theorising of 'log rolling' do so?

It is argued here that the Public Choice theorising of log rolling (Buchanan and Tullock 1962) can provide such a rationalisation, as its framework can be stretched to admit the possibility of 'distortions all round'. The word 'stretch' is used advisedly: the unhappy possibility of 'distortions all round' is perhaps unrepresentative of the more optimistic bent of the Public Choice theory of log rolling. Yet, the pessimistic possibility still has value as a corrective to the overly hopeful account that Buchanan and Tullock originally provided of log rolling.

An Australian illustration of universal distortions: 'Protection all round'

Australian experience of the twentieth century resonates with the vision of universal distortions expounded in the introduction.

The advent of the new Commonwealth of Australia in 1901 was followed by a spreading inhibition of competition. This began with the establishment of a national tariff wall for manufacturers; first of low height but later inexorably increasing. This tariff quickly saw the attempt by labour unions to encumber competition in the labour markets of protected industries, under the banner of New Protection. Though initially unsuccessful, the regulation of the labour market quickly swelled, and a sense of quid pro quo between labour and manufacturers certainly added charge to the surge.

The sudden emergence of the Country Party at the close of the First World War may have been expected to menace this exchange between urban capital and labour, as the agricultural interest was injured by tariffs on manufactured importables. But the admission of the Country Party to the cabinet room in 1922 saw no moderation in the now 'settled policy of Protection'. The relevant Act was simply revised to require the Tariff Board to include representatives of the rural interest. Thus, the farming sector had joined the club, and a stifling of competition in agriculture ensued. This was sometimes through tariffs and bounties (e.g. sugar), but also through 'marketing boards': first for fruit in the interwar period, then wheat in the post-Second World War period, and finally (and most catastrophically) for wool for about 20 years from the 1970s. The untiring partisan of this last disastrous piece of competition restriction was Jack McEwan, who was very briefly prime minister in 1960s but (de facto) deputy prime minister from 1958 until 1971. As industry minister, he was the epitome of the creed of 'Protection All Round'. Such protection would be conferred not only on import competitors, but also exporters through export subsidies ('export incentives'). Whoever you were, there was a tariff or bounty for you.2

How might a 'log rolling' explain, or rationalise, such a universal schema of distortion?

The Buchanan and Tullock model of log rolling

Log rolling is the trading of favours by sectional interests. Thus, the timber interest supports a tariff on sugar, in return for the sugar interest supporting a tariff on timber.3 The thought easily arises that 'protection all round' might arise from a universal log rolling. But does 'theory' give grounds for supporting this notion?

In their The Calculus of Consent (1962) James Buchanan and Gordon Tullock (B&T) present a theoretical analysis of log rolling. …

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