Voluntary Pressure Groups David Austen-Smith Economica, New Seri Vol. 48, No, 190. (May, 1981), pp. 143-153 Stable URL hitp:/flinks.jstor-org/sicisici=0013-0427% 28198 105%292%3 A48%3A 190%3C143%3A VPG%3I CO%3B2-H Economica is currently published by The London School of Economies and Political Science, Your use of the ISTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at hup:/www,jstororglabout/terms.hml. ISTOR’s Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at hupswww.jstor.orgijounals/lonschool ht ch copy of any part of'a JSTOR transmission must contain the same copyright notice that appears on the sereen or printed page of such transmission, ISTOR is an independent not-for-profit organization dedicated to creating and preserving a digital archive of scholarly journals. For more information regarding JSTOR, please contact support @ jstor.org. hupulwww jstor.org/ Sat Sep 2.07:04:44 2006Economica, 48, 143-153 Voluntary Pressure Groups By Davin Austen Smirit University of York Intropucrion In the rapidly growing literature on positive public choice theory, the analysis of pressure groups has been relatively neglected since Olson (1965).' And in view of the empirical relevance of pressure group activity this is surprising. One reason for the neglect may be that, while the existence of active pressure groups is essentially a disequilibrium phenomenon, the emphasis in public choice theory is cquilibrium-oriented. The dynamic problems involved in analysing disequilibrium behaviour in this context, however, relate to group interaction, eg., between pressure groups and government agencies, or between counteracting pressure groups. Given an individualistic methodology, to examine such interactions requires a model of coordination and/or leadership within groups so to move from the rational, self-interested individuals’ behaviour to strategic group behaviour (Gee Moe, 1980, on this). And a prerequisite for such a model is an understanding of individual behaviour within groups. This is the subject of the following essay, “which presents an individualistic analysis of a large class of pressure groups. AA pressure group is defined “as any group . .. which articulates a demand that the authorities in the political system or sub-systems should make an authoritative allocation {and which] do not themselves seek to occupy positions of authority” (Kimber and Richardson, 1974, p. 3). It is clear from this definition that pressure group activity is directed towards influencing the likelihood of changes in some particular dimension (or set of dimensions) of the prevailing social state. Pressure groups can then be classified first by the dimensions they attempt to affect. Two ‘main types of group are generally identified in this way: 1) The “interest” group which is set up to protect shared sectional intrest. (i) The ttude” group set up to achieve a specially delimited objective or cause and which is defined notin terms of the common interests ofits members, but in relation to ther shared attitudes. Castes, 1967, p. 2] ‘While the results of this paper apply equally to both types, to fix ideas the formal analysis is more in terms of interest groups’—for example, the trade unions. In The Logie of Collective Action, Olson (1965) suggested a second classification of groups, by size. Olson argued that, since the results of collective action are public goods to group members, only for groups that are not “too large” is there any presumption that collective action will occur in the absence of coercion or other “selective incentives”, ie., non-public incentives to contribute 10 group activity. Although the relationship between the level of collective action and the numerical size of groups is now recognized to be more complex than Olson originally indicated (Chamberlin, 1974; Taylor, 1976), the question of why public .goods-oriented collective action arises in a world of rational egoists remains open. (in Sections II and III we provide a partial answer to this problem.) We therefore define a voluntary group as one in which some level of collective action is forthcoming independently of any coercion or selective incentives (although these144 ECONOMICA [may might exist). Only voluntary pressure groups are considered here. Since most pressure groups have at least their origins in the voluntary activities of some set of individuals, this restriction (empirically) is not serious. And it is important to notice that this definition of “voluntary” does not necessarily entail anything in regard to the numerical size of groups. ‘The plan of the paper is as follows. Section I describes the basic model and ‘examines individuals’ behaviour on the assumption that every individual takes other group members’ decisions as given and known. A novel feature of the model is that individuals’ decisions regarding whether to act in the economic or political sector (or both) are endogenous. This section also relates outcomes under fully coordinated group activity to those resulting when such activity is uncoordinated. In all but the smallest groups, any individual's information about others’ behaviour is unlikely to be complete. In Section II, therefore, individuals’ decisions are analysed when they are uncertain about others’ behaviour. Section IIT considers how individuals’ activity inthe political sector is affected by uncertainty concerning returns to activity in the economic sector. A concluding section summarizes our principal results and relates these informally to some empirical observations on pressure group behaviour. An appendix contains proofs for the formal propositions. 1. INDIVIDUAL BEHAVIOUR UNDER CERTAINTY Under certainty every member of a group takes other members’ behaviour as given and known. Consider a group of m individuals, indexed i N= 1, ....)- Throughout, group size is taken as parametric. Any individual i € N has a thrice differentiable and monotonic increasing von Neumann-Morgenstern utility function U', defined over disposable income (y") and leisure (L'. Let Tbe the total time available to the individual; ¢f be the amount of time spent working at a sven wage rate w; and let ¢} be the time / spends not working. If i engages in no pressure group activity, then, y! = (T'—).w and L!= 1, However, individuals may devote non-working time to lobbying in the political sector. Such non-market activity is directed towards increasing the likelihood of some public good (x) being allocated to the group via the legislative process. This, public good may be (in Olson’s terminology) “exclusive”, in-that the level of supply accruing to each member ofthe group is inversely related to group size: or clusive”, in that each member receives the entte supply of the good provided to the group as a whole, irrespective of group size. We assume x is excludable to the extent that no non-group member can benefit Since we leave the particular details, of the public good incompletely specified, let 6! = 6x.) be the income-equivalent value of x to i € N. If x is inclusive, then 6! is independent of n and (by suitably choosing units of measurement for x) b> 0, where subscripts denote partial derivatives in the usual way. If xis exclusive, bis not so independent and by < 0. ‘The exposition to follow can be considerably simplified at negligible cost by assuming b= b =x/a, all iE N; where a= 1 (n) if and only if x is inclusive (exclusive). And we do assume this. Noting that collective action by the group (to press for provision of the good x) is itself an inclusive public good to group members, let 1! be the time 7 N devotes to pressure group activity and write s = Dy1. Then the probability that pressure group activity is wholly successful in securing the allocation of public19811 VOLUNTARY PRESSURE GROUPS las good supply—at the predetermined level, x, for which the group is lobbying —is given by p(s1x,n) €[0, 1); where p(Olx,n) = 0 all x,n; and s Sn. T. We assume: PoPa> — PaPmg <0; PSO; Puy >0. Hence, i’s expected utility ifthe group engages in lobbying activity is given by: (BUY, L) = plsix MUG, ww + bf 18) + 11 = pC Ua ft) where measurement of the public good supply (x) is normalized so that the status 4quo level to the group is zero. Throughout we assume, Vi € N: UL>0,US, <0: UL>0,U}, <0: Ujy 20. In particular, individuals are risk-averse and have non-decreasing marginal utilities of leisure in income. These conditions seem unexceptional. Individuals’ decisions regarding their time allocations clearly depend (among, other things) on the level of public good supply (x) that the group as a whole elects to lobby for. With individuals having different tastes. some aggregation ‘mechanism internal to the group is necessary to determine this value of x. While the study of such mechanisms is important, it is not (as mentioned in the introductory section above) the subject of this paper. Here, we are concerned to analyse “within-group” behaviour, given group objectives. Consequently, suppose xis parametric for any group member. Hereafter, the superscript / will be dropped where there is no ambiguity, and we consider an arbitrary / € N. The individual's problem, then, is choose fj. f,| to maximize (1), given , 2x> 0 and n. We are concerned with voluntary pressure groups. The definition of voluntary here entails that, for some individuals # € Ny there is an internal solution, to this problem. The first-order conditions for such an individual are: OQ (p.0, +1 — pW} — wlp. Oy + 1 — pW) =0 Q— p.