Public Management and Administration - Owen E.hughes

214 Public Management and Administration
powerful, as pluralist theory argued, it is actually small groups that dominate
and are more successful in getting government to agree with their views. Small
groups – special interest groups – represent only a narrow segment of society.
They have little or no incentive to make sacrifices in the interests of the society
and can best serve their members’ interests by striving to seek a larger share
of a society’s production for themselves. And, indeed, small groups in society,
especially those with collective economic interests, do seem to have power
greater than their numbers. Olson can be used to explain why it is that doctors’
groups are far more powerful than the potential group of medical patients. Even
if the sum total of concern about medical funding is greater among consumers,
there is the problem of organizing when the benefit obtained by any one actual
organizer will be small.
Large or ‘encompassing groups’, such as a union peak council or an employers’
association, may be more willing to make sacrifices for the benefit of the
nation and their own long-term interest. But, Olson argues: ‘on balance, special
interest organizations and collusions reduce efficiency and aggregate income in
the societies in which they operate and make political life more divisive’ (1982,
p. 41). In other words a society with many special interest groups will perform
worse than one with none.
There is substantial explanatory power in Olson’s theory and it is only when
it becomes rather more grandiose – interest group competition is regarded as
the single reason for the rise and decline of nations – that there are some problems.
However, the point that special interests may reduce aggregate economic
efficiency provides a lesson in going too far in allowing groups to make policy.
Stigler’s view of interest groups is that their intervention leads to poorer outcomes.
His ‘capture theory’ argues that there is a co-optive relationship
between an agency and the relevant interest groups (1975). The regulatory
agency of an industry will be captured by the industry it is supposed to be regulating
which then controls what it does. While it is unlike the other theories
mentioned here, the theory of agency capture has had an impact in the process
of deregulation. It has also been used to support the arguments of those who
believe that bureaucracy is an inherently flawed instrument. However, Stigler
goes too far. For him there are no examples of public benefit and no examples
of public interest. All regulation, all interest group pressure being followed by a
governmental response, he argues, leads to outcomes worse than if the government
stayed out. Even if Stigler’s argument can be supported in some cases, the
general case is overstated. He denies any chance for the political system to
operate, as well as denying any possibility that political action in response to
public demand can be beneficial.
The significance of Stigler’s work, allied with that of Olson – both could be
described as New Right economists – has been to give further theoretical backing
to demands to reduce government involvement because of the persistence
of links between government and interest groups. It has become easier to cut
assistance schemes that support special interests, perhaps as a result of such