Published online by Cambridge University Press: 07 December 2012
This article sets out and tests a theory of public policy investment – how democratic governments seek to enhance their chances of re-election by managing a portfolio of policy priorities for the public, analogous to the relationship between investment manager and client. Governments choose policies that yield returns the public values; and rebalance their policy priorities later to adjust risk and stabilize return. Do the public reward returns to policy capital or punish risky policy investments? The article investigates whether returns to policy investment guide political management and statecraft. Time-series analyses of risk and return in Britain 1971–2000 reveal that risk and return on government policy portfolios predict election outcomes, and that returns, risk profiles and the uncertainty in public signals influence the prioritization of policies.
USC Price School of Public Policy, USC Gould School of Law, University of Southern California (email: firstname.lastname@example.org); and School of Public Policy, University College London, respectively (email: email@example.com). The authors have greatly benefited from the comments of David Barker, Laura Chaqués, Scott Desposato, Keith Dowding, Patrick Dunleavy, Francesca Gains, Christoffer Green-Pedersen, Stephen Greasley, Will Jennings, Bryan Jones, Christopher Kam, George Krause, John Matsusaka, David Nixon, Oguzhan Ozbas, Anna Palau, Kaare Strøm, Andrew Whitford, Jonathan Woon and those of seminar participants at the University of California, Los Angeles; University College London; the London School of Economics; the University of Pittsburgh; the University of Hawaii-Manoa; the University of Manchester; the Montesquieu Institute, Den Haag and panel participants at the European Political Science Association 1st Annual Conference, Dublin, 2011. They also wish to thank three anonymous referees and the Editor, Hugh Ward, for their attention to and engagement with the manuscript. They acknowledge generous support from the UK Economic and Social Research Council (grant reference R105938). An appendix containing Annex 1 can be viewed at http://www.journals.cambridge.org/jps.
1 Crain, W. Mark, Volatile States Institutions, Policy, and the Performance of American State Economies (Ann Arbor: University of Michigan, 2003)CrossRefGoogle Scholar
2 Knight, Frank, Risk, Uncertainty and Profit (Chicago: Houghton Mifflin Company, 1921)Google Scholar
3 Page, Benjamin and Shapiro, Robert, The Rational Public (Chicago: University of Chicago Press, 1992)CrossRefGoogle Scholar
Erikson, Robert, Wright, Gerald and McIver, John, Statehouse Democracy: Public Opinion and Policy in the American States (New York: Cambridge University Press, 1993)Google Scholar
Jacobs, Lawrence, The Health of Nations: Health Policy and Public Opinion in the US and Britain (Ithaca, N.Y.: Cornell University Press, 1993)Google Scholar
Stimson, James, MacKuen, Michael and Erikson, Robert, ‘Dynamic Representation’, American Political Science Review, 89 (1995), 543–565CrossRefGoogle Scholar
Wlezien, Christopher, ‘Dynamics of Representation: The Case of US Spending on Defense’, British Journal of Political Science, 26 (1996), 81–103CrossRefGoogle Scholar
Erikson, Robert, MacKuen, Michael and Stimson, James, The Macro Polity (Cambridge: Cambridge University Press, 2002)Google Scholar
Wlezien, Christopher, ‘Patterns of Representation: Dynamics of Public Preferences and Policy’, Journal of Politics, 66 (2004), 1–24CrossRefGoogle Scholar
Hobolt, Sara and Klemmensen, Robert, ‘Government Responsiveness and Political Competition in Comparative Perspective’, Comparative Political Studies, 41 (2008), 309–337CrossRefGoogle Scholar
Soroka, Stuart and Wlezien, Christopher, Degrees of Democracy Politics, Public Opinion, and Policy (Cambridge: Cambridge University Press, 2010)Google Scholar
Jennings, William and John, Peter, ‘The Dynamics of Political Attention: Public Opinion and the Queen's Speech in the United Kingdom’, American Journal of Political Science, 53 (2010), 838–854CrossRefGoogle Scholar
Hakhverdian, Armen, ‘Political Representation and its Mechanisms: a Dynamic Left–Right Approach for the United Kingdom, 1976–2006’, British Journal of Political Science, 40 (2010), 835–856CrossRefGoogle Scholar
