10 June 2014
San Francesco - Cappella Guinigi
I propose a political agency model where rent-maximizer rulers are constrained by sophisticated principals/producers that use an awareness-management model à la Bénabou and Tirole. Sophistication is explained by educational attainments and producers are endowed with different levels of education, that increase over time with human capital investments. I allow education to be both the engine of growth and a determinant of political participation; in equilibrium, more educated societies are more able to punish politicians that, in turn, invest more in productive public goods such as infrastructure, roads or legal rules for contracts enforcement. I prove the existence of multiple steady states featuring, respectively, a sophisticated society with congruent politicians in office, and a naive society ruled by dissonant politicians. Finally, I address inequality concerns and show how, for intermediate values, inequality opposingly hits citizens and ruler and only the latter is found to better off; conversely, citizens are averse to inequality, contributing to explain, via sophisticated accountability, why most people dislike living in a society which is too unequal.