Writing for the Washington Examiner, Tim Carney records the emergence of “a new quirky-sounding consumer-rights group” called “Consumers for Paper Options.” Recently, when mutual funds asked for relief from requirements that they mail physical copies of prospectuses, they were repelled by the raw and dedicated power of Consumers for Paper Options.
At first glance, this looks like a counterexample to the “concentrated benefits, diffuse costs” logic of public choice economics. After all, it’s an organization of consumers who simply want to keep getting paper copies of their mutual fund prospectuses fighting against mutual fund providers who want to save a few dollars by putting prospectuses online instead of in the mail. It looks like an example of David taking on Goliath and winning.
There’s more to this than meets the eye, though. As Carney points out, the organization’s executive director is lobbyist John Runyan, who represents “timber giant Rayonier, Inc. and the Envelope Manufacturers Association.” Also deeply concerned with consumers’ access to paper-based financial disclosures were the National Association of Letter Carriers and Maine Senator Susan Collins.
It might seem like such rules are good ways to save jobs in the timber industry. However, there is more than meets the eye. We might see the logger or paper mill worker who is able to keep his job because companies like International Paper and Georgia Pacific are able to sell more paper. What we don’t see are the businesses that aren’t started and the jobs that never come into being because SEC rules force mutual fund providers to waste money on paper.
It’s a useful illustration of the logic of political action when the state is in a position to dispense favors, whether those favors be subsidies or mandates or barriers to entry that protect special interests’ profits. Special interest concessions like these don’t represent a system being corrupted. They represent how a system of politics-as-exchange works.
If anything should surprise us, it should be the fact that this kind of thing doesn’t throttle economic growth the way it did before the Industrial Revolution. Adam Smith wrote that “there is a great deal of ruin in a nation.” This is one example. It’s surprising there isn’t much more.