Monday, November 28, 2011

Politicians and Incentives

Reading this week's article has reinforced my views as an economist looking at the world. Before thanksgiving break me and and my friend were having a heated debate on practically the same topic, however instead of baptists and bootleggers it was Teachers and Politicians.
The main point of his argument was that politicians were paid too much, which was making more corrupt people think it was a good idea to be a politician. I countered that the wage doesn't matter much since the idea of the special interest groups paying their campaigns or making donations will be enough to create the incentive for them to sway their way as they are human and respond to incentives. His idea was that if we had lower wages for those politicians, the corrupt ones would be disinterested at making the lower wage which would opt out the bad ones. Not a bad idea on paper and i'm sure that others would be tempted to sway to his side of the argument until you think about the other interest group that is bribing the politician. If the politicians are being paid less wouldn't the temptation of giving into the special interest group be stronger since the difference in amount is now larger than before?
Obviously there are a couple of wrong assumptions on my point, first of all we could expect that if politicians were paid an enormously large sum that it would drive the supply of people offering their experience for the job yet the special interest groups could still probably come up with other incentives to deter a politician. But beyond this argument after I made this point he switched it up to the topic of teachers wages and education.
Since teachers are not being paid enough there are not enough good people that have a comparative advantage in teaching that would be willing to take up teaching as a career. Not a bad point right? Well this is kind of linked to the argument above, if you pay them more and fluctuate the market to the wage you want it to be, you will have plenty of teachers however you will have more unemployement for that area of expertise as well since schools would have to pay the teachers a bigger salary and to fix the dilemma of a bigger salary expense, they could just make the classes bigger and cut out some of the teachers to fill the gaps of their budget. Also, increasing the wage might not even bring better teachers. If we assume that easily corruptable people end up in the senate, wouldn't it be as likely to assume that some teachers wouldn't be as good as teaching as others and is there just for the wage? Not saying they are particularly lazy but that they don't have a comparative advantage in teaching as they would in say engineering. Now it is a longshot to say that that those wage differences would be a long shot at best, it would be difficult none the less to prove exactly how good the legislation would do in either case of the politician or the teacher. They all respond to incentives and wages are a good way for us to sway the market but is it really worth it to poke and prod at the market while everything else is set and it is controlled by no one?
Perhaps those wages are set and I just don't happen to know enough about their particular details but I find it peculiar that it all the statements and ideas end up on a supply and demand graph.

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