Capitol Investments: The Marketability of Political Skills

Chapter 2 Politicians, Institutions, and Human Capital; or, Becker Goes to Washington

Chapter 2 Politicians, Institutions, and Human Capital; or, Becker Goes to Washington It might seem rather pessimistic or perhaps outlandishly cynical to characterize public of‹cials as consumed with economic self-interest, since they are often depicted in civics texts as just the opposite—that is, as serving broad societal goals rather than merely individual, personal ones. Even when self- interest has been assumed, the motive is incorporated into a reelection incentive that binds leaders to followers in a democratic fashion, agent-principal problems notwithstanding (Downs 1957; Mayhew 1974; Fiorina 1989). But if politicians are rational, we might expect them to seek returns that transcend the bene‹ts of reelection in maximizing their “pro‹ts” from elected of‹ce. Monetary gain comes easily to mind as a complement or supplement to the desire to be reelected. And, not surprisingly, we all too frequently ‹nd evidence of politicians taking bribes, manipulating campaign contribution reports , and engaging in a wide range of opportunistic acts. It seems that selfinterest ensures that politicians (1) pander to voters because they are motivated by the desire to be reelected; (2) seek monetary gain because they can; or (3) engage in opportunistic behavior, such as exploiting coordination and agency problems, because of the near-prohibitive costs associated with policing their behavior (see, for example,Alchian and Demsetz 1972). Self-interest enters the calculus of politicians in other less ominous or menacing ways that have equally far-ranging consequences. For instance, rational politicians may acquire skill sets designed to augment postelective earnings and in so doing set into motion investment strategies that directly and indirectly shape policy outcomes. In this initial stage of inquiry, we introduce a theory to explain how and why politicians accumulate human capital through the acquisition of political skills; propositions drawn from this theory are then explored and tested in chapters 4–6. Conventional and prominent features of the political landscape of legislatures incorporated into our model—in particular, special interests, elections, voters, and party leadership—are discussed next. In elaborating on 17 our theory, we address two supplementary but nonetheless relevant issues— speci‹cally, the acquisition of human capital in politics by public-spirited citizens , and the apparent close connection between our theory and rent-seeking explanations of legislative behavior. Human Capital Formation in Legislatures We begin by offering a political variant of Becker’s (1993) human capital argument : during of‹ceholding, politicians make investments in human capital— that is, themselves—by undertaking activities in which they obtain skills, knowledge, expertise, experience, and the like. This array of skills, or stock of human capital, increases their marketability by impressing potential employers with their political know-how. Our conjecture parallels Becker’s (1993, 120) contention that “persons who invest relatively large amounts in themselves tend to receive relatively high pro‹ts and measured earnings after the investment period.” Or, to put the matter differently, service in politics and political institutions is a résumé builder in the truest sense of the term; accordingly, those with the best credentials garner the highest postelective salaries and the best jobs. This seems to be the case with labor markets in general, and the market for employee-politicians shares this trait.1 Our theoretical treatment of politicians’ human capital incorporates several interrelated components. Rational Expectations Underlying our reasoning is a dose of the logic behind the theory of rational expectations, which has been successfully applied to basic economic questions such as consumption and stabilization. The theory was ‹rst proposed by John Muth in the 1960s, but many early economists, including A. C. Pigou and John Keynes, assigned a central role to people’s expectations about the future . Economic situations include many examples of rational expectations that lend considerable validity to the notion that anticipation of future conditions in›uences current behavior. For example, the price of agricultural commodities depends on the number of acres planted, which in turn depends CAPITOL INVESTMENTS 18 • 1. While inducements to of‹ceholders, such as bribery, constitute the types of spot-market transactions that are less subject to cheating, they entail greater danger. Quid pro quo transactions between politicians and special interests are the only type of exchanges where corruption—that is, bribery—can be legally claimed. Risk-averse politicians can be expected to avoid such situations; hence, lucrative postelective jobs look like a better way for politicians to cash in on their public service employment. on the price farmers expect...