Trust in the Mixed Economy

[Politicians are] loved and admired, then hated and feared, in the binge-and-purge cycle that characterizes the American public’s dysfunctional relationship with the presidency.

Gene Healy, Cult of the Presidency, Introduction.
Jul30
Political Economy

Trust in the Mixed Economy

Politics is heavily personality-based. Charisma is required for advancement in elected office, and requires the trust of at least 50% of the voting public at certain intervals – at least compared to the opponent.1 The mass-captivation with presidential candidates as in 1988 and 2008 is familiar; less so but hardly less common is the cult of personality central to the maintenance of dictatorships such as North Korea and Soviet Russia.

Business, on the other hand, makes personality largely irrelevant. Personality cults such as maintained by Steve Jobs are a rarity in a world where consumers couldn’t care less who runs the company: there is no need to appeal to the consumer on any ground other than the product itself, which except in rare cases carries no hint of the executive’s personality. To be sure there is some amount of interpersonal skill necessary to advance in the business world, but the sort of mass appeal necessary for political success is superfluous. The businessman himself has a very limited number of people he must personally appeal to.

Thus politics selects for people who can project trust on a mass scale, while business selects for people with better interpersonal or managerial skills.

But that’s only half the story. The incentives faced by elected officials rarely comport with anything resembling the public weal. As the individual voter’s effect on outcomes is negligible, the incentive to be informed in anything more than a cursory way is low. Given this fact and the high payoff for groups extracting money from the political process, the incentive is naturally for the elected official to give as many favors – and to expand his ability to give favors – as far as possible without running afoul of the capricious public mood.

Business on the other hand, where it survives without such favors, is dependent on repeated interactions with people in whose interest it is to know whether they’ve been screwed or not. I can switch brands much more easily than I can switch politicians. Regardless of his actual honesty, it is therefore much more difficult (again, where he is actually dependent on consumers) for the businessman to be dishonest where he expects his customers to return.2

It is no ideological abberation that politicians are trusted more than businessmen. It is a perverse dynamic of the mixed economy. Politics selects the soothing and makes him a liar; business selects the effective and makes him honest. It is the great benefit of the private market that it pays little respect to personal characteristics. By the same token, it is the supreme danger of politics that it becomes sublimated into personality. Who cheered for the first black CEO with as much enthusiasm as he cheered for the first black president? We binge on the politician’s soothing talk, and purge when the scam becomes apparent enough.

  1. This point may be strengthened by noting that when the public loses trust in an elected official, the redemption of that trust is often made a key distinctive of the opposition.
  2. Hence the “tourist trap” and the absurd prices charged for souvenirs in popular tourist destinations, where there is no expectation of repeated interaction.

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