Does ‘Business Experience’ Result in Better Governance?
“What I am far and away greater than an entertainer is a businessman, and that’s the kind of mindset this country needs to bring it back, because we owe $19 trillion right now — $19 trillion — and you need this kind of thinking to bring our country back.”
— Donald Trump, Republican presidential debate, September 16, 2015</blockquote>
Donald Trump’s claim that he would make a great president was based in large part on his business experience. He’s confident he will be a better trade negotiator, for example, because he has mastered “the art of the deal.”
But does business experience really make for better performance in office?
Research shows that educational level has an impact on performance. So, in some cases, does gender. Party affiliation can also be a factor.
But a study conducted by the College of William & Mary’s economics department suggests that business experience might not matter as much as you’d think.
It’s certainly “a characteristic that both candidates and voters seem to think is rather important,” writes Brian Beach and Daniel B. Jones in the <a href=”http://www.sciencedirect.com/science/article/pii/S0167268116302013″>November 2016 issue</a> of the <em>Journal of Economic Behavior & Organization</em>. They note that candidates “at all levels, from city council to presidential elections, tout ‘business experience’ as a positive during their campaigns.”
Also, a 2014 Gallup poll found that 81 percent of Americans say the country “would be better governed if more people with business and management experience were in political office.”
But Beach and Jones see scant objective support for this belief — at least at the municipal level. There’s not much evidence that “the election of a single member (and his or her professional experience) can (and has been shown to) have a large and immediate impact on city budget and policy outcomes.”
After examining the records of California city councils from 1999‒2011 and defining a business background as experience as a CEO, CFO, COO, business executive or company president, the researchers write:
“Ultimately, we find no evidence that the election of a candidate with business experience generates an observable change in a city’s budget or policy outcomes. City expenditures, revenues, debt ratios, likelihood of maintaining a budget surplus and unemployment rates are all unchanged.”
City governments “do not spend more or less on public goods (roads, parks, etc.) or on themselves (salaries, benefits to government works).”
However, there’s one exception. There’s “some evidence that the city’s cost of borrowing is lower as a result of electing a businessperson.”
This might not be an earth-shaking exception, but given today’s economic conditions, it’s not nothing, either.
<a href=”/impact”><img src=”//pac.org/images/impact/elements/back_button.jpg” /></a>