This article was featured as part of ESSA’s annual Equilibrium publication.
The Australian political scene is widely considered as having been particularly tumultuous over the past few years by virtually all political commentators. A federal hung parliament following the 2010 election was set to usher in a new paradigm of collaborative democracy, but instead vitriol and antagonism purportedly reached new heights. When the Peter Slipper and Craig Thompson affairs, combined with the ongoing Labor leadership tensions that took three years to eventually come to a head were thrown into the mix, the standard of politics certainly appears to have been lacking. Of course, this is all without even mentioning the recently exposed corruption in NSW Labor.
However, against this backdrop there have not been any successful no confidence motions and most legislation passed with bipartisan support. The independents, for one, disagree with the sentiment that the hung parliament has been a complete failure. While comprehensive evaluation of the standard of politics is pointless and ostensibly impossible, analysis of the economics behind the processes resulting in what we end up with is not.
In its most basic form, the political process is simply democratically elected individuals — known as politicians — representing their constituents through a parliamentary procedure that creates public policy. Complicating variables such as the role of political parties (and the factions within them) also operate in the process.
The number of electorates or regions will generally dictate the number of politicians in a given political system. For example, at a federal level in Australia there are 150 seats in the lower house and 76 in the upper house. This is therefore essentially a mechanism that keeps the demand for federal politicians in the labour market fixed indefinitely at 226 people. As a result, it is left exclusively to supply-side factors to determine the calibre of individuals who present themselves for exposure into the political domain.
The supply of politicians is inextricably linked to the incentives that are present. Despite each individual having separate preferences, a holistic approach can be taken to examine the political labour market. Remuneration is obviously a large part of what seemingly drives individuals to desire holding public office – but there has to be more to it than that. After all, when the absolute maximum salary for a politician in Australia is only around half a million dollars – and consequently lower than some senior bureaucrats and myriad of positions in the private sector – there must be other elements at play if politicians are considered to be of a remotely similar quality.
It would seem to be reasonable to suggest that additional considerations pertaining to the relative attractiveness of a political career would relate to altruism, patriotism and a desire to ‘serve’. Perhaps paradoxically though, self-aggrandising individuals with a degree of narcissistic emulation would also be drawn to politics – it is indeed the profession of power.
The weighting of these non-monetary factors relative to remuneration is what determines the quality of our politicians. Those that are only motivated by money are unlikely to put their hand up for political consideration. As private sector pay packages are driven by a fluid market, if politicians’ pay is not, then this distortion must affect the calibre of our politicians unless they receive a large proportion of their utility from the aforementioned non-monetary elements.
However, some would perhaps agree with the ‘natural selection’ argument that politics is about changing lives and that those who would only consider politics if salaries were higher are perhaps not suitable for public office anyway. This contention supports keeping MP’s pay well below what similarly demanding positions in the private sector would offer.
The number of significant political parties that operate in a given political ‘market’ can also be explored. The political domain at every level of government is generally a natural oligopoly with the potential also for one or two minor parties. This is because of the high barriers to entry that exist for independent candidates and those who desire to establish new parties. Additionally, the existence of two dominant parties is congruent with the nature of the left-right political spectrum; each party can always satisfy a large proportion of the electorate by appealing to those slightly off the centre (to either the left or right), while hoping to still capture the centre, through their respective policy platforms.
As a result, it would be expected that policy formulation would be undertaken by political parties in response to the views of the population. However, does demand for a certain policy always create the supply or can it be the other way around? The reality is that policy platforms are generally a combination of ‘populist’ policy and ‘conviction’ policy – the latter being very high-risk and thus less common.
The outcome from a given political system that society deserves is simply the one that it provides the platform for receiving. This occurs through social influences pertinent to the desire for individuals to enter politics and the ideologies and endorsed viewpoints related to public policy formulation. If the labour market for politicians is to be considered as efficient and politicians are assumed to behave rationally, then we must simply get the politicians, political parties and public policy that we are worthy of receiving.
The fundamental nature of the field of politics is that politicians, and by extension political parties, operate in the context of incentives. It is the delicate calibration of those incentives that ultimately determines the outcomes that arise from politics.
The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.