Monday, August 21, 2006

Incentives for leaders

I recommend this interview of Bruce Bueno de Mesquita where he looks, through a public choice lens, on the incentives various forms of political rulers have given how the government is structured (themes he details in his book: The Political Economy of Power).

He identifies two groups within a population -- the "selectorate" (those who get to select the ruler) and the "ruling coalition" -- a subset of the selectorate who keep the ruler in power once they are in.

The broader a group of people who make up these two groups, the more the ruler needs to pay off his supporters in public goods rather than private goods, since he needs to keep a lot of people happy and it is easier to do that with good roads and reliable electricity than lucrative government contracts. When the ruling coalition is a small (as a % of the selectorate, and as a % of the population) then the leader can maintain power more efficiently through the provision of private goods needn't worry about public goods so much.

The interview is too long, and the interviewer too twee/snarky, but I think the essential insight is correct -- that leaders do not exist in a vacuum, they need support to stay in power, their primary interest is to stay in power, and they will be *forced* by their environment to confiscate goodies from everyone to pay off their supporters. If they did not redistribute wealth, in this way, their supporters would replace them with someone who did.

This model has some interesting consequences:

1) Don't give any foreign aid.

Foreign aid acts like natural resources -- namely, it is a source of wealth that the rulers get that does not need to be taken from the people. This wealth, therefore, can be directly transferred to cronies who, in turn, keep the ruler in power. The ruler will sell policy concessions to get this money, and the policy concessions will likely rile the population, who will hate the donor country for propping up their leader, while wanting to move there themselves to enjoy the public goods that that country provides but their country does not.

2) Increasing the selectorate, and the ruling coalition is critical to making rulers focus on public goods over private goods.

The easiest way to increase the selectorate is to allow people to vote. Essentially, buying people off with public goods is much better than buying them off with private goods, so anything that makes public goods provision more important to a ruler is beneficial.

3) If you can't vote, and don't have guns your opinion does not matter.

Note that if you are not part of the selectorate, and you are not part of the ruling coalition, your opinion will have no impact on policy. Most of the population in dictatorships are in this situation, which is sad, but true. When dealing with such countries, it is a waste of time to consider this disenfranchised majority -- if you want to influence the leader you should focus only on the groups that 1) selected him, and 2) keep him in power.

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