Since the financial crisis, a lot has been written about the revolving door between Washington and Wall Street. We know regulators, political aides, and politicians themselves go to Wall Street firms to finally make some money, and we know that bankers move to Washington when they're tired of making money. But how big of an effect does this really have on legislation? International Monetary Fund economists have studied this question and provided an answer.
Here's a chart created by IMF economists Deniz Igan and Prachi Mishra showing the effect of lobbying and connections on getting regulatory bills passed:
Lobbying clearly has an effect, but connections are even more significant. This leads to the economists' second point:
Second, network connections between politicians and lobbyists who worked on a specific bill also influenced voting patterns. If a lobbyist had worked for a legislator in the past, the legislator was very likely to vote in favor of lax regulation.
Of course, we shouldn't get too carried away here and immediately assume that all lobbying and connections are bad. To be sure, in some cases those working in the industry have legitimate concerns about a new rule that would do more harm than good. The difficulty, of course, is separating those situations from others where the industry's influence in Washington is being used to pursue greater profit at taxpayers' expense.
Read the full story at the IMF.
(h/t: John McDermott at Alphaville)
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