The Supreme Court has long held that campaign finance regulations are permissible for preventing corruption or the appearance of corruption. Yet the implied hypothesis that campaign finance reforms are effective tools for combating public corruption has gone essentially untested. We conduct the first systematic evaluation of the effects of campaign finance laws on actual corruption rates in the states. We examine the effects of state reforms on both convictions and filings in public corruption cases over the last 25 years.
In the end, he endorses a “zero tolerance” approach to subsidies and tax loopholes while he is more comfortable with regulatory interventions. This is curious. The regulatory process is opaque and complex, arguably making the code of federal regu- lations an easier place to hide a targeted privilege than the federal budget or the tax code. But Zingales hasn’t enough time to dwell on such considerations; he has too many other interesting and creative ideas to consider.
Since at least the days of Adam Smith, economists have suspected that economic freedom was a necessary, if not sufficient, condition for human prosperity. Smith wrote of freedom as a “system of natural liberty” and declared that “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice.”…
This study documents the economic distortions and inefficiencies that result from a tax system filled with tax expenditures. We review each of the ten largest tax expenditures for individuals and corporations, focusing the following distortions of economic activity: spending on goods and services, capital allocation, the distribution of income, and lobbying and rent-seeking.
The ability to target those benefits is a result of the spending and regulatory power of government, so cronyism is caused by big government. One remedy often suggested for cronyism is more government regulation and oversight of the economy, but this remedy misunderstands the cause of cronyism. The economic literature on the components of crony capitalism shows that big government is the cause of crony capitalism, not the solution.
This paper surveys the research on cronyism and the available methods of measuring it—in particular, using surveys to measure the perception of cronyism. We also make suggestions for improving our measurements of cronyism.
The academic literature indicates that, in addition to other negative effects, cronyism can cause public mistrust in government that limits the effectiveness of core government functions such as maintaining property rights and other individual rights.
The more power the government has over the economy, the more allocation of resources will depend on political connections. The way to eliminate cronyism is to have free markets and little government control. As we shall see, cronyism has been around for a long time and is a bipartisan problem that has thrived under Democratic and Republican presidents and congresses. Cronyism not only picks winners based on political connections rather than on the extent to which they serve consumers, but also is destructive of wealth, sometimes highly so.
The financial bailouts of 2008 were but one example in a long list of privileges that governments occasionally bestow upon particular firms or particular industries. Whatever its guise, government-granted privilege is an extraordinarily destructive force. It misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector.
Evidence shows that tax revenues dedicated to politically popular expenditures like education or highways are used to increase general fund revenues and overall government size rather than for the intended purpose. Dedicated, or “earmarked” tax revenues, are generally ineffective in increasing expenditures for the program they are tied to, and they successfully increase total government spending.<