Policy Advice as an Investment Problem

25 Pages Posted: 27 Sep 2004

See all articles by Klaus Heine

Klaus Heine

Erasmus University Rotterdam (EUR), Erasmus School of Law

Karsten Mause

University of Muenster, Germany

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Abstract

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 overinvestment 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.

Suggested Citation

Heine, Klaus and Mause, Karsten, Policy Advice as an Investment Problem. Kyklos, Vol. 57, No. 3, pp. 403-427, August 2004. Available at SSRN: https://ssrn.com/abstract=591557

Klaus Heine (Contact Author)

Erasmus University Rotterdam (EUR), Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

Karsten Mause

University of Muenster, Germany ( email )

HOME PAGE: http://www.uni-muenster.de/IfPol/mause.html

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