Toward a More General Theory of Regulation: Comment

IN the broadest sense Sam Peltzman's paper' aims at developing-to quote his own words as applied to Stigler-a theory of the optimum size of effective political coalitions. The novelty and excitement of the results obtained are all the more impressive as Peltzman's analysis seems entirely independent of the literature in the "public choice" tradition that has grown from the pioneering work by Downs and by Buchanan and Tullock.2 The penetrating power of the analysis displayed here is, however, in part due to limiting the field of attention to the specific area of regulation, a limitation that makes possible a fruitful interaction of economic and political conceptualizations. In Peltzman's model the contending interest groups are supposed to be seeking, simply, wealth redistributions through the regulatory process. In effect, each group bids for the right to tax the remainder of the community. The regulator, taken as equivalent to an elected politician, arbitrates among the interest groups in seeking to maximize his majority-that is, his probability of election or re-election. All the results obtained derive from these simple assumptions. It is remarkable how far they carry us. The interest groups, of course, really do have more complex aims. But I do not quarrel with postulating, as a strategic simplification, the onedimensional materialistic goal of wealth maximization. There are two things wrong with taking the regulators' goal as majority maximization, however. First, and most obviously, the regulators themselves constitute an interest group. They should, therefore, also be aiming at wealth maximization. Indeed, the pathbreaking work of Downs really started from the question: Are Chicago aldermen guided by goals any different from or higher than the goals of Chicago factory workers or Chicago economics professors?-a question answered in the negative, of course. If wealth is the ultimate goal, majority maximization can only be an instrumental and partial aim. The politician should be willing to accept some risk of defeat in exchange for a sufficient direct or indirect monetary payment. If majority maximization is not the only goal, we get the important implication that there are diminishing returns to size of majority from the politician's point of view-which is