Principled Agents

Timothy Besley’s recent book on political economy, “Principled Agents?” attempts to chart a course between the skepticism of Virginia School public choice and the credulity of traditional political economy. That is, he tries to show how government could work without assuming either perfect benevolence or complete self-interest on the part of politicians. Rather, he tries to show how democracies are likely to elect politicians who will serve the public good, using a comparative statics framework. He believes that the key problem of political economy is creating systems where these principled people are most likely to be elected to office.

This kind of approach has a fair number of problems, many of which are detailed in the RAE symposium on the book. The most obvious is that he assumes that there are people who are inherently principled and those who are not. This goes directly against Gary Becker’s belief that the best economics is done when we assume that all agents have the same utility function. Using that method, we can see how incentives affect individuals without relying on certain kinds of individuals. Put differently, if we just assume that there are certain principled politicians, we are blinded to how previously moral politicians are tempted by the new incentives of office and end up acting against the public good.

Another very important point is one that has been made by Bryan Caplan. If voters are irrational and demand public bads of their politicians, democratic failure may be a feature, not a bug. Since the information on voter preferences seems to confirm that they habitually demand policies that have detrimental effects, it is entirely possible that unprincipled politicians will craft better policies than principled ones.