ParisTech Review

Our world seems increasingly beset by large intractable problems. The enormity of problems like the Fukushima nuclear disaster, the worldwide economic slowdown, and global climate change are due in part to their notable complexity. The intractability of these problems, however, derives as much from political impotence as it does the inherent difficulty of these problems. Governments, as the in case of the Fukushima meltdown, seem incapable of planning for catastrophic rare events. When these events happen there is an invariable overreaction as appears to be happening with moves to shut down nuclear reactors in Germany and elsewhere, despite the effects on the environment and energy prices. Even with persistent calls for reform and threats from creditors, governments fail to solve serious debt problems by cutting spending or raising more revenue. Political failure risks increased borrowing costs in the short run and insolvency in the long run. Widespread recognition of global climate change and its environmental effects has not generated successful political solutions to this problem. Worldwide, the political class seems to do a better job talking about solutions to problems than implementing them.

Is there a problem with democracy? The foundation of democratic government is the selection of political officials through regular, fair elections; these elections provide an opportunity for public deliberation, allowing citizens to make choices not only on persons, but on programs as well. Elections also ensure that government operates based upon the wishes of citizens and provides a protection against governments abusing their own people. Ideally, elections should lead representatives to focus on the public good and make well informed, carefully discussed choices. Yet, the options actually discussed are shaped by the desire to secure public status and the prospect of reelection. This election issue leads to some predictable problems, and the very idea of an observant and informed electorate calling politicians to account for their choices may sometimes look like a fiction. Let’s explore some of the biases that the reelection incentive creates and some possible ways of reducing their influence.

Visibility bias
From the perspective of citizens concerned about large problems, the first mistake reelection motivated politicians make is to focus overwhelmingly on visible issues. Talking about and working on visible issues provides politicians a way to communicate to voters that they are active on behalf of constituents. If working on the visible issue provides a means of funneling resources to the constituency of the elected official or party, all the better from the perspective of elected officials – so long as the politician or party gets credit from voters. There are few electoral rewards for tackling problems that voters do not care about, understand, or recognize as problems.

The problem is that visible issues are often not the most important ones. The visibility of different policy issues is increasingly driven by forces unrelated to real importance such as scandal, controversy, or the need for media outlets to cover material that will secure an audience. This leaves important issues persistently off the agenda of elected officials. In my own research into the problems surrounding the U.S. government’s role in preparing for and responding to Hurricane Katrina in 2005, I found that national officials in the United States historically have paid little attention to disaster management—until a disaster hit. The federal agency in the United States charged with responding to natural disasters has been a haven for political appointees from the campaign or party except for the periods immediately after a disaster. After Hurricane Andrew hit the electorally important state of Florida during the presidential election year in 1992, President Clinton appointed the agency’s first professional emergency manager at its head. By the end of Clinton’s tenure, the agency had begun to return to business as usual. At the time that Hurricane Katrina hit the United States Gulf Coast, only one of the top 8 managers had emergency management experience prior to taking a job in the agency. The final result was 1,500 deaths, hundreds of thousands of people displaced, and billions of dollars in property damage.

The safety of nuclear facilities, the stability of the markets, and global climate change are problems that are visible now after disaster, collapse, and severe weather events. Yet, these large problems were not always visible to reelected-minded officials. Few Japanese elected officials were attentive to nuclear safety prior to the Fukushima nuclear disaster. Financial officials worldwide were not willing to make a case for the regulation of new financial instruments when the markets were soaring. Global climate change is difficult to deal with because of the complexities of international politics and the effort and expense that will be required to reduce emissions but also because it so easily fades from view.

Elected officials do work on issues that are less visible and most are involved in tirelessly trying to make important issues visible. Many are successful. Ultimately, however, the political class is most receptive to taking action on issues of visible issues which makes attention to important but less visible issues an uphill battle.

Short time horizons
Related to the problem of focusing on the most visible issues is the tendency of both voters and elected officials to be attentive to decisions and policies that deliver immediate benefits. Since elected officials must demonstrate results in order to get reelected in the next election, they systematically prefer to focus attention and effort on those issues with immediate electoral consequences. We should encourage elected officials to focus on issues that get them reelected since this behavior creates responsiveness to voters which is the essence of democratic government. Taken too far, however, a narrow focus on policies with immediate benefits leads elected officials to eschew long term planning and programs where the payoffs are uncertain and will not become apparent until some distant point after the election.

As an example consider the case of revenue forecasting by U.S. state governments. My research with colleagues George Krause and James Douglas shows how short term electoral pressures to manipulate revenue forecasts leads governments to produce forecasts that are persistently overoptimistic (and inaccurate). The pressure to make deals before an election induces elected officials to shade the numbers and push budgetary problems down the road, often to their successors. It is easy to understand why elected officials would do this since predicting that the government will be flush with revenues in the future justifies higher spending or tax cuts (or both!). Increased spending and tax cuts have direct electoral benefits for elected officials. Interestingly, elected officials that are on their way out due to term limits are the most inclined to produce overly optimistic forecasts. This makes sense since the fiscal problems, debt downgrades, and painful cuts associated with bad forecasts will be borne by successors. The governments that rely on career professionals to produce these forecasts generally produce the most conservative forecasts. When forecasters will still be in office when the bitter fruit that bad forecasts produce ripens, they are less likely to make bad forecasts in the first place.