4 Wright, Anthony, Citizens and Subjects: An Essay on British Politics (London: Routledge, 1994)CrossRefGoogle Scholar
Weir, Stuart and Beetham, David, Political Power and Democratic Control in Britain: the Democratic Audit of the United Kingdom (London: Routledge, 1999)Google Scholar
5 Nordhaus, William, ‘The Political Business Cycle’, Review of Economic Studies, 42 (1975), 169–190CrossRefGoogle Scholar
6 Dorussen, Hans and Taylor, Michael, eds, Economic Voting (London: Routledge, 2002)Google Scholar
Duch, Raymond and Stevenson, Randy, The Economic Vote: How Political and Economic Institutions Condition Election Results (Cambridge: Cambridge University Press, 2008)CrossRefGoogle Scholar
7 Wouter van der Brug, C. van der Eijk and Mark Franklin, The Economy and the Vote (Cambridge: Cambridge University Press, 2007)Google Scholar
8 Alt, James and Lassen, David Dreyer, ‘Transparency, Political Polarization, and Political Budget Cycles in OECD Countries’, American Journal of Political Science, 50 (2006), 530–550CrossRefGoogle Scholar
Brender, Adi and Drazen, Allan, ‘How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Panel of Countries’, American Economic Review, 98 (2008), 2203–2220CrossRefGoogle Scholar
9 Brender, Adi and Drazen, Allan, ‘Political Budget Cycles in New Versus Established Democracies’, Journal of Monetary Economics, 52 (2005), 1271–1295CrossRefGoogle Scholar
Franzese, Robert, ‘Electoral and Partisan Cycles in Economic Policies and Outcomes’, Annual Review of Political Science, 5 (2002), 369–422CrossRefGoogle Scholar
10 Frank Baumgartner and Bryan Jones, Agendas and Instability in American Politics, 2nd edn (Chicago: University of Chicago Press, 2009 )Google Scholar
Baumgartner, Frank, Jones, Bryan and MacLeod, Michael, ‘The Evolution of Legislative Jurisdictions’, Journal of Politics, 62 (2000), 221–249CrossRefGoogle Scholar
Jones, Bryan, Sulkin, Tracey and Larsen, Heather, ‘Policy Punctuations in American Political Institutions’, American Political Science Review, 97 (2003), 151–169CrossRefGoogle Scholar
Jones, Bryan and Baumgartner, Frank, The Politics of Attention: How Government Prioritizes Problems (Chicago: University of Chicago Press, 2005)Google Scholar
Baumgartner, Frank, Breunig, Christian, Green-Pedersen, Christopher, Jones, Bryan, Mortensen, Peter, Nuytemans, Michiel and Walgrave, Stefaan, ‘Punctuated Equilibrium and Institutional Friction in Comparative Perspective’, American Journal of Political Science, 53 (2009), 603–620CrossRefGoogle Scholar
11 Mortensen, Peter, Green-Pedersen, Christoffer and Breeman, Gerard, Jennings, Will, John, Peter, Timmermans, Arco, Chaques, Laura and Palau, Anna, ‘Comparing Government Agendas Executive Speeches in the Netherlands, United Kingdom, and Denmark’, Comparative Political Studies, 44 (2011), 973–1000CrossRefGoogle Scholar
12 McDonald, Michael and Budge, Ian, Elections, Parties, Democracy: Conferring the Median Mandate (Oxford: Oxford University Press, 2005)CrossRefGoogle Scholar
Budge, Ian, Ezrow, Lawrence and McDonald, Michael, ‘Ideology, Party Factionalism and Policy Change’, British Journal of Political Science, 40 (2010), 781–804CrossRefGoogle Scholar
13 Ian Budge and Richard. Hofferbert. ‘Mandates and Policy Outputs: U.S. Party Platforms and Federal Expenditures’, American Political Science Review, 84 (1990), 111–132CrossRefGoogle Scholar
Hofferbert, Richard and Budge, Ian, ‘The Party Mandate and the Westminster Model: Election Programmes and Government Spending in Britain, 1948–85’, British Journal of Political Science, 22 (1992), 151–182CrossRefGoogle Scholar
King, Gary and Laver, Michael, ‘On Party Platforms, Mandates, and Government Spending’, American Political Science Review, 87 (1993), 744–750CrossRefGoogle Scholar
14 Budge, Ian and Fairlie, Dennis, Explaining and Predicting Elections: Issue Effects and Party Strategies in Twenty-Three Democracies (London: George Allen & Unwin, 1983)Google Scholar
Petrocik, John, ‘Issue Ownership in Presidential Elections, with a 1980 Case Study’, American Journal of Political Science, 40 (1996), 825–850CrossRefGoogle Scholar
Wouter van der Brug, ‘Issue Ownership and Party Choice,’ Electoral Studies, 23 (2004), 209–233CrossRefGoogle Scholar
15 Clarke, Harold, Sanders, David, Stewart, Marianne and Whiteley, Paul, Performance and the British Voter (Cambridge: Cambridge University Press, 2009)CrossRefGoogle Scholar
