Does the cost of capital lead to a system where the wealthy use money to influence laws to increase the wealth they earn from capital costs?
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Does the fact that capital has costs lead us to a system where the rich have a motivation to use their money to influence the system so laws and institutions serve to increase how much money can be made charging for capital? i.e. does the cost of capital cause rich people to lobby the government so laws are passed that allow them to get more money "selling" capital, thus transfering money from creators to extrators. This is a follow-up question to .
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Answer:
Yes, but this isn't really due to the cost of capital. Even if capital was free, rich people would lobby in favor of their interests, and since they can afford better lobbyists, those interests would be reflected in laws. But if capital has no cost, then it has to be rationed (otherwise I'll borrow a bunch of money and start speculating; my worst-case scenario is declaring bankruptcy and starting over). If capital is rationed, it's just another chance for rich people to lobby. Who can afford a better lobbyist to bend the ear of Senator So-and-So about how he can use 0% loans: you, or Lloyd Blankfein?
Byrne Hobart at Quora Visit the source
Other answers
It's called Regulatory Capture and Wikipedia has some examples: http://en.wikipedia.org/wiki/Regulatory_capture#Examples
Xianhang Zhang
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