Wednesday, 19 December 2012

What is an MP worth?

Homepaddock writes,
The Remuneration Authority has recommended a small increase in pay for MPs and that has resulted in the usual carping:
While Christmas is still grim financially for many New Zealanders, politicians – who earn nearly three times the average wage – are about to pocket even more. . .
Good MPs are worth far more than they get.
No, an MP is worth whatever it takes to get them to do the job. If the current pay is enough to get MP's to do the job, and it is as they are doing the job, then that is what they are worth. No more; and may be even less. A nice experiment would be to lower MP's pay and see how many leave.


Eric Crampton said...

Imagine some limit cases, Paul.

Suppose we paid them zero. Who would apply for the job? What would be their incentives in office?

Suppose we paid them a quarter million a year. More people would apply for the job. But would we select better ones?

I think you can make a pretty decent case for paying efficiency wages to MPs. But it's eminently debatable - maybe at a very low salary, you'd still have some competent retired publicly spirited types applying for it, and maybe they'd be selected. Or maybe we'd only get people whose opportunity costs are nil.

I worry more about the risks of getting even worse politicians than we do get...

Paul Walker said...

But the experiment has been run. Up until relatively recently (1950-60?) MPs in the UK were not paid. So the data is there, you can look at the characteristics of MPs and their decisions in pre and post pay periods.

There is a thesis in there somewhere!