Adam Smith on MPs wages

Reports that MPs are demanding a 22% pay rise have been denied. But the question remains: how much should they be paid?

Let’s apply Adam Smith’s theory of compensating advantages. There are, he said, “five... principal circumstances which…make up for a small pecuniary gain in some employments, and counterbalance a great one in others.” (Chapter X here). Do these justify MPs getting big wages?

1. “the easiness and cheapness, or the difficulty and expense of learning them.”

Any twat can be an MP, so this doesn’t apply.

2. “the constancy or inconstancy of employment in them.”

You’ve got a secure job for four years. And at the 2005 election, only one-in-ten seats changed hands. So the job’s pretty safe. Indeed, in a safe seat, an MP has a job for life.

3. “the small or great trust which must be reposed in those who exercise them.”

This, says Smith, explains the wages of doctors and goldsmiths; these have to be high to encourage good behaviour. But this applies only slightly to MPs. Most do as the whips tell them. And their behaviour is easily scrutinized. On the other hand, though, we want to deter them from taking too many backhanders, so some wage premium is necessary.

4. “the probability or improbability of success.”

Smith says this explains the high wages of lawyers:

The counselor at law who, perhaps, at hear 40 years of age, begins to make something of his profession, out to receive the retribution, not only of his own so tedious and expensive education, but that of more than 20 others who are never likely to make anything by it.

This applies only slightly to MPs. Loads of people fail to become MPs, but they invest little money in the pursuit of the job, and much less time than junior lawyers do. As there’s little invested in the effort to become an MP, the pay-off to a successful investment must be small.

So far, we’re struggling to justify MPs’ pay. Only two of four of Smith’s principles apply. But here’s the fifth:

“the agreeableness or disagreeableness of the employments themselves.”

Yup. This explains their good pay. Being an MP is a rubbish job. There’s all that travelling from constituency to Westminster, getting up at some ungodly hour to talk to Jim Naughtie, listening to nutters at constituency surgeries and party meetings, having to appear to agree with party leaders, and being held in contempt by all right-thinking people. And – worst of all – just look at the company they keep.

You’d have to pay me a fortune to do it.

Comments

[Tim Worstall]

Or we could look at the number of people who want the job. 5,000 or so stood for the 650 odd seats in May. They’re way overpaid.

[dearieme]

If we paid them much less, more of them would have to take part-time jobs and thus learn something about the realities of life. Seems a good idea to me.

[Robert Schwartz]

The argument for paying politicians is if you do not pay them enough, they will take to stealing.

[chris]

I forgot to say that we could pay them their marginal product - but in most cases this is heavily negative.

[the-man-in-black]

How do we incentivise lawyers to stay away from being MPs or ministers? There is way too many of them.

If by raising their wages we could tell them to get their snouts out of various troughs such as arms company directorships etc etc then it would be worth it perhaps?

Is there any such thing as a politician who isn't corrupt? (in however a small way...)

[John East]

There's been no mention of paying them in proportion to their effectivness.
How about coming up with an equation relating Crime figure reduction, NHS effectivness (however defined), per capita wealth, tax reductions etc. to their pay.

This would have the added advantage that most of the buffoons would end up owing us money.

[Salvatori]

I rather think of politicians in terms the Groucho Marx comment that he "wouldn't want to belong to any club that would have him as a member". My view is that any politician prepared to do what it takes to get elected is totally unsuitable for high office. One could argue that the intolerable culture spin is the logical conclusion.

[The Moai]

Your blog is very, very interesting, and I hereby link forthwith.
Two other considerations should be made for a comparatively high rate of pay for MPs:
- unlike most people, they can decidee their own payrate
- paying them to stay in the job keeps them off the streets and away from jobs where they could do REAL damage eg. surgeon, pilot, nuclear engineer
TM