Public Interest Theory and the Special Interest Theory

Public Interest Theory and the Special Interest Theory 

Public interest theory is based on the assumption that the regulations implemented are equivalent to the interest of the regulator and the interest of the broader public. Notably, this is a naïve or rather optimistic assumption. Nevertheless, this means that all legislation is determined by society as a whole, which enhances equity and efficiency (Weisbrod, Handler & Komesar, 2021). On the other hand, the special interest theory operates under the assumption that there are individual incentives for every rational agent. This assumption is in contrast to that of public interest theory. As such, the supply and demand forces in the economy determine the legislation implemented under this theory. The legislation supplier is the politician with the maximum votes, while the buyers of the legislation are the most wealthy special interest group.

Secondly, the public interest theory assumes that it maintains balance by promoting equity and restoring efficiency through the allocation of resources, whereby marginal cost is equal to marginal social benefit (Dewar, 2017). This is in addition to encouraging competition, protecting from harmful external factors, redistributing income within the society, and providing consumer information. On the other hand, in special interest theory, legislation is implemented so that the main beneficiaries are the special interest groups, and the cost to the general public falls disproportionately, creating an imbalance (Rausser & Roland, 2010). One similarity between the two regulation theories is that their main objective is to maximize social welfare.

One recent public interest legislation example is the Medicare and Medicaid insurance programs. Conversely, an example of special interest theory is the tort reform HB 837: Civil Remedies, signed into law in Florida in March of 2023. Accordingly, tort reforms are changes made in the civil justice system to prevent plaintiffs from filing tort litigation, especially of negligence, to reduce the damages they have incurred. These mostly apply to trade associations.

References

Dewar, D. M. (2017). Essentials of health economics. Jones & Bartlett Publishers.

Rausser, G. C., & Roland, G. (2010). Special interests versus the public interest in policy determination. The Political Economy of Agricultural Price Distortions, 105-25.

Weisbrod, B. A., Handler, J. F., & Komesar, N. K. (2021). Public interest law: An economic and institutional analysis. University of California Press.

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The public interest theory and the special interest theory of government intervention have their similarities and differences.

Public Interest Theory and the Special Interest Theory

Compare and contrast these two theories and provide a recent example of each.