Public Policy Investment

Associate Professor Anthony Bertelli has been working with colleague Peter John, from University College London,  on the question of why governments favor one policy over another.  Their findings will be released in an article titled “Public Policy Investment: Risk and Return in British Politics,” in the British Journal of Political Science. We talked with Bertelli about this research and what the findings could mean.

How did ideas for the article come about? What made you want to write on the topic?

The question that concerns us is why governments emphasize one policy over another. It could be that the government is swayed by the concerns of the media or by public opinion; or that it reacts to agenda setters who compete for the attention of key actors. Despite a long line of scholarship that supports an attention generating process that remains static, reluctantly changing when signals are strong enough, we do not think this is likely. Politicians consider carefully what they need to do next and they desire to use effectively the discretion they have over the levers of the state. Most of all, politicians want to make decisions that show them to be statesmanlike in what they do, so they are seen to shape events rather than just to follow them. They need to support policies that indicate citizens are in a safe pair of hands; but they also want to show that they take the initiative when needed to better the country.

What is the crux of your argument for why government policy priorities look like they do?

We first claim that a higher stock of what we call policy capital increases the likelihood that government will be re-elected. We then treat the emphasis of particular substantive policy areas by governments like investment by a fund manager who seeks greater returns to policy capital investment but considers risk in developing a strategy for buying and selling stocks. The government is the agent of the people, investing attention to prioritize policies on their behalf.  Each substantive policy to which a government can allocate attention is known as a policy asset. The government establishes an initial portfolio of policy assets in its election manifesto. Proportions of attention to policy assets in the manifesto are called initial investment weights. The government rebalances its portfolio by choosing new investment weights during its time in office. The public reveals a relative weighting of the importance of the policy assets, providing a price signal for the government in its investment decisions.  This weighting and re-weighting of policy assets—given the information incorporated in price signals—yields gains and losses to the government’s stock of policy capital that affect electoral outcomes.

What are the major findings of your research?

We examined our claims in Britain between1971-2000, when and where policy making was concentrated in an executive led by the prime minister. Britain’s first-past-the-post (single-member plurality) electoral system usually created a majority of seats for one party after a general election so that it could govern largely unchecked. Within this system, the prime minister is very powerful.  She or he is leader of the governing party, may appoint and dismiss ministers, chairs the Cabinet, is in charge of the bureaucracy and has the freedom to call elections. Consequently, any assessment of risk and return in British government must at the same time appraise the policy investment choices of prime ministers as well as parties in government.  We find that, first, governments take more risk when investing in policy assets in office than they do in their party manifestos, and we find no evidence that the voters punish this deviation from the government’s electoral promises. Secondly, the timing of investment decisions is very important. Return from a manifesto departure hurts government performance in by-elections during the year it occurs and would make re-election difficult if done too close to a general election. That punishment fades after a year, however, and increasing returns do help performance generally. The favorable climate created by good returns persists into the following year. Third, governments do plenty of rebalancing of their policy portfolio between elections to achieve stable returns to their political policy capital and preserve the stock they had upon winning the election. Fifth, some prime ministers face noisier signals about the value of policy assets from the voters than do others, and make their investment choices using less information.

What are some conclusions or insights that you think people would find most interesting or surprising?

Some of the more interesting findings have to do with particular substantive policy domains.  A naïve model of investment in which governments invest where past gains have been realized does not fully describe policy attention. In foreign and defense, economic, and environmental policy areas, prime ministers use the successes of past investments to guide their current priorities, yet in social policy and law and order domains, governments disinvest after successes, seemingly to maintain their gains. Party issue ownership and manifesto commitments also shape investments. Prime ministers remain party politicians in these respects, but investment considerations have larger substantive impacts on the allocation of policy priorities than these party-political characteristics.