Introduction

There are two ways to accumulate wealth: produce it or take it away from someone else. The former is production, which increases wealth. The latter is predation, which transfers wealth. Production is a cooperative effort in which both parties gain. Predation is a noncooperative effort in which the predators gain but the prey lose. Endogenous protection is a consequence of political predation.

Political power can create wealth and economic wealth can create political power. It is this mutual attraction between power and money that motivates redistributive activity. Individuals and groups devote resources to redistribution as long as the expected gains exceed the costs. They invest in both production and predation until the marginal returns from each are identical. Lobbies are predatory groups. Protectionist lobbies contribute funds to a protectionist party to maximize their economic gain from the political system. When the protectionist party sponsors a tariff, say, it gains votes using the campaign contributions from the protectionist lobby but it loses votes because voters are upset over higher-priced imports.