(O- Y= Ip.0, + piu, =0 where a caret indicates a function is evaluated at y = cw + b; no cart indicates a function is evaluated at y= 1f.w; and asterisks denote optimizing values of variables, ic. {rf,/2}. Letting D, be the second partial derivative of EU(),L) with respect to a, itis straightforward to confirm thatthe assumptions on the functions pand U guarantee: 4) DypD, <0 so that {f,r$} is indeed maximizing. Proposition 1 describes the principal comparative statics results. ll the partial derivatives are evaluated atthe solution to the optimizing problem. Proposition 1. (i) Sign (@t,/éx)is ambiguous. (i Sign (24,/én)is ambiguous for both 6 = x and b= x/n. (ii) y/28" <0; where s’=s fy the total of all other group members’ contributions to lobbying, iv) afew <0. Given the trade-offs involved, parts () and (i) are not unexpected, although it is only relatively recently that the possibilty of individuals increasing their (public) input with group size was recognized (see, ¢g., Chamberlin, 1974: McGuire,146 ECONOMICA Imay 1976). Part (ii) of the proposition, however, is unequivocal: under the assumptions of the mode, individual choice of fis negatively correlated with the total of all other group members’ choices of f,. This result, together with part (i), suggests that it is not so much the mumerical size of groups that induces an undersupply (see below) of lobbying by individuals, as their perception of the total of others’ contributions to collective action. And in all but the smallest groups, individuals are unlikely to know s’ ex ante, despite knowing n. We return to this issue in Section IL Similarly, part (iv) of this proposition unambiguously states that relatively higher wage rates (in the economic sector) are associated with relatively less individual lobbying (in the political sector). Notice that ét,/@w < 0 does not ental Gt,/éw > 0: all (iv) claims is that higher wage rates (loosely) induce lower participation rates in political action: the opportunity cost of group action to individuals isin terms of both (economically) earned income and leisure forgone As in the discussion of part (ii), however, itis unlikely that the extent of these opportunity costs are fully known to the individual. In particular, in unstable social environments, the real return to economic activity in any period may be random and/or the agent may (ex ante) be imperfectly aware of such returns. The impact of such uncertainty on the individual's choice off, is explored in Section M1 Before turning to these issues, itis worth considering the relationships between individuals’ independent decisions on (t,t) and those generated by a fully coordinated group. (To do this, itis clearly unnecessary to know how the group became so organized.) While individuals choose {¢,/4| to maximize expected utility, the raison d'étre of the group qua pressure group is to influence the likelihood of securing some level of the public good, x. Thus the fully coordinated pressure group seeks to maximize the probability of successful collective action subject to a set of minimum expected utility constraints, one for each i € N.! And, in this context, the choice of x for which to lobby is no longer exogenous. Letting (o"*, L'*) be the optimal bundle for 1€.N if the group engages in no collective action, the fully coordinated group wishes to: max pls.xin) S.EU'EL.w + bf A) 2 ULM), WEN: and the non-negativity constraints. Forming the Lagrangean, and evaluating the first-order conditions in the usual ‘manner, yields Proposition 2. Under the assumptions of the model, self-interested individuals in voluntary pressure groups will always supply a suboptimal level of time (t,) to collective action. Since any individual's contribution to lobbying is an inclusive public good 0 the group as a whole, Proposition 2 is neither surprising nor novel (It wil, though, prove useful in Sections If and IIL) The main concern here isto present the fully coordinated pressure group's problem as a probabilty-maximizing problem, in contrast tothe group members’ independent expected ullty maximizing goals We close our analysis under certainty by remarking that the relationship between the (Fully coordinated) group's optimal choice of x and group size, n, i in general non-monotonic. This holds whether or not xis inclusive or excl1981] VOLUNTARY PRESSURE GROUPS 147 TL, UNCERTAINTY ABOUT OTHER MEMBERS’ CONTRIBUTION TO LOBBYING Suppose the total of all other group members’ contributions