Abstract
Timothy Besley’s Principled Agents? carefully surveys the modern social science literature on political agency problems and tries to chart a sensible middle course between the naive assumption that politicians maximize the public welfare and the pessimism of Virginia-style public choice. However, the literature that Besley showcases is seriously flawed. By building on the empirically discredited rational expectations assumption, it neglects the strongest normative argument against political accountability and overlooks the extent to which “agency failures” stem from principal negligence.
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Notes
Admittedly, unlike many researchers in this area, Besley recognizes that there is more to good politics than accountability:
[T]here is no necessary link between accountability and the welfare of society. There is likely to be such a link when the issues at stake are mostly common values… [W]e will work mainly here with models that assume that voters do have a common interest in achieving some outcome and discuss whether we would expect the political system to deliver it. (2006: 101–2)
Notice, however, that Besley’s reservations about the benefits of accountability hinge on differences in values. But if the rational expectations assumption fails, common values are not enough to make accountability a virtue. When voters falsely believe that protectionism will achieve the common value of enriching the country, for example, accountability forces politicians to become protectionists even if they know better.
Besley appears to concede this point at the end of chapter 3:
It could well be that the role of politicians is to take unpopular actions for the social good even if they do not result in re-election. This is especially true when voters want inconsistent things. Politicians who simply follow voters’ interests may actually be worse for society. Of course, the dangers of populism have always been recognized and this is really only an instance of such concerns in an agency framework. (2006: 173)
I will argue, however, that despite Besley’s assurances, modern political economy almost completely neglects “the dangers of populism.” In standard models, populist inefficiencies only arise if a policy that is bad on average happens to be good in a particular case.
P(good leader|trade agreement)=0.4 × 0.5/(0.4 × 0.5 + 1 × 0.5) = 2/7.
Besley’s book briefly considers this (2006: 172) as an avenue for future research but uncharacteristically provides no citations to existing literature.
Fifty-eight percent of Americans endorsed this view in a 2004 poll (PIPA-Knowledge Networks 2004).
Of course, any particular piece of protectionism could be the exception that proves the rule. But the rational expectation assumption ensures that the rule itself is right.
For a seminal analysis of pay-for-performance in politics, see Walsh (1995).
Finicky rational choice theorists may object that the public would have an ex post incentive to give negative evaluations to all politicians in order to save money. Since individual survey respondents would only have a tiny effect on a politicians’ evaluation, however, it is hard to take this concern seriously. Would people really denounce a beloved politician in a phone survey in order to save themselves a fractional penny?
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Acknowledgment
I thank Diana Weinert for the excellent research assistance and the Mercatus Center for financial support.
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Caplan, B. Irrational principals. Rev Austrian Econ 22, 159–167 (2009). https://doi.org/10.1007/s11138-009-0073-9
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DOI: https://doi.org/10.1007/s11138-009-0073-9