The Market for Political Lemons

In yesterday’s post discussing lies in politics, I referred to Andrew Coyne’s column on politicians breaking campaign promises, saying that promise-breaking “is both different from that of misrepresentations of fact and perhaps more complicated than Mr. Coyne allows.” I would like to elaborate on this.

Mr. Coyne argues that promise-breaking, which he equates with lying, though always a big problem, has been getting even worse in recent years. This is disturbing because, while voters sometimes ― by no means always ― punish the promise-breakers, “[t]he problem … is that nobody is inclined to believe any of them [the politicians, that is] any more, the honest politicians along with the dirty liars.” He adds that

[w]e’ve been burned so often, with such mounting shamelessness … that we now pretty much assume they’re all lying. Certainly there’s no incentive to tell the truth, since there is no way for the honest pol to establish his bona fides. Virtue may be its own reward, but it doesn’t do much for your election chances.

What Mr. Coyne is describing here is politics as what George Akerlof called a “market for lemons” ― and it is real problem. When the sellers offer goods of variable quality (such as well-maintained used cars and “lemons”), while the buyers have difficulty assessing the quality of the goods before they buy, the buyers will adjust the price they are willing to pay to take into account the odds of buying a lemon. This price will, therefore, be lower than what the seller of a high-quality good would expect to fetch, prompting such sellers to exit the market. But as such sellers exit the market, the average quality of the goods on offer goes down, and so does the price buyers are willing to pay, prompting more sellers to exit the market, and so on, in a “death spiral” until the market does not exist. Similarly, if politicians (the sellers in the electoral market) are known to break their promises, and voters have no way of distinguishing the honest ones from the liars, they will, as Mr. Coyne says, “pretty much assume they’re all lying” ― that all the sellers are offering lemons, in other words.

The trouble with this is that the high-quality sellers ― that is to say, the honest politicians ― will exit the market, either by starting to lie or by actually exiting politics (or not entering in the first place). Mr. Coyne, at least in his column, might be worrying more about the former possibility, but the latter is no less disturbing. Unlike in the market for used cars, where sellers are stuck with vehicles they have no need for and are likely to prefer getting a price they consider too low to not getting anything at all, the potential honest politicians have many alternatives to participating in this lemon market. The well-documented decline of interest and active participation in electoral politics over the last forty years or so, and the not-coincidental growth of NGOs and, more recently, social movements no doubt have many causes, but it seems likely that they are, in part, visible manifestations of potential quality sellers exiting the market for political lemons. (So is, perhaps, the growth of public interest litigation.) And while NGOs and social movements can, of course, do a lot of good, we are probably all worse off if honest people refuse to enter electoral politics, where the binding decisions about the use of the state’s coercive power are ultimately taken.

So is Mr. Coyne right that we need mechanisms “with real teeth,” albeit ones “which politicians could opt into, at their discretion,” to ensure that they keep the promises they make? Here are two reasons why I am skeptical.

First, there is the context in which political promises are made. It is one where “the same sorts of conditions and caveats that apply to private contracts,” which Mr. Coyne acknowledges would be necessary for any promise-keeping mechanisms to work, look singularly out of place. One reason for this is simply the need to deliver one’s platform to voters in made-for-television soundbites. Another is that political promises tend to be made for a fairly long time in the future, often the duration of a parliamentary mandate, with all the difficulties of prediction this entails. (Churchill is said to have described a politician’s chief quality as the ability to predict what will happen in a week, in a month, or in a year ― and the ability to explain, afterwards, why it didn’t happen.) Furthermore, the politicians’ ability to keep their promises is subject to a huge number of factors well outside their control. All this suggests that the moral failing of a politician who does not keep a promise will often be lower than that of a person ― including, as I suggested yesterday, that same politician ― who actually lies in the sense of misrepresenting existing facts, and that Mr. Coyne’s equation of the two is somewhat misleading.

Second, there is the issue of bundling. The politicians’ platforms are bundles ― they take positions on a variety of issues, and the voters cannot pick and choose by voting for, say, the Liberal position on the legalization of marijuana, the Conservative position on income-splitting, and the NDP position on the federal minimal wage. However, chances are that most voters agree with at least some elements of the platforms of more than one party or politician, or that on some points they agree with none. They still vote for one politician or party, even though they disagree with parts of its platform, because it is the best ― or the “least worst” ― available bundle, and voting to have some of their preferences implemented is better than not voting at all. But they are probably not distressed ― indeed, they are probably quite happy ― that the person they vote for is able to break those of his or her promises they did not like in the first place. Thus political promise-breaking might not only be “objectively” less blameworthy than lying, but also valuable to at least some voters some of the time.

Now, you (or Mr. Coyne) might say that the proper response to my concerns is for politicians to make fewer promises in the first place, knowing that they might be unable and/or unwilling to keep them ― and to keep those few they do make. That sounds fair enough. But, quite apart from the collective action problems that will stand in the way of such an approach (imagine the reaction to a politician whose response to a journalist’s question about what he or she will do about x is “let’s wait and see, it’s too early too tell”), politicians making fewer promises can produce perverse effects of its own. As Bernard Manin points out in his book on The Principles of Representative Government, politicians are, in fact, making fewer detailed promises than they used to. Instead, they are increasingly competing not on platforms, but on “leadership.” The resulting campaigns are vapid, substance-free affairs. They are not an obvious improvement on the market for political lemons ― if anything, they might create a market for lemons of an even more sour variety.

One thought on “The Market for Political Lemons

  1. I frankly disagree with Coyne’s entire premise; that somehow things are worse now than they were half a century ago, a century ago, or right back to the beginning of representative democracy. Politicians have always been viewed as dubious figures; their pronouncements, particularly during elections, taken with a grain, if not a shaker-full of salt. Voters have always taken great pleasure in pointing out how a government has failed to live up to platform promises; for instance the Chretien Liberals forced into mea culpas over both the GST and NAFTA.

    While I’m sure the impression that politicians are liars plays its part in voter apathy, I think that issue is far too complex to sum up with something so superficial as “people are tired of lying politicians.” Low voter turn out theories are like “what started World War 1″ theories”; everyone’s got one, and none are precisely wrong. Coyne himself has offered much more compelling arguments in the past few months; such as his observations that the First Past the Post voting system effectively disenfranchises many voters.

    There’s another side to this as well. Do we actually want politicians who follow every policy plank in their platform to the letter? I’m actually rather glad that Jean Chretien didn’t toss out the GST. It was far superior to the hidden and cumulative manufacturing taxes that it replaced. I would argue, as well, that NAFTA, on the balance, has served Canada well, and its deficits are mainly in the areas it doesn’t cover; like softwood lumber exports. And Stephen Harper’s government has caused itself no small number of bruises by trying to push an implausible Senate reform program that ultimately had it handed a pretty monumental defeat at the hands of the Supreme Court. He would have been much better served to have turfed his commitments to that plank and went straight to the Supreme Court for a reference opinion seven or eight years ago.

    And your last paragraph is absolutely spot on. Our politicians are, in fact, moving away from the whole notion of comprehensive policy platforms. We’re moving steadily away from a sort of political professionalism to cults of personality where political parties are defined in terms of their leaders. Political commentators are notorious, for instance, for accusing the Liberals of essentially running on Justin Trudeau’s good looks, with policies barely mentioned. That, to my mind, is what happens when parties decide to dispense with platforms, no matter how flawed those platforms may be. In its place we get a world where 30 second sound bites are too long, and instead we just get flashed pictures of political leaders.

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