Public Policy Investment: Risk and Return in British Politics

Forthcoming, British Journal of Political Science

58 Pages Posted: 1 Aug 2011 Last revised: 6 Jun 2012

See all articles by Anthony M. Bertelli

Anthony M. Bertelli

New York University - Robert F. Wagner Graduate School of Public Service; Bocconi University - DONDENA - Carlo F. Dondena Centre for Research on Social Dynamics

Peter John

Department of Political Economy, KCL; University College London - School of Public Policy

Date Written: 2011

Abstract

We set out a theory of political capital investment to explain how democratic governments emphasize specific public policies. Our claim is that governments seek to enhance their chances of re-election by managing their portfolio of public policies in a calculated manner. In this way, government is like an investor making choices about risk to yield return on its investments of political capital. We introduce a quantitative method for assessing risk and return in government policy portfolios. An active investment strategy emerges as an element of statecraft; stability in returns is crucial and governments assume significant risk to maintain it. Do the public reward returns to political capital? Do they punish risky policy investments? How do the returns to policy investment guide political management and statecraft? We address these questions through time-series analyses of risk and return in the case of Britain between 1971-2000. Our findings reveal that risk and return predict election outcomes and that returns, risk profiles and the uncertainty in public signals influence the prioritisation of policies.

Keywords: policy attention, policy priorities, political risk, public opinion, asset pricing

JEL Classification: D72

Suggested Citation

Bertelli, Anthony M. and John, Peter, Public Policy Investment: Risk and Return in British Politics (2011). Forthcoming, British Journal of Political Science. Available at SSRN: https://ssrn.com/abstract=1900007

Anthony M. Bertelli (Contact Author)

New York University - Robert F. Wagner Graduate School of Public Service ( email )

The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

Bocconi University - DONDENA - Carlo F. Dondena Centre for Research on Social Dynamics ( email )

Via Roentgen 1
Milan, 20136
Italy

Peter John

Department of Political Economy, KCL ( email )

Strand
London, WC2R 2LS
United Kingdom

University College London - School of Public Policy ( email )

29/30 Tavistock Square
London, WC1H 9QU
United Kingdom

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