Thu, 01 Oct 2009

Cornering the Market on Legislators

My friend Nat Friedman proposes on Twitter "If it's really only $19M in health industry lobbying holding us back, why doesn't some rich guy just spend $50M and get this done?". Won't work. Here's why.

The health industry lobbies for its interest. They spend a certain amount only because they don't need to spend any more. They're buying influence with legislators.

Now, introduce some rich guy and have him try to buy up all the influence, so that the health care industry doesn't get its way any more. This is an attempt to "corner the market" -- to own all of it so you can demand the price you want.

The problem with trying to corner any market is that the other participants in the market still desire the product. As you buy up more and more of the product, the other participants still want to buy it, so the price rises higher and higher. You have to be willing to spend as much for the last item as the richest customer for the produce.

In this case, the intent is to extinguish the industry. So the price for the lobbying is not $19M. The price is the entire value of the health industry. No way is $50M going to cover that price.

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