16 Adams, James, Ezrow, Lawrence and Somer-Topcu, Zeynep, ‘Is Anybody Listening? Evidence that Voters Do Not Respond to European Parties’ Policy Programmes’, American Journal of Political Science, 55 (2011), 370–382CrossRefGoogle Scholar
Warwick, Paul, ‘Bilateralism or the Median Mandate? An Examination of Rival Perspectives on Democratic Governance’, European Journal of Political Research, 49 (2010), 1–24CrossRefGoogle Scholar
17 Strøm, Kaare, Minority Government and Majority Rule (Cambridge: Cambridge University Press, 1990)Google Scholar
Rose, Richard and Mackie, Thomas, ‘Incumbency in Government: Asset or Liability’, in Hans Daalder and Peter Mair, eds, Western European Party Systems: Continuity and Change (Beverly Hills, Calif.: Sage, 1983)Google Scholar
18 Nanestad, Peter and Paldam, Martin, ‘The Cost of Ruling’, in Han Dorussen and Michael Taylor, eds, Economic Voting (London: Routledge, 2002)Google Scholar
19 Paul C. Light, The President's Agenda, 2nd edn (Baltimore, Md.: Johns Hopkins University Press, 1991), p. 32Google Scholar
20 Bailey, Michael, Sigelman, Lee and Wilcox, Clyde, ‘Presidential Persuasion on Social Issues: A Two Way Street?’ Political Research Quarterly, 56 (2003), 49–58CrossRefGoogle Scholar
21 Cronin, Thomas, The State of the Presidency (Boston, Mass.: Little, Brown, 1980)Google Scholar
Polsby, Nelson and Wildavsky, Aaron, Presidential Elections (New York: Charles Scribner's Sons, 1980)Google Scholar
22 Neustadt, Richard, Presidential Power and the Modern Presidents (New York: Free Press, 1990 )Google Scholar
Kernell, Samuel, Going Public: New Strategies of Presidential Leadership (Washington, D.C.: Congressional Quarterly, 1986)Google Scholar
III, George C. Edwards, At the Margins (New Haven, Conn.: Yale University Press, 1989)Google Scholar
Johnson, Timothy and Roberts, Jason, ‘Presidential Capital and the Supreme Court Confirmation Process’, Journal of Politics, 66 (2004), 663–683CrossRefGoogle Scholar
23 Canes-Wrone, Brandice, Who Leads Whom? Presidents, Policy, and the Public (Chicago: University of Chicago Press, 2006)Google Scholar
24 Butler, David, Adonis, Andrew and Travers, Tony, Failure in British Government: The Politics of the Poll Tax (Oxford: Oxford University Press, 1994)Google Scholar
Moran, Michael, The British Regulatory State: High Modernism and Hyper Innovation (Oxford: Oxford University Press, 2003)CrossRefGoogle Scholar
Dunleavy, Patrick, ‘Policy Disasters: Explaining the UK's Record’, Public Policy and Administration, 10 (1995), 52–70CrossRefGoogle Scholar
Hood, Christopher, Explaining Economic Policy Reversals (Buckingham: Open University Press, 1994)Google Scholar
Finer, Samuel, ‘Introduction: Adversary Politics and Electoral Reform’, in Samuel Finer, ed., Adversary Politics and Electoral Reform (London: Anthony Wigram, 1975), pp. 3–32Google Scholar
25 A. H. Birch, Representative and Responsible Government (London: George Allen and Unwin, 1964: p. 245Google Scholar
King, Anthony, The British Constitution (Oxford: Oxford University Press, 2008)Google Scholar
26 Bulpitt, Jim, ‘The Discipline of the New Democracy: Mrs. Thatcher's Domestic Statecraft’, Political Studies, 34 (1985),19–39CrossRefGoogle Scholar
27 Bulpitt, Jim, Territory and Power in the United Kingdom (Manchester: Manchester University Press, 1983)Google Scholar
29 Dewan, Torun and Dowding, Keith, ‘The Corrective Effect of Ministerial Resignations on Government Popularity’, American Journal of Political Science, 49 (2005), 46–56CrossRefGoogle Scholar
Dewan, Torun and Myatt, David, ‘Scandal, Protection, and Recovery in the Cabinet’, American Political Science Review, 101 (2007), 63–77CrossRefGoogle Scholar
30 There is, of course, no political market where voters go continuously to the polls with high turnout and assess individual policies. This is arguably the central difference between studies of politics and of economics. However, we claim that citizens can express opinion that we measure through frequent polls. Governments endeavour to learn such information and take it as a price signal for its policy assets. With that information, sometimes noisier than at other times, government makes investment choices. We hypothesize that the resulting risk in the portfolio and returns to policy capital investment impacts election results.
