“This is a paper that relates quality with uncertainty” explains George Akerlof at the beginning of his famous paper The Market for Lemons:  Quality Uncertainty and the Market Mechanism.  In this work, Akerlof studies the market for used cars and goes on to show that because of the existence of uncertainty from the buyer’s point of view, the supply of used cars available in the market will tend to be of bad quality.

This happens because dishonest sellers can mix up their cars with honest sellers without the buyer noticing it.  Eventually, the presence of bad quality cars or “lemons” will drive the price down until a point where honest sellers will withdraw their cars from the market because the price they can get for them is too low.

A similar pattern can be found in the world of politics in developing countries.  Voters face an uncertain choice among politicians, because in many cases they are unaware of their capability to perform while in office.  Charismatic speeches and catchy songs help hiding the lack of proven records in the public sector, hence, creating uncertainty.

Moreover, the politicians known to voters are most of the times regarded as dishonest and corrupt.  In other words, they are examples of “lemons”.  The biggest problem with this conception is that, as a result of it, societies tend to see politics as some kind of dirty business. 

Referring to the costs of dishonesty, Akerlof is quick to point out that the biggest cost comes from the fact that “dishonest dealings tend to drive honest dealings out of the market”.  He rightly points out that “the cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.”

The analogy to politics is significant.  Unfortunately, the stigma that society places to those living from politics (rightly or not) can act as a deterrent for honest people who may otherwise be interested in entering this world.  Moreover, if politicians tend to be linked with various sorts of unlawful activities, as it happens in many countries, there may also be safety concerns and other unpleasant situations which help preventing the end of the vicious cycle. 

In such circumstances, the only people who are willing to make sacrifices to enter politics are those who expect large gains from it:  most likely, dishonest politicians or those with marked partisan interests.

Clearly, we have a market for lemons.  The supply of politicians is very much the result of an adverse selection problem.  The incentives provided by the politics environment are not good enough to attract the individuals with the most integrity and capability.  Is there a way out for societies?

Unfortunately, there is no short term solution.  The only way out comes from civil participation, which takes longer than most people are willing to wait for.  If those who are not interested in using politics for their own benefit start entering the political arena, then little by little there will be less room for dishonest politicians and politics will regain its right place at the helm of the development of nations.

* Luis Alejos (UWCAd 99-01) works as an economic advisor to the Guatemalan government and as a lecturer at Universidad Rafael Landivar, Guatemala.  He holds an MSc in Economics from University College London, England.