DP4362 The Paradox of Competence

Author(s): Hans Gersbach
Publication Date: April 2004
Keyword(s): double-sided asymmetric information, paradox of competence, polls, populists, statesmen
JEL(s): D72, D80, D82
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4362

We examine a model in which the public is unsure about the competence of a politician, and whether they are concerned about the long-term consequences of their decisions (statesman) or about the public?s opinion concerning their competence and preferences (populist). The main finding suggests that the public benefits by disregarding the competence of candidates and by re-electing candidates based on their beliefs about whether a politician is a statesman. This paradox of competence might explain why politicians are so concerned about being perceived as statesmen. We also provide a rationale as to why governing by polls can be detrimental for society. Moreover, our model illustrates in general that delaying irreversible project decisions is a bad signal.