to lobbying, sis unknown to the individual. This agent is assumed to have a given distribu- tion function F(zlx,n), conditional on x and m, defined over the interval =10,(n— 07). Given x,m and F, the individual seeks to (6) max E|EUU,1)! where Ey is the expectation operator with respect to F. The first-order conditions for an interior solution are, simply, (© EplEU,—w.EU,} =0 — Bplp,. V—EU,b=0 where EU,=p.0,+(1—p).Uya=yLi and V=(0-U)>0. In view of (4, the relevant second-order conditions hold, ‘The frst two results ofthis section (Propositions 3 and 4) are conditional not only upon the structure of the individual's utility funetion, but also on the structure of p,(s|.). There seem to be no a priori grounds for choosing any one particular characterization. However, having taken p(s!.) to be monotonic ereasing and striely concave on the hal-open interval (0,1), p, cannot be concave everywhere. But, given n finite, it remains possible for p, to be, say, sirictly concave for s € [0,nT'l. For the purposes of this section, then, we take p, to be either strictly convex or strictly concave in over the relevant interval. As is clear from the formal arguments (See Appendix) this assumption is stronger than necessary. It is enough that E{p,) % p, when E{s"} = s', and s ~5" solves the individual's optimizing problem under certainty (Section 1). Strict convexity oF concavity simply guarantees this for any arbitrary group member and distri bution function F. Proposition 3. Under the assumptions of the mode, if pis strictly convex/eoncave ins € [0,n7, then the choice of ¢(,) by an individual facing an uncertain s’ with expected value E,{s'} is greater/less (Iess/greater) than that chosen when the individual is certain that s' = E,(s') This proposition is particularly interesting: for p, strictly convex in s it asserts that, if every group member is risk-averse, then uncertainty about others’ behaviour results in an increase (possibly from zero) in political, and a fall in economic, activity. The intuition here is immediate, once we appreciate that pystricly convex means increasing returns in marginal probability of lobbying success. And in view of Proposition 2, we have Corollary. Suppose p, strictly convex in s. Then under the assumptions of the ‘model, s'-uncertainty—if itis not “too large”—generates a more efficient (from the group perspective) level of collective activity. The qualification on the extent of the uncertainty is important here. If individuals are “very uncertain” about s’, they may select supra-optimal levels of 4, (from the group perspective). The result does, however, provide a partial answer148 ECONOMICA [may to why rational egoists will voluntarily supply some level of collective action. But it must be emphasized that, if p, is not strictly convex, risk-averse individuals will not so respond to the uncertainty in, effectively, the returns to collective action. This theme is pursued further in Section III. Given x, the extent of individual uncertainty regarding sis conditional upon m. For numerically small groups such uncertainty is unlikely to be significant, but the exact relationship between m and the riskiness of F for any individual is obscure. However, itis possible to examine the impact of at least a marginal change in the ness of F on individual behaviour without altering n. Proposition 4. Under the assumptions of the model, if, is strictly convex/concave in 5 € [0, nT, then any marginal Rothschild-Stiglitz (1970) increase in risk of the s" distribution for any individual results in an increased/decreased (decreasd/ increased) level of f(,) For the certainty case, Proposition 1 (ii) states that an upward shift in the value of s" always leads to the individual's reducing his own contribution. A particularly simple way of capturing the notion of an “upward shift” for a random variable is to move the whole distribution to the right (cf. Sandmo, 1971). In the present context, this involves replacing s' by s' + y where y’> 0, a constant. For a sufficiently small choice of y this is always possible: from (6), ¢2 > 0 for all group members: and so for the individual there exists a number r € (0, (n— 1)T) and a subinterval J=[x, (n= I)T]CI such that F(zi.)