31 Myerson, Roger, Probability Models for Economic Decisions (Belmont, Calif.: Duxbury, 2005)Google Scholar
32 Krause, George, ‘Testing for the Strong Form of Rational Expectations with Heterogeneously Informed Agents’, Political Analysis, 8 (2000), 285–305CrossRefGoogle Scholar
33 Our assumption here is that the characteristic voter can participate in the political process without cost and that he or she is presented with competing views in that process such that a prioritization of policies is possible. Relaxing this assumption would mean that some voters would be systematically excluded from the political marketplace, as in the case of African-Americans before the Voting Rights Act of 1965 in the United States or when secrecy in foreign crises is maintained by governments as a matter of national security. Such conditions most likely do not apply to the average voter across our time period across all policy domains. Moreover, uncertainty about the importance of policies can be the result of voters not having enough information about the relationship between their well-being and the policies offered by the government. As we discuss below, our framework produces estimates of price signal uncertainty to address the extent to which the voters form clear priorities given the information they do acquire. It may arise because parties, the media and other elites are not sufficiently clear about the importance of policy problems, but those elites cannot discover the precise probability model for determining public priorities.
34 Eisinger, Robert, The Evolution of Presidential Polling (Cambridge: Cambridge University Press, 2003)Google Scholar
35 Ross, Stephen, ‘The Arbitrage Theory of Capital Asset Pricing’, Journal of Economic Theory, 13 (1976), 341–360CrossRefGoogle Scholar
36 Bartels, Larry, ‘Uninformed Votes: Information Effects in Presidential Elections’, American Journal of Political Science, 40 (1996), 194–230CrossRefGoogle Scholar
37 Rose, Richard and Davies, Phillip, Inheritance in Public Policy (New Haven, Conn.: Yale University Press, 1994)Google Scholar
38 Taken together with the claim that commitments narrow the scope for the creation of new assets, our argument has empirical validity. Between 1971 and 2000, the policy asset classes we employ in the empirical work that follows capture between 82 and 97 per cent of the quasi-sentences in the Speech from the Throne, with a very high average of 89 per cent.
