Olson (1982) has argued that the greater the density of interest organizations in a society, the slower its rate of economic growth. Interest groups have no inhibitions about lobbying for policies that depress growth because they obtain the benefits of such policies in full while paying a fraction of their cost. An exception to this rule is the “encompassing” interest organization: because of its size, its members are bound to “internalize” much of the external costs of such policies. Consequently Olson predicts that such an organization will tend to have less parochial — and so less growth-defeating — legislative objectives. This prediction is tested for both business and labor using political action committee contribution data.
Bibliographical noteFunding Information:
* Thanks to Edwin M. Epstein and Frank J. Sorauf for their help. The research on which this paper is based was made possible by financial support from the Burlington Northern Foundation and from the Graduate School and School of Management of the University of Minnesota. 1 The term is Hayes's (1981). For catalogues of such failures see Hayes and Schick (1969). 2 For the first claim see Lindblom (1959, p. 85); for the second see Wildavsky (1974, p.