Policy Advice as an Investment Problem
Published in: Kyklos - International Review for Social Sciences, Vol. 57, No. 3, 2004, pp. 403-428
26 Pages Posted: 15 Feb 2018
Date Written: August 11, 2004
From the viewpoint of Public Choice theory, the logic of electoral competition makes it difficult for rational, self-interested politicians to advance unpopular reforms. As political decision-makers have primarily the aim of re-election in mind, 'inconvenient' scientific policy advice often falls on deaf ears in the political arena. This implementation problem has been widely discussed in political science, economics, and related social sciences. Complementary to this qualitative dimension, the present paper uses insight from the economics of innovation to analyze the quantitative dimension of policy advice. It is assumed that additional expert opinion is only requested whenever it increases a politician's chance to become re-elected. This simple politico-economic reasoning, it will be argued, induces a systematic under- and over-investment in policy advice, which is inefficient in terms of social welfare. After discussing the advisor's role in this framework, the paper concludes with a brief presentation of possible remedies to dilute these undesirable incentive effects. The theoretical reasoning will be illustrated by the case of Germany where problems of policy advice have become apparent in recent years.
Keywords: Politics, Policy Advice, Welfare Economics, Public Choice Theory
JEL Classification: D60, D72, D78, P16, Z18
Suggested Citation: Suggested Citation