=1, all z J. Hence there cexists a suitable y and a rightward shift of the distribution of s’ on Fis feasible. Proposition 5. A rightward shift of thes" distribution for any individual results in a decreased input to collective action. So the presence of s'uncertainty leaves unaffected the certainty result, Proposition 1 (i) TIL, UNceRTAINTY AzouT THE WAGE RATE Loosely, the preceding section was concerned with the level of collective action (in the political sector) when the expected returns from such action themselves were only known imperfectly. This section relates to individuals’ allocation of resources between political and economic activity when returns to the latter are random (or imperfectly known ex ante). We assume s' is known with certainty by any agent; and no particular structure on p, (save Py <0) is supposed. Let w be unknown ex ante by the individual; and let his expectations concerning the value of w be described by a given distribution function G(2) defined on the interval (1,0). The individual's problem and the resulting set of first- and second-order conditions are formally identical to those of Section II: save inthis case the expectation operator is with respect to G, Ey. Proposition 6. Under the assumptions of the model, the choice of 4(¢,) by an individual facing an uncertain w with expected value Eq\w) is greater (ess) than that chosen when the individual is certain that w = Eg\w With risk-averse individuals, w-uncertainty stimulates an inerease in pressure ‘group activity relative to when w is known surely. The intuition here is that the individual responds to economic uncertainty by seeking utility gains through the1981] VOLUNTARY PRESSURE GROUPS 149 political system: he is essentially adjusting his portfolio to shifts in the relative riskiness of the two “assets”. Proposition 6 contrasts with Proposition 3 in so far as, for a similar portfolio adjustment to take place under s'-uncertainty, p, must additionally exhibit (loosely) decreasing returns in s. If p, is strictly convex for s€|0,nT, Propositions 3 and 4 state that risk-averse individuals invest more time in that activity whose returns have become even more uncertain! In summary: without detailed information on the structure of p,, we are unable to identify unequivocally the impact of s'-uncertainty on collective action; but (for risk-averse individuals) w-uncertainty unambiguously stimulates an increase in lobbying activity and a fallin economic activity. Despite the similarity between Proposition 3, when p, is convex. and Proposition 6, a corresponding corollary is unavailable here. While (fully coordinated) group-efficient levels of f, can consistently be independent of any individual's ex ante knowledge of s', it is rarely the case that group-efficient levels, ‘of 1, are independent of the fact that the wage rate is random. More generally, itis worth emphasizing that neither proposition follows from the other. This because s” is not an argument of individuals’ utility functions: and w is such an argument. This is reflected in the following result, which is certainly more restrictive than its companion, Proposition 4. Proposition 7. Suppose, for the individual, U,, is a constant function of disposable income (9). Then any marginal Sandmo (1971) increase in risk of the w distribution results in an increased level off, Proposition 7 is more restrictive than Proposition 4 for three reasons. First, although a Sandimo increase in risk is a Rothschild-Stiglitz increase, the converse not true, Second, Proposition 7 says nothing about the individual's choice of ty response to such an increase in risk. And third, the assumption that Uy independent of y is quite strong and the proposition, therefore, is weak. Unlike with the structire of p, in Section Tl, there are some theoretical grounds for expecting Uy, in fact to be a strictly increasing function of y. In general, individuals are held to have non-inereasing Arrow-Pratt indices of absolute risk aversion (see, for example, Hey, 1979): a necessary condition for this to hold is for Uryy > 0. However, Uy, = 0 is only a sufficient, not a necessary, condition for Cour rest: if Uy, 2 0, the outcome is ambiguous. Finally, since wis assumed to take some value in the open interval (w',W""), suitable rightward shit ofthe distribution Gis clearly feasible. lence Proposition 8. 8 rightward shift of the w distribution for any individual results in a decreased input to collective action. IV. ConcLupine Discussion This paper has developed a simple model of individual behaviour within inmerest groups. In the model, returns to collective action in the politcal sector are known only probabilistcally: and individuals’ decisions regarding whether to seek utility gains through economic or political activity are endogenous. Under the assumption that any individual takes others’ decisions as given and known, we found that, although the individual's response to variations in (numerical) group size is ambiguous, the individual unequivocally offers a lower contribution to150 ECONOMICA [may group