What Do Indian Politicians and Drug Dealers Have in Common?

Politicians campaigning in Mumbai. (Photo: Al Jazeera English)

Freakonomics described the economics of a crack-selling gang – a tournament model where you don’t earn much unless you can get to the top of the pyramid. Columbia Business School professor Ray Fisman, who has shown up on this blog before, argues that politics isn’t all that different.  In Slate, Fisman summarizes his new working paper, coauthored with Florian Schulz and Vikrant Vig, which uses disclosed finances of politicians in India in the last election cycle. The researchers found that being a politician doesn’t really pay off:

Comparing the reported assets of politicians who have run for office in elections since 2003, we find that candidates who were elected to state assemblies fared only marginally better financially than runners-up. There is an exception: Politicians who get high-level cabinet posts do sometimes make out like bandits. But for politicians who never make it very far up the hierarchy, politics doesn’t really pay at all.

Since 2003, Indian law has required anyone running for office to publicly list their asset holdings and bank account balances. The researchers found that wealth of an elected member of the legislative assembly grows 6 percent faster than his runner-up; politicians who attain cabinet-level posts see their wealth grow 15 percent faster. Wealth accumulation is also faster for incumbents and those who win by a small margin.

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 12

View All Comments »
  1. Pyramid Head says:

    But what about the very obvious fact that people *lie* about their assets? Brazil has the same kind of law, and our politicians underreport their income/assets all the time (not to mention legally dodgy tactics, such as shielding your assets behind a holding company).

    Well-loved. Like or Dislike: Thumb up 18 Thumb down 0
  2. DNA says:

    I fail to see how this is different than the regular corporations and even govt organizations. The CEO of our company makes millions of dollars every year and that is more than 50/60 times what I make. What’s new??

    Thumb up 5 Thumb down 1
  3. frankenduf says:

    the concept of this post seems to presume corruption- that public service is a ‘payoff’ in the private sector- it would certainly be disturbing if the actual politicians share this presumption of the researchers

    Thumb up 3 Thumb down 0
    • Clovis Sanger says:

      How pristine a conception of the actual practice of politics (in contradistinction to the principle of it) you still possess in this day and age. If it’s genuine, you should harness its purity in service of a remake of “Mr. Smith Goes To Washington.”

      Thumb up 1 Thumb down 0
  4. WiW says:

    Most people with any wealth (starting at the lower-middle class) in India have a significant portion off the books. When you buy a home or land, the stated value is much lower than what is actually paid. To think that the corrupt politicians report their true wealth is naive at best.

    There was a report a while back adding up all the money Indians have in Swiss accounts. Do you really think that money is reported to the Government?

    See http://en.wikipedia.org/wiki/Indian_black_money

    Well-loved. Like or Dislike: Thumb up 13 Thumb down 0
  5. Niranjan Kumar says:

    The photo you have inserted here shows some of the most representative samples of Indian politicians. Congrats!!

    The tricky part of the Indian politics is that these thugs are so hand-in-gloves with each other when it comes to protecting their self-interests. Studying corruption in Indian politics is beyond the reach of established methodologies. You can not use measures like disclosed assets to gauge the real “net worth” of an Indian politician, irrespective of he/she is state/national level politician. Unless someone comes up with Swiss bank account details and/or deposits in tax havens, it is impossible to estimate the real value of these crooks.

    Niranjan

    Well-loved. Like or Dislike: Thumb up 6 Thumb down 0
  6. Erik Dallas says:

    Power is wealth; the politician fought so hard to get the election, this fight will not be misguided vein. Microeconomics and game theory indicate that everyone’s actions, including politician’s, are motivated by self-interest. Find me a better motive to spend cash and fight on an election campaign, I seriously doubt many politicians are virtuously altruistic.

    Not sure India is the best place to collect accurate election disclosure data. Are we just measuring the reporting error / bias? Probably the US or EU also has reporting error / bias, but probably some real trends might show up under the lower noise ratio.

    Thumb up 0 Thumb down 0
  7. Pritesh Desai says:

    Indian politicians obviously don’t disclose their real assets. They stash away most of it in Swiss banks. Almost every other month we have a new corruption scam worth billions. I’m sure the money trickles down.

    Thumb up 0 Thumb down 0
    • Nigel Pope says:

      Actually, they stash it away in Singapore and Dubai. (Don’t forget, the Indian black market is arguably larger than the real economy thanks to the parallel cash economies in place in Singapore and Dubai.)

      Thumb up 0 Thumb down 0
  8. sao says:

    Has anyone studied the watches of Indian politicians? It’s not uncommon to see watches that cost half a million dollars on the wrists of Russian politicians whose reported assets and income suggest that if he worked for 20 years and sold his tiny apartment and car, he’d still never be able to afford it. I think it was Kommersant which did a watch report. I’m not sure if it was translated, but it was mostly pictures.

    Thumb up 0 Thumb down 0