The implications for the short time horizons are clear. First, long term planning becomes the exception rather than the rule. Elected officials who will be out of office when the implementation of plans occurs are less inclined to engage in such planning. Some policies require a longer term vision rather than responsiveness to immediate electoral considerations. In the case of Hurricane Katrina, my research shows that elected officials at the state and national levels failed to invest resources or time into preparing for uncertain but potentially catastrophic events. Elected officials pushed levee maintenance and construction down on the agenda in favor of other more electorally salient issues like job creation, crime, and social welfare provision. These are understandable decisions from the perspective of politicians since these are all important issues and politicians do need to get reelected. When these decisions are made year after year, mayor after mayor, and party after party, however, the cumulative effect is scandalous negligence. The persistent and immediate need to get reelected and focus on the issues that were most likely to secure reelection persistently led state and local officials to push difficult choices to invest time and resources into disaster preparations into the future.

Second, governments have a difficult time dealing with large but distant problems. The insolvency of some social welfare programs for the aged or deficit spending are two good examples. In the United States neither party is willing to engage the issue of Social Security reform seriously as a matter of politics because the system will not become insolvent until far into the future and the electoral benefits for doing so now are low. Long term debt problems in a number of nations around the world result partly from a willingness to sacrifice the future for spending in the present. The pain of cuts in the future is less real than the benefits of spending now.

Finally, the bias toward policies with immediate electoral benefits also makes politicians undervalue policies whose benefits will not appear until after the next election. Research and development programs are an excellent example. It is hard to predict in advance which money spent on research and development will be effective and when it will be effective but we know that this spending has produced tremendous advances in science, technology, and business, particularly in areas where markets are unlikely to provide the right incentives (e.g., where the costs of entry are high, where there are few markets for the products, for basic as opposed to applied research).

Collective action problems
One of the fundamental insights of the American economist Mancur Olson was to identify a key problem in the efforts of groups to cooperate. He pointed out that there are numerous cases where all members of a group would benefit from a collective choice but few have an incentive to do what is mutually beneficial. Instead, they have an incentive to free-ride off of the actions of other members of the group. Any person who has worked in groups in school or at work understands intuitively the kind of problem Olson described. As he pointed out, this problem only grows as the group gets bigger since in large groups it is harder to monitor who is contributing and who is not and there are fewer ties of friendship or kinship to overcome the incentive to free-ride.

This is a problem prevalent in politics from an individuals’ decision about whether or not to participate in a protest or vote to nations’ choices about whether to cooperate to reduce nuclear arms or greenhouse gases. Olson pointed out that many group benefits, once provided, are generally available regardless of whether you participate in the provision of the benefits or not. For example, if a neighborhood association convinces the local government to create a new park, all of the neighborhood residents benefit, even those who did nothing to organize the neighborhood and lobby the local government. If nations agree to reduce arms everyone benefits even if they do not reduce their own arms stores. This creates an incentive to free-ride on the actions of others.

This type of problem leads to the under provision of important group benefits. When all have an incentive to free-ride or not cooperate, sometimes groups do nothing at all. The protest does not happen. The committee meeting does not get planned. The group to protect the public interest does not get formed.

Unfortunately, large problems often require cooperation among significant numbers of people or organizations to achieve solutions. The costs and benefits of cooperation are often distributed unequally among the different parties further complicating cooperation. For example, the nations of the world would all benefit from curbing anthropogenic sources of climate change but there are substantial economic costs to making such choices. Nations are willing to let other nations cut their emissions to reach targets set by international meetings but reticent to do it themselves. This is particularly the case for countries where the economic costs are particularly high, including high emissions economies like the United States and rapidly industrializing nations such as China and India. The benefits of collective action in this case are most immediately felt by coastal and island nations susceptible to changes in ocean temperature and levels and severe weather events. However, these are not the nations most responsible for greenhouse gas emissions.

Fixing Mistakes?
Big problems such as the Fukushima Nuclear Disaster, the worldwide economic crisis, and the persistence of global climate change are not easily solved. The sources of these problems are complex and defy easy solutions. Yet, even in cases where some solutions are possible the inability of politicians to take the necessary action can be puzzling and frustrating. Reelection motivated politicians who have adapted to their environment make predictable mistakes associated with their need to be reelected. They focus more on some problems than others and they have a hard time cooperating. The problems they neglect or find the most difficult to deal with are, unfortunately, sometimes the most important.

If we are to mitigate these problems we need to take some decisions away from homo politicus and we must seek to change their natural environment. First, we should seek to insulate some important policy areas and programs from the vagaries of the electoral cycle. There are different ways to do this. Some nations provide agency heads with fixed terms, preventing them from being removed for a fixed and usually lengthy period of time. In modern democracies more and more agencies are independent, which does not mean that their leaders do whatever they want, rather that the people, generally through Parliament, decided to give them one single mandate and not to let politicians interfere. Central banks are now the best example, but one can find more and more democratic institutions working this way. This guarantees a level of stability that diminishes the importance of the immediate and the visible. It also provides enough time to engage in long term planning and the building of relationships that can help overcome collective action problems.

Governments can also empower experts or professionals to handle some policies. Research on the public sector in the United States shows that federal programs run by career professionals perform significantly better on average than programs administered by political officials. Career professionals serve longer tenures, have more expertise, and are less beholden to electoral concerns. As a result, they are more likely to practice strategic management and demonstrate progress toward long term agency goals.

Second, we can change the environment of elected officials by ensuring that important problems (rather than naturally visible or immediate problems) are more visible before and after the election. One way to do this is to subsidize private groups in society that care about important issues as a way of keeping these issues visible and before the public. Governments can also create advisory boards of experts to monitor and produce reports concerning progress on key issues and empower these boards with public platforms to make these issues visible.

With some reasonable changes in these areas we can help minimize the mistakes that politicians make and transform large intractable problems into policy successes.