The Quality of Politicians

In a recent paper entitled “Political Careers or Career Politicians?,” Andrea Mattozzi and Antionio Merlo ask the following questions: “Who wants to be a politician and why? How do monetary incentives affect the quality of politicians and their career paths?” Naive economic thinking would suggest that if society offers better financial rewards to politicians, it will attract the best talents, much like one can buy better-quality tomatoes, or a better car, if only one is prepared to pay more for them. But Mattozzi and Merlo suggest that the market for politicians differs from the market for tomatoes. How?

Their explanation is based on the assumption that there are two types of people in politics: (1) those who are career politicians, call them group A and (2) those who have political careers, group B. Group A (career politicians) are people who “live for” politics: they really care for a cause and/or they enjoy power. These guys only leave politics when they are voted out. Group B people “live off” politics: they are there for the money and they leave politics when voted out or when outside opportunities (in business, consultancy, etc) are better.

What motivates each group to join politics? Group A people enter politics because of the non-monetary rewards of being in office; group B people enter politics in order to increase their monetary rewards (when and after they leave politics). What happens if, say, the salary of politicians were to be doubled? For a start, there will be more wannabee politicians. But, the increase in the number of wannabees will come mainly from group B (those who live “off” politics). In a situation of perfect information (i.e. voters can perfectly ascertain the quality of politicians), as the pool of candidates is now larger, the average quality of elected politicians is bound to increase.

The problem, of course, is information asymmetry: initially, the quality of a politician is not well-known to voters, only revealing itself over time, if at all. Suppose that there are initially 100 candidates from each group and only 100 in total are elected (thus, with uninformed voters choosing pretty much randomly, there would be, on average, 50 chosen from group A and 50 from group B). Suppose now that the salaries double and, as a result, there are now 100 candidates from group A and 150 from group B. Uniformed voters, choosing blindly, will now elect 40 from group A and 60 from group B. Higher financial rewards have then altered the types of politicians. Whether the average quality of politicians has gone up or not depends on the quality of the new people emanating from group B.  Quality can go down if the salary increase leads to too many low-quality group B entrants.

The dynamics of the story is also interesting. As time goes by, talent gets partially revealed. The next time voters go to the polling booth, they have a better picture of the incumbents. Some group B people, who will have revealed their talent, will now be offered better outside options (in consultancy, etc) and do not ask for another mandate. There is therefore some adverse selection at play: only the worse of group B stays. Group A people stay put, as they are career politicians. And new entrants arrive, only to confuse voters. What impact would the doubling of salaries now have on the new set of politicians chosen by voters? Once again, it depends. Two opposing forces are at play here. On one hand, the higher salary of politicians means that more candidates from group B will stay (lessening the adverse selection effect). This has a positive impact on the quality of politicians. But on the other, the initial impact of an increase in group B politicians may still play a negative role. Additionally, any improvement in the quality of politicians depends on the degree to which politicians’ talent are revealed over time.

The paper is all very geeky, but the lesson is simple. Increase the salary of politicians and the proportion of a given profile of politicians will rise to the detriment of another, meaning that average quality may either go up…or down. Quality therefore does not go hand-in-hand with price. Then, how does the quality of politicians improve? The usual stuff perhaps: better-educated voters, who have an understanding of the role and limits of government, who disconnect politics from religion, etc.

---

Possibly related posts: (automatically generated)

• Little Tests of Quality
• Where goes quality of life?
• “I Can See Dick From My House!”