action with higher levels of others’ contributions. Similarly, the greater the ‘marginal real return to economic (earning) activity, the lower are individual contributions to political (lobbying) activity. While these results carry through conce we introduce individual uncertainty concerning others’ contributions to collective action and the real return to economic activity, the individuals resource allocation turns out to be sensitive to such uncertainties. In particular: if any (isk-averse) individual is uncertain regarding others’ contributions to collective action, then he or she will allocate relatively more (less) resources to the political sector, with respect to the certainty case, as the marginal probability of lobbying success is subject to increasing (decreasing) returns to total group input to collective action. Similarly, ifthe rea rate of return to economic (earning) activity is uncertain, then such an individual will unequivocally devote relatively more resources to political (lobbying)—and less to economic—actvity, with respect to the certainty case. Both these results provide reasons why (risk-averse) individuals, may voluntarily contribute to public goods-oriented activity. To illustrate these results, consider first trade unions: these are clear examples of interest groups. The good x that unions seek to obtain through the political process may be “closed shop” legislation, job security, reduced national insurance contributions, etc. Then Proposition 6 claims that, if the real wage rate in any period for union members becomes uncertain, then that union can be expected (oosely) to transfer resources from earning to seeking collective gains via the legislature. If varying rates of inflation, increasing general unemployment and increasing bankruptcies are associated with such uncertainties, then this result may provide at least partial explanation for the recent growth of union unrest in the poltical—at the expense of the economic—sector of both the USA and the UK. Similarly, when considering more attitude-oriented (in the sense of the introductory section) groups, such as Shelter or Friends of the Earth, Proposition 3 suggests that potential contributors to these lobbies are likely to provide relatively more if they are uncertain as to the total contributions already offered, and if they expect the marginal likelihood ofthe lobbies’ success to be subject to increasing returns in contributions. Should this be correct, then such groups’ practices of advertising. their total resources (beyond, of course, any legal requirements of open access to accounts) may well be counter-productive! ‘Apart from the problems of internal organization and of strategic behaviour by groups at a more aggregated level, the main omission of this paper is to account for multi-objective groups. If such groups’ objectives are independent, then our model suffices, atleast as a frst approximation. In many cases, however (eg, trade unions), this feature is absent. To incorporate a multidimensional set of objectives requires a more complex framework. We leave this to future research, ACKNOWLEDGMENTS | should like to thank John Hey for a useful conversation about various aspects ofthis paper: and an anonymous referee for constructive comments on an earlier attempt at the Piece. This version was written while I was visiting the Department of Economics at the University of Maryland. T am grateful to that institution for its hospitality: and to the ‘Nufield Foundation, London, for financial support. The usual caveats apply.19811 VOLUNTARY PRESSURE GROUPS 151 APPENDIX Propositions 1 and 2, and the remark closing Section I, follow from an entirely routine ‘comparative statics analysis ofthe relevant problems. Details are left tothe reader. Proof of Proposition 3, We prove ths for p, strictly convex ins: the remaining case follows similarly. The individual's von Neumann-Morgenstera utility function is independent of s ‘and so the first-order conditions (6) and (7) can be written, (AD BEU,H/E,(EU,) (A2) Erlp,) = Ep(EU,1/VQ, L). By assumption, p is strely concave in s and p, is stietly convex in s. Hence, E,|EU,] < EU, @= y, Ls and Ey|P,1 > Pe lm parculr, for Eyla'] ~s', (A2) implies ‘tat (a3) EplEUssI/ve" > BUI where (*) denotes values at the maximum when s i uncertain with expected value Erie's and (0) denotes these values when s'=,{s") with certainty. Clearly, G**, 1%) 40%L"); otherwise the inequality (A3) would be reversed. And ve note Vy= 0, U, 20, since Us, 20 by assumption. Now suppose. L** 2 L*. Then vow abe and, since Us <0, EylEUE) = EylEUt] < BU, contradicting (83). Therefore L*" Ep(EUE). Then, using (A; Epi EUp) > E,lEU3] = > G*> if, by Uy, <0. Together, L** < L* and rf* > of entail $* > fs and the proposition follows. QED. Proof of Proposition 4. Theotem 2 of Rothchild and Stiglitz (1970) establishes tat the expected value of any still convex (concave) function of a random variable increases (Gtereases) with « Rothschld-Stigltz increase in risk. Since such increases in risk are ‘mean preserving, diet application of the technique used to prove Proposition 3 yes the required results. QED. Proof af Proposition 5. Substitutes + 7 for sin (7) and totaly differentiate, holding sx ivand w xed to give Gty[0y = —EpllDy VP, ¥iVDy)- By (4), D,, <0. By assumption, p,, < 0 and p, > 0. By U,, 2 0, ¥; 2 0. The result follows. QED. Proof of Proposition 6. The first-order conditions here ar: (Ad) E((EU,—wEU,) =0 (Ad) Eel BU, )=0. Using (A), rewrite (AS) a8 (49) Eclp,¥—weU,) Let iv = Bsubteact Eg EU, hi from both sides of (A6) and rearrange to give (AN) EGlBU,Ow— = Eelp,¥ ~ EU, But the left-hand side of (A7) is cov. [EU,, wl. By assumption, U,, <0: and s0 cov. [EU vel <0. Hence, (a8) Felp,¥—EU,.0 <0. ‘When w = Surely, this expression equals zero. Therefore, (*, L**) + (y*, L*)—where (€*) and (*)funetion asin the proof of Proposition 3, with w Tors By (AA) and Uy. U0 9) LL Suppose 1f* = ¢f sot (A9), which entails EU wh given s'; and assume L** L*, Then (1) y** 2 y.by and (2) V*¥ = V*, by Uj, 2 0. Together, these Facts152 ECONOMICA Imay violate, the inequality (A8), Therefore, L™* if. Together, L** ff imply #f° > rf. The proposition follows. Q-E.D. Proof of Proposition 7. A Sandmo increase in risk about a given mean is defined by an increase inthe parameter from an inital value of Tin (A10) wow — 8) + Substitute (A10) for w in (A6) and totally differentiate, holding w, x and fixed, to ive a -dg ABU yy Aw — 1) ty + BU, — W)—p, Vy. — wl] where Vj=0,-U,<0, by Uy <0. By (4), D,, <0; and so a, FE> OCD Bal Ey) te + EU O98 —P, Hs — il <0. (=) COV. [EU jp Wl ® + €0v. LEU, 1 ~ Py.00¥. [Fy Wy < 0. (0, Hence the frst and tied terms disappear, and the By assumption, U,, <0 and U,, ‘remaining term's negative. QED. Proof of Proposition 8. Substitute w + y for w in (AS) and totally differentiate, holding s' ‘sand n fixed to give ay a and the proposition follows straightforwardly. QE.D. APs. ¥y— BU, Me/D, Hs NOTES "Exceptions include Brock and Magee (1978), Chamberlin (1978), Guttman (1978) and Moe 1980) * Most pressure groups engage in both interest and attitude oriented activites. Since our analysis applies to both types of group, this overlap is unimportant here. "Assuming iferentibiity of any Function inne not tity legitimate since ms integr valued. But this assumption greatly eases the exposition without affecting anything of substance Of course, he group per se has no existence or goals beyond those ofits constituent members But its clear tha pressure group activity here is concerned wo influence the liklibood of some state ‘occurring. REFERENCES BROCK, W. and MAGEE, S. (1978), The economics of special interest groups: the case ofthe tari. “American Economie Review, 8, 246-280. ‘Castuss, F. (1967). Pressure Groups and Political Culture. London: Routledge and Kegan Paul (Cuanenenuty J. (1974. Provision of collective goods asa function of group size. American Political ‘Science Rete, 68, 707-716 1978). A coletve goods model of pluralist poiea systems. Publ Chole, 38, 97-113. GGurraan, J (1978) Interest groups and the demand foragrcukural research Journal of Poitical Economy. 86, 467-484 Hey, J (1979) Uncertainty in Microeconomics, Oxford: Martin Roberton, KnwneR, R. and RICHARDSON, J [eds] (1974), Pressure Groups ln Britain. London: Dent -McGuine, M. (1976) Group size, group homogeneity, and the agaregate provision ofa pure public ‘00d under Cournot behaviour, Public Chole, 18, 107-126. Mor, (1980). The Organization of Interests. Chicago: University res Oxs0x, M. (1965) The Logie of Collective Action, Cambridge, Mass. Harvard University Pres1981) VOLUNTARY PRESSURE GROUPS 153 Romiscntua, M. and Sot, J. (1970). Increasing risk I: a defition. Journal of Economic ‘Theor. 2225-243, Savowo, A. (1971). On the theory of the competitive firm under price uncertainty. American ‘Economic Review, 61,65-73. ‘TAYLOR, M. (1976), Anarchy and Cooperation, Landon: Joba Wily. Note added in proof Having written this paper, a coleague refered me to Jonathan J. Pincus’ book, Pressure Groups and Poles in Antebellum ars (Columbia University Press, New York, 1977) ‘While this sesentilly apiece of quantitative economic history, Pincus does address some of the fssues considered in my Section Il, above (ef. Pincus pp. 114-121).