Economic Analysis of Social Issues 1st Edition by Alan Grant

Exercise 27

[Related to Application 10.2 on page 206] The current farm bill includes a number of different subsidies for producers of mohair, a yarn made from the wool of the Angora goat, amounting to some $20 million each year. Taxpayers fund those subsidies. Economists know that the mohair subsidy makes Americans poorer on the whole. Apply Mancur Olson's explanation of the power of organized interests to explain why it is so difficult for U.S. taxpayers to end the mohair subsidy. Your explanation should incorporate the term transactions costs.