39 Chen, Nai-Fu, Roll, Richard and Ross, Stephen, ‘Economic Forces and the Stock Market’, Journal of Business, 59 (1986), 383–404CrossRefGoogle Scholar
Burmeister, Edwin and Wall, Kent, ‘The Arbitrage Pricing Theory and Macroeconomic Factor Measures’, Financial Review, 21 (1986), 1–20CrossRefGoogle Scholar
Chen, Nai-Fu, Grundy, Bruce and Stambaugh, Robert, ‘Changing Risk, Changing Risk Premiums, and Dividend Yield Effects’, Journal of Business, 63 (1990), 51–70CrossRefGoogle Scholar
40 Roll, Richard and Ross, Stephen, ‘An Empirical Investigation of the Arbitrage Pricing Theory’, Journal of Finance, 35 (1980), 1073–1104CrossRefGoogle Scholar
Chen, Nai-Fu, ‘Some Empirical Tests of the Theory of Arbitrage Pricing’, Journal of Finance, 38 (1983), 1393–1414CrossRefGoogle Scholar
Lehmann, Bruce and Modest, David, ‘Mutual Fund Performance Evaluation: A Comparison of Benchmarks and Benchmark Comparisons,’ Journal of Finance, 42 (1987), 233–265CrossRefGoogle Scholar
41 Grinblatt, Mark and Titman, Sheridan, ‘Factor Pricing in a Finite Economy,’ Journal of Financial Economics, 12 (1983), 497–507CrossRefGoogle Scholar
42 Beggs, John, ‘A Simple Exposition of the Arbitrage Pricing Theory Approximation,’ Australian Journal of Management, 11 (1986), 13–22CrossRefGoogle Scholar
44 McLean, Iain, What's Wrong with the British Constitution (Oxford: Oxford University Press, 2010)Google Scholar
45 Cox, Gary, The Efficient Secret: The Cabinet and the Development of Political Parties in Victorian England (Cambridge: Cambridge University Press, 1987)CrossRefGoogle Scholar
Norton, Phillip, Parliament in British Politics (Basingstoke: Palgrave, 2005)CrossRefGoogle Scholar
King, Anthony, ‘Modes of Executive-Legislative Relations: Great Britain, France, and West Germany’, Legislative Studies Quarterly, 1 (1976), 11–36CrossRefGoogle Scholar
46 King, Anthony, ‘The British Prime Minister in the Age of the Career Politician’, West European Politics, 14 (1991), 31–47CrossRefGoogle Scholar
47 King, Anthony and Allen, Nicholas, ‘ “Off With Their Heads”: British Prime Ministers and the Power to Dismiss’, British Journal of Political Science, 40 (2010), 249–278CrossRefGoogle Scholar
48 King, Anthony, ‘Overload: Problems of Governing in the 1970s’, Political Studies, 23 (1975), 284–295CrossRefGoogle Scholar
Anthony King, ed., Why is Britain Becoming Harder to Govern? (London: BBC, 1976)Google Scholar
Whitehead, Phillip, The Writing on the Wall (London: Michael Joseph/Channel 4, 1985)Google Scholar
49 Bacon, Robert and Eltis, Walter, Britain's Economic Problem: Too Few Producers (London: Macmillan, 1975)Google Scholar
50 Hennessy, Peter, The Prime Minister: The Office and Its Holders since 1945 (Basingstoke, Hants.: Macmillan, 2001)Google Scholar
51 Information on the UK Policy Agendas Project can be found at http://www.policyagendas.org.uk. The project coded the Speech from the Throne according to 19 major and 225 minor topic codes, which are common to the Policy Agendas Project and apply to policies comparatively. See Baumgartner and Jones, Agendas and Instability in American Politics.
52 We thank Ian Budge for advice on interpreting and bridging the categories and Judith Bara for supplying the data.
53 Hobolt, Sara and Klemmemsen, Robert, ‘Responsive Government? Public Opinion and Government Policy Preferences in Britain and Denmark’, Political Studies, 53 (2005), 379–402CrossRefGoogle Scholar
Gerard Breeman, David Lowery, Caelesta Poppelaars, Sandra Resodihardjo, Arco Timmermans and Jouke de Vries, ‘Political Attention in a Coalition System: Analysing Queen's Speeches in the Netherlands 1945–2007’, Acta Politica, 44 (2009), 1–27CrossRefGoogle Scholar
John, Peter and Jennings, Will, ‘Punctuations and Turning Points in British Politics: The Policy Agenda of the Queen's speeches’, British Journal of Political Science, 40 (2010), 561–586CrossRefGoogle Scholar
Jennings, Will, Bevan, Shaun and John, Peter, ‘The Agenda of British Government: The Speech from the Throne, 1911–2008’, Political Studies, 59 (2011), 74–98CrossRefGoogle Scholar
54 Jones and Baumgartner, The Politics of Attention, p. 240Google Scholar
Soroka and Wlezien, Degrees of Democracy, pp. 65–66Google Scholar
Cohen, Jeffery, ‘Presidential Rhetoric and the Public Agenda’, American Journal of Political Science, 39 (1995), 87–107CrossRefGoogle Scholar
Petrocik, John, ‘Issue Ownership in Presidential Elections, with a 1980 Case Study’, American Journal of Political Science, 40 (1996), 825–850CrossRefGoogle Scholar
56 The emphasis on foreign policy in the speech is high, but this reflects the traditions of the speech in drawing attention to such matters by the head of state.
