Nexus: Chapman's Journal of Law and Public Policy

The strong influence corporations and other special interest organizations have over politics is undisputable. In my prior blog I expressed that these groups must be having success by influencing politics because they continue to openly spend millions of dollars supporting “their” candidate. As mentioned before, these groups have very clear motives and yet we still blame them for trying to achieve these motives. I analogized this line of thought with blaming the mistress for a spouse’s infidelity, when really the spouse needs to be kicked out of the House (maybe a little pun intended). So, the question became, “How do we best incentivize our leaders to act in the interest of the majority?”

In order to determine the best incentive, we must first look at the relationship that exists between the people and elected government officials. From economics comes the conundrum of moral hazard often arising from principal-agent relationships. The idea is that when a party is sheltered from bearing the full consequence or risk associated with an action, than that party is more likely to act in a manner that would otherwise expose them to that risk. I have heard it most commonly referred to when renting a car. Since a person has no real sentimental feeling towards the car the only disincentive to wrecking the car (assuming in doing so no one gets hurt) is that person would have to pay for the damage. However, if he were to buy insurance, well then let’s “Get a little mud on the tires!” In theory and simplistically, our government is a large scale principal-agent relationship with our government officials acting as agents for the people. The further from the people these officials get, the less they have to answer to the people, the more likely they are to be affected by moral hazard and act in their own interests. However, this relationship is no different than any other, it requires two-way communication. It is easy to say that the more removed politicians are from their constituents the more they act inappropriately, but responsibility must be placed on the constituents to communicate what they want and not leave politicians to their powers of clairvoyance. In my opinion, this is a big argument for the special interests. These groups are representative of at least some citizens and though maybe not acting in the majority’s best interest, maybe they are the only ones speaking up. In that case, it is the politician’s job to advocate for those desires. As the Supreme Court in Citizens United concluded, these organizations have a right to freedom of speech and speak they do.

One way to offset moral hazard and perhaps incentivize our leaders is by adjusting term limits and the impeachment process. Many arguments exist for the shortening and lengthening of term limits. In a business, if someone is not performing or doing what the boss tells them, they get fired. Why should government be any different? Well some people suggest that when politicians are in the beginning and middle of their political career the incentive is to “play nice.” This means that they should not be too extreme or side too strongly with certain political ideologies because it is important to be well liked in order to maintain a good political image. Then, when they are on the way out, the incentive is to side with the special interests at which they are likely to receive the next job upon retirement or expiration of the term. This way of thinking suggests that longer term limits would be more beneficial. However, longer term limits create a disincentive to act on the people’s behalf because their job is not at risk. In other words, they are insulated from the risk of losing their job, thus a moral hazard exists. Shorter terms would allow for new ideas to be brought to government more regularly, but may result in uncooperative groups of legislators waiting for the next election to bring someone that will side with them. It is likely that this mentality will encourage even more special interest influence in order to consistently achieve majority in the political process, thus at the minimum maintaining the status quo. With focus on the federal government, the current term system seems to be the best approach to offset moral hazards, at least in theory. The Senate has fewer representatives from each state and is stationed further away from the State and therefore less exposed to political pressure from their constituents. The balancing factor is that Senators have shorter terms than House members that are in theory closer to the people and exposed to the political pressures. The best approach may be to hold politicians accountable through the impeachment process; however this would require more active involvement by the people.

So…vote? Well, yes voting is important and helps to drive democracy, but it also raises a somewhat counterintuitive problem. Commonly, people think of voting as doing their part to participate in government and help make their city, county, state, and nation a better place. They are making their voice heard, but two problems arise in this process. The first is that voters are often voting on issues that insulate them from receiving the full cost of the proposal. A cost that likely if a voter were fully exposed to would not see as such a good idea. However, one of the benefits of living in a community is to an extent risk can be pooled thus making everyone better off. Secondly, voting only allows people to express an opinion about whatever law, measure, or candidate is made available to them. The only laws, measures, or candidates made available to the people are those selected by the politicians. So, if the people are not acting in their capacity as principal to the agent politician, then the agent politician is left to act on their own accord. If the agent is acting on their own and then presenting “options” to the principal, then the agent will be able to steer the principal in any direction he pleases by focusing on bringing issues to the ballot that further the agent’s own agenda. In order for a democracy to be successful, the people must not only cast their vote on issues when they are brought to the ballot, but the people must be the ones to spark the initial debate on such issues. The following quote sums up the role people must take to achieve true political and economic freedom.

“Political and economic freedom is not simply the absence of government controls over the economy and of dictatorial authority. It involves the emergence of alternative and more fragmented notions of “authority” in which participants in effect have to earn the always partial authority they have. It depends on the active participation in the polity and in the economy by diverse people who exercise their own initiative.” –Lavoie and Chamlee-Wright, Culture and Enterprise

The key to this statement is “diverse people who exercise their own initiative.” When people push to achieve their own initiative, they are forced to debate and compromise in order to reach a mutually beneficial result. However, if we leave all the initiatives to be brought by corporations and other special interests, then we are in a sense saying that either we do not care or we agree with the initiatives brought by these groups. Everyone agrees that we favor the structure of “check and balances” in government, but sometimes we forget that instead of just writing checks to government, the people are supposed to be the “check” on our government.

http://www.libertarianstandard.com/2010/09/01/voting-moral-hazard-and-like-buttons/