Markets in political influence: rent-seeking, networks and groups

Mainstream economic theories of rent-seeking and interest groups typically ignore the parallel, yet highly relevant, streams of research on social networks and groups. Incorporating these broader social and psychological theories into economic models of rent-seeking appear to be a promising avenue for developing an integrated theory of the market for political influence that predicts many of the observed stylised facts, and can better inform policy makers. Such a theory has the potential to predict the often conflicting findings of empirical studies - such as significant underinvestment in rent-seeking, loyalty of political donors and recipients, and the variation in the prevalence of the ‘revolving door’ across industries. This review highlights the shortcomings of basic rent-seeking theory and analyses how network and group concepts can improve the alignment between theory and evidence. Directions in research and policy analysis based on an integrated model are discussed.