59 Wlezien, Christopher, ‘On the Salience of Political Issues: The Problem With “Most Important Problem” ’, Electoral Studies, 24 (2005)Google Scholar
Jennings, William and Wlezien, Christopher, ‘Distinguishing Important Issues and Problems’, Public Opinion Quarterly, 75 (2011), 545–555CrossRefGoogle Scholar
60 King, Anthony and Wybrow, Robert, eds, British Political Opinion 1937–2000: The Gallup Polls (London: Politico's, 2001)Google Scholar
61 Our measure of inflation is the monthly relative price index from the Global Financial Data electronic database. The measure is drawn from a hypothetical bundle of items reflecting typical household expenditure. See, for example, E. H. Phelps Brown and Sheila V. Hopkins, ‘Seven Centuries of the Price of Consumables, Compared with Builders’ Wage-Rates’, Economica, new series, 23 (1952), 296–314.
62 Unemployment is measured by the number of claimants in the United Kingdom as a percentage of the sum of employees, self-employed individuals, members of the armed forces, and government training programme enrolees and the claimant total. This measure is available from the Global Financial Data Series.
63 The daily FT 30 index was obtained from Global Financial Data and is based on an equally weighted sum of values for 30 constituent stocks chosen by editors of the Financial Times. Monthly averages for the index are employed in our analysis.
64 Hewitt, Joseph, ‘Dyadic Processes and International Crises’, Journal of Conflict Resolution, 47 (2003), 669–692CrossRefGoogle Scholar
65 Dowding, Keith and Kang, Won-Taek, ‘Ministerial Resignations 1945–97’, Public Administration, 76 (1998), 411–429CrossRefGoogle Scholar
66 Kolenikov, Stas and Angeles, Gustavo, ‘The Use of Discrete Data in Principal Component Analysis: Theory, Simulations, and Applications to Socioeconomic Indices’ (Working Paper, No. WP-04-85, Carolina Population Center, University of North Carolina, 2004)Google Scholar
67 We performed an orthogonal varimax rotation of the factor loadings and noted correlations between the indicators and loadings. The macro-economic factor was highly positively correlated with inflation (0.9), oil prices (0.3), the FT 30 (0.9). The foreign policy factor was positively correlated with interstate crises (0.7) and the cost of living factor positively correlated with inflation (0.4) and oil prices (0.7). The factor we call government personnel displayed a positive correlation with ministerial resignations (0.3). ‘Ministerial resignations’ is the measured indicator with the highest degree of uniqueness, also correlating positively with the macro-economic factor (0.3). Unemployment also had high uniqueness in correlating negatively with the foreign policy factor (−0.6). Our labels were based on our own best interpretation of these correlations.
68 The mixed factor analysis is appropriate because of the varying distributions of the observed indicators. Inflation, unemployment, and FT30 measures are continuous whilst interstate crises and ministerial resignations are categorical. We use a polychoric routine in combination with the principal factors routine to form a correlation matrix (factormat) for the STATA software package to do the estimation (see Stas Kolenikov and Gustavo Angeles, ‘The Use of Discrete Data in Principal Component Analysis: Theory, Simulations, and Applications to Socioeconomic Indices’, Working Paper, No. WP-04-85, Carolina Population Center, University of North Carolina, 2004). Four positive eigenvalues were recovered. Because Equation 1 defines asset values conditional on the factors, but does not define them substantively, our approach is to use all factors that positively explain variance in the factor indicators (e.g., interstate crises). An eigenvalue describes the variance explained by the factor across all indicators. As a result, we include four factors in our analysis, which taken together fully explain the shared variance in the indicators. A likelihood-ratio test suggests that the four-factor model fits the data better than a model with no factors, χ2 (15 d.f.) = 1349.18.
70 Efron, Bradley and Tibshirani, Robert, An Introduction to the Bootstrap (New York: Chapman & Hall/CRC, 1994)Google Scholar
71 King, Gary, Tomz, Michael and Wittenberg, Jason, ‘Making the Most of Statistical Analyses: Improving Interpretation and Presentation’, American Journal of Political Science, 44 (2000), 347–361CrossRefGoogle Scholar
Treier, Shawn and Jackman, Simon, ‘Democracy as a Latent Variable’, American Journal of Political Science, 52 (2008), 201–217CrossRefGoogle Scholar
72 A longer and broader application of our framework to British politics will appear in our monograph, Public Policy Investment: A New Theory of British Statecraft.
73 Bara, Judith, ‘A Question of Trust: Implementing Party Manifestos’, Parliamentary Affairs, 58 (2005), 585–599CrossRefGoogle Scholar
74 Przeworski, Adam, Stokes, Susan and Manin, Bernard, eds, Democracy, Accountability, and Representation (Cambridge: Cambridge University Press, 1999)CrossRefGoogle Scholar
75 Speech to Conservative Party Conference, 10 October 1980, see http://www.margaretthatcher.org/document/104431, accessed 4 April 2011.
76 Kavanagh, Dennis, ‘The Heath Government’, in Peter Hennessy and Anthony Seldon, eds, Ruling Performance (Oxford: Basil Blackwell, 1987)Google Scholar
Campbell, John, Edward Heath: A Biography (London: Jonathan Cape, 1993)Google Scholar
Hennessy, Peter, The Prime Minister: The Office and Its Holders since 1945 (Basingstoke: Macmillan, 2001)Google Scholar
78 King, Anthony, ‘Margaret Thatcher: The Style of a Prime Minister’, in Anthony King, ed., The British Prime Minister (London: Macmillan, 1985), pp. 118–120CrossRefGoogle Scholar
Bulpitt, Jim, ‘The Discipline of the New Democracy: Mrs. Thatcher's Domestic Statecraft’, Political Studies, 34 (1985), 19–39CrossRefGoogle Scholar
79 Two sample t-tests for mean differences support the claim. For risk, the manifesto mean of 9.953 is significantly less than the rebalanced mean of 11.161 (|t| = 2.902, p = 0.003). For return, the manifesto mean of 9.532 is less than the rebalanced mean of 10.162 (|t| = 1.290, p = 0.101), though at a lower level of statistical significance.
80 Standard errors on the portfolio return show it is not possible to rule out the hypothesis that the return is zero in most years. This means that policy capital is largely unchanged, a very good result for a government as it maintains capital after winning an election.
82 A paired-samples t-test of the difference between other premiers and Heath provides evidence for this claim overall (t = −5.306, p = 0.000) and versus Thatcher specifically (t = −3.437, p = 0.002).
83 A paired sample t-test that Thatcher faced smaller factor loadings than a pool of other premiers in regard to social policy supports the claim for the foreign policy (|t| = 1.725, p = 0.048) and government personnel (|t| = 1.557, p = 0.065) factors.
84 A paired sample t-test that Blair faced smaller factor loadings than other premiers in regard to social policy shows this true for foreign policy (|t| = 1.517, p = 0.070) and the cost of living (|t| = 1.463, p = 0.077) factors.
85 A paired sample t-test that Heath faced smaller factor loadings than a pool of other premiers in regard to foreign and defence supports the claim for the macro-economic (|t| = 1.632, p = 0.057), foreign policy (|t| = 2.625, p = 0.007), and cost of living (|t| = 2.879, p = 0.004) factors.
86 A paired sample t-test that Thatcher faced smaller factor loadings than a pool of other premiers in regard to the macro-economic policy asset shows this for the foreign policy (|t| = 2.235, p = 0.017) and cost of living (|t| = 2.086, p = 0.023) factors.
87 A paired sample t-test that Heath faced larger factor loadings than a pool of other premiers in regard to environment and natural resources upholds the claim for the foreign policy (|t| = 2.093, p = 0.023) and cost of living (|t| = 3.137, p = 0.002) factors.
88 A paired sample t-test that Heath faced smaller factor loadings than a pool of other premiers in regard to infrastructure and investment supports the claim for the foreign policy (|t| = 1.496, p = 0.073), cost of living (|t| = 1.461, p = 0.073), and government personnel (|t| = 1.886, p = 0.035) factors.
89 A paired sample t-test that the Wilson and Callaghan governments pooled together faced smaller factor loadings than a pool of other premiers in regard to law, order and civil rights supports the claim for the foreign policy (|t| = 1.789, p = 0.042), cost of living (|t| = 2.308, p = 0.014), and government personnel (|t| = 1.657, p = 0.054) factors.
90 Manin, Bernard, Przeworski, Adam and