As Kolko (1963) describes it, private sector actors are not merely acting within the framework given by government constraints, the “major economic interests” are designing the constraints under which they act, so that they can retain their dominant positions. . .they sought government regulation and oversight to preserve the status quo
I would say that the forgotten history is that the regulatory state began as an attempt to rein in competition. The idea of pro-consumer regulation only emerged in the latter part of the New Deal. From the start of the Progressive era through Roosevelt’s first term, the goal of progressives was to rationalize the economy by managing it. Alan Brinkley describes how regulation in the name of consumer improvement came to replace regulation in order to rationalize production. (Of course, one can question whether regulation actually achieves either goal.)
Later in the essay, Holcombe writes,
By combining Buchanan and Tullock’s (1962) analysis of logrolling for the benefit of those who are able to engage in political exchange with Coase’s (1960) notion of transaction costs, a theory can be developed in which the elite are in a low-transaction-cost group so they can engage in political exchange for their benefit, at the expense of the masses who are in the high-transaction-cost group. This happens in politics but not in markets because government is able to force people to pay for their programs regardless of whether they want to participate, whereas in markets even those with substantial economic power can obtain resources from the masses only if they voluntarily agree to participate in transactions.
In other words, there is a reason that in politics insiders are insiders and outsiders are outsiders. Housing policy reflects the real estate lobby because the transaction costs of assembling real estate agents, home builders, and mortgage lenders into a pressure group are low. The transaction costs of assembling ordinary taxpayers into a pressure group are high. (Although if 1 percent of taxpayers pay half the taxes, those transaction cost might not be quite so high. Something to watch, perhaps.)
Thus, contrary to conventional wisdom, exit is better than voice at giving power to the little guy.
“exit is better than voice at giving power to the little guy”
But that’s a power people can’t easily identify with, as it’s merely everything one DIDN’T buy or otherwise participate in. When I think of power, I think of someone being proactive somehow (I beat you up, etc.) as I think most people do. Even marketing, effectively capitalism’s outreach effort, discusses “consumer power” in terms of entering, not exiting. As in “Sign up now and get the first year free!”, not “Don’t sign up with anyone else and let them deduce that you’re unhappy with their service!”..