So-called “revolving doors” between government and the private sector raise the specter of potential corruption (if not in the strict legal sense, then in the broader sense), and some anticorruption advocates have called for much more aggressive restrictions on former government officials’ ability to work for the sectors they used to regulate. (See, for example, here, here, and here.) Though the concerns are legitimate, I argued in a post a little while back that the issue is much more complex: many of the concerns about the harms of the revolving door may be overblown, and revolving doors might in some cases have beneficial effects.
I thought I’d revisit the issue in light of two very interesting recent contributions on this topic: a blog post last week by Transparency International Programme Manager Dieter Zinnbauer on the pros and cons of the revolving door (along with a companion post on measurement issues), and an article by Wharton School Professor David Zaring. Mr. Zinnbauer concludes that the weight of the evidence suggests that the revolving door is indeed a serious problem, and that for the most part the costs outweigh the benefits; Professor Zaring reaches more or less the opposite conclusion.
Although I think the first half of Mr. Zinnbauer’s post is an excellent, succinct, evenhanded summary of the main issues, I respectfully disagree with the inferences that he draws from the existing evidence. That’s not to say that his conclusions are wrong, or that revolving doors are nothing to worry about. But when Mr. Zinnbauer says that “a much larger body of new evidence comes down quite distinctively on the negative impact of the revolving door,” I think he’s overstating his case. Here’s why:
First, let’s take a step back and clarify what, exactly, we’re worried about, and therefore what we’re looking for in the data. Though there are many potential concerns with the revolving door, the big one is that government officials’ past or potential future private sector employment will distort their decision-making in ways that are harmful to the public interest. The usual version of this concern emphasizes the possibility that public sector employees’ desire for future private employment will cause them to go easy on those potential employers. That’s why some suggest the revolving door encourages a kind of “corruption” — even if not illegal, and even if not conscious, when a regulator does something that’s not in the public interest, in order to help the regulator’s own future job prospects, the regulator has abused her public power for private gain. Another version of the revolving door concern is that regulators who come from the regulated industry will have a natural tendency to identify and sympathize with their former employers; this version of the problem doesn’t so much involve the corrupting interest in future employment, but rather a form of what’s sometimes called “epistemic capture” — a fancy term for the idea that if you’ve spent most of your life hanging out with bankers (or whatever), and being one yourself, you start seeing things from their point of view.
The big question is the extent to which this possible concern is, in fact, a serious problem in the real world. To Mr. Zinnbauer’s credit, he points out that the answer is not obvious, and that many commentators have pointed out reasons why the revolving door might not only not be bad, but might actually be good: First, public officials might improve their job prospects more not by going easy on the regulated industry, but by being quite aggressive — and highly competent — so that firms think that this is the kind of person they’ll want on their side in future interactions with the government (what Mr. Zinnbauer calls a “signaling competence effect”). Second, the prospect of future private employment makes the relatively lower salaries in most public service jobs less of a disincentive for the most talented people to take those jobs, at least for a while (a “talent attraction” effect). (It’s also possible that regular movement of individuals back and forth will lead to better communication between the public and private sectors and a better understanding of the issues in the industry, though these are less directly relevant to the question of whether the revolving door might distort government decisions.)
Mr. Zinnbauer, as noted above, acknowledges this complexity but says that the weight of the evidence supports the conclusion that the downsides of the revolving door — the potential for corruption — outweigh the good. But the evidence he offers doesn’t really seem to support that conclusion:
- Most of the evidence cited indicates that firms that hire lobbyists with government experience receive benefits — faster approvals, more funding, more favorable results, and a higher stock price. That’s plausible, but it is not evidence that the officials going through the revolving door made worse decisions while in government. Now, it does suggest that firms that hire such officials do better than firms that don’t, and perhaps that’s troubling for other reasons. But it’s not clear exactly what the problem is: Unless we know the right baseline, we can’t say whether the problem is that firms with revolving door lobbyists get (undeserved) special benefits, or rather whether firms that fail to hire such lobbyists are failing to get what they deserve. Another difficulty is the fact that hiring revolving-door lobbyists is not random, and so it’s hard to tell whether it’s the fact that these firms hired such lobbyists that leads to the better outcomes, or some other factor about the firms that tend to hire them.
- Mr. Zinnbauer also points out that revolving door lobbyists tend to work on a broader range of issues than other lobbyists, indicating their value is in their contacts rather than their expertise. But, first, that still doesn’t show that these lobbyists’ behavior in government was distorted, and, second, it may just mean that lobbyists without government experience need to specialize to make up for the fact that they don’t have as much general understanding of how government works.
- Perhaps the most compelling evidence that suggests some distortion effect is a working paper that does provide some fairly strong evidence that analysts at credit rating agencies (not technically government employers, but performing a public function) give more favorable ratings to financial institutions when they are about to switch to managerial jobs at those institutions. That result is indeed troubling, and consistent with the negative assessment of the revolving door. But it’s not clear that the result is generalizable.
And that last point is where Professor Zaring’s article comes in. In addition to discussing many of the same criticisms of the anti-revolving-door position (in much greater depth), he reports a study of 152 prosecutors who were in the criminal division of the US attorney’s office in the Southern District of New York in 2001. At the risk of oversimplifying Professor Zaring’s nuanced findings, the headline result is that there was no statistically significant correlation between a prosecutor’s aggressiveness (measured by number of cases brought, prison sentences imposed, publicity) and that prosecutor’s future private sector employment.
All this leads me to the somewhat unsatisfying conclusion that we still don’t know all that much empirically about how much the revolving door phenomenon corrupts government decision-making. Mr. Zinnbauer has done the anticorruption community a great service in providing such a lucid overview of the debate, and he is admirably careful to qualify his arguments with all of the appropriate disclaimers. Nonetheless,I would push back a bit on his main conclusions as to the weight and strength of the existing evidence on this issue.