"In it for themselves"

The problem isn't that politicians are in it for themselves; it's that they have bad incentives.

“MPs are all in it for themselves and are out of touch with the real world.” I don’t know how true these cliched sentiments are; like Elizabeth I, I have no window into people’s souls. But I know something else - that they are irrelevant.

Almost everybody in work is in it for themselves. Doctors, binmen, guys on the checkout at Lidl - none would be there if they weren’t being paid. And do you care what a dentist or mechanic knows about the real world? No.

Why, then, do we put our trust into these people who are all in it for themselves and are out of touch with the real world? And why, so often, is this trust justified?

Incentives, that’s why. The mechanic who couldn’t fix your car, or dentist who couldn’t mend your teeth, or the shop that sold you mouldy veg, would soon lose business. And, being in it for themselves, they don’t want that. As Adam Smith famously said:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens.

And here’s the problem. Whilst the self-love of the butcher, the brewer, or the baker gets us our dinner, that of politicians doesn’t so often do so. As voters we are beggars, depending on the benevolence rather than self-interest of politicians.

This is because well-functioning markets (which are only a subset of all markets) give people who are in it for themselves incentives to act in our interests. In politics, however, these incentives are weaker and even perverse.

In theory, this shouldn’t happen. Politicians want to get re-elected, and this should incentivize them to pursue the public interest.

One problem with this is that voters don’t know what the public interest is because they are systematically misinformed about social affairs. They have no idea about the size and composition of public spending; misunderstood the impact of EU regulations; overestimate the numbers of asylum seekers; overestimate (pdf) spending and fraud on welfare benefits (pdf); and don’t understand how economics works.

Politicians feel incentivised to pander to such ignorance. Cameron and Osborne spoke of the “nation’s credit card”; Labour promised in 2024 not to raise income tax rates; and the Greens and LibDems want the government to respond to high energy prices by cutting fuel duty. In any rational polity, all these statements would be greeted by voters with contempt and plummeting support. But they weren’t.

Politicians who are incentivized to pander to public opinion thus give us bad government, because voters’ preferences aren’t a good guide to their interests. The fact that voters sometimes wise up to their mistakes - for example by regretting Brexit or being cheesed off with declining public services - does not overturn this point.

There’s another bad incentive: there are no penalties for failure. There have certainly been many such, from privatized water through fiscal austerity to Brexit and privatized probation services and children’s homes. But the authors of these have not suffered. Quite the opposite. Cameron and Osborne went onto big money jobs. Even Chris Grayling, one of the most egregiously abject of ministers, got paid £100,000 a year for seven hours work a week on leaving office. And advocates of Brexit such as Daniel Hannan or Nigel Farage are still raking in cash despite having been proven wrong.

In fact, failure can sometimes be good for politicians even in electoral terms because, as Gilles Saint-Paul points out, it can maintain a government’s client base. He gives the example of pro-poor parties that would lose their supporters if they actually abolished poverty. But there are others. The fact that Brexit hasn’t worked gives its advocates the chance to whine that it hasn’t been properly tried. And grievances about immigration have to be maintained by parties trying to appeal to anti-immigrant voters.

The converse is also true: success doesn’t get you elected. Rising incomes for workers under the Labour governments of the 60s and 70s meant that many felt themselves sufficiently well-off to vote Tory. And the 1997-2010 Labour government did a good job of reducing pensioner poverty - with the result that pensioners stopped voting for it.

Politicians don’t, then, have strong incentives to avoid bad policies. But they do have incentives to chase corporate donations and cushy jobs after leaving office. This encourages them to not regulate industries harshly; to not demand value for money in procurement (pdf); and to extend profitable subcontracting. Wes Streeting’s keenness on introducing more private companies into the NHS might be founded less upon fine considerations about NHS productivity and transactions cost economics and more upon the career prospects of an MP with a majority of only 528.

The claim that politicians are “in it for themselves” therefore misses the point. Incentive structures in politics encourage those who are “in it for themselves” to make bad policy. Whereas well-functioning markets can make bad people do good things, political systems can make even good people do bad things.

Incentives matter. In failing to see this, people are substituting moralistic cliche for analysis of systems.

What to do about this? You can perhaps all think of ways of changing incentives - though almost all those ideas run into the problem of how to actually achieve such change.

You might, therefore, that this is a case for having more public-spirited people in politics, for somehow strengthening the notion of “public service”.

But “find a saint” is not a reliable political strategy. And even if one could do so, the fact remains that politics is not merely a matter of good will. The politician’s job, like that of the dentist or car mechanic, requires technical skills: the ability to recognise trade-offs and explain them to voters; an understanding of decision theory and cognitive biases; an awareness of the key mechanisms in the social sciences; an ability to drive through the implementation of policy; an ability to get elected; and so on.

Herein lies yet another problem. Our degraded public sphere is dominated by noisy fanatical partisans who demand only that politicians echo their prejudices - hence the Tory party electing Truss or Badenoch. Nobody is much interested in encouraging (or even defining) the technical skills of politics. And so these wither away.

It’s a tired cliche that we get the politicians we deserve. But it’s true.