Shakedown at Gucci Gulch: A Tale of Death, Money & Taxes

Abstract

Ever since Mancur Olson's 1965 classic The Logic of Collective Action was published, the dominant view of politics in the academy and the popular understanding has featured the special interest model. Small groups with high stakes in legislative outcomes solve their coordination and free-rider problems and then descend on Washington and other bastions of power, seeking rents. In this model, the special interests are the predators, the legislators the prey. In this paper, we argue that in an important set of cases, the process works in reverse. Legislators pro-actively solve the coordination and free riding problems identified by Olson so that they can then shake down the groups so formed for campaign contributions. We illustrate this model of a reverse Mancur Olson phenomenon with the extended example of estate tax repeal/non repeal, and suggest further extensions. The key properties of the phenomenon are small groups with high stakes that Congress has helped to frame or set up; plausible action; two or more sides; plausible longevity for any legislative action. The key predictions are that, once Congress has found rich territory for the game, it will string matters along, frequently voting, never really acting, and avoiding sensible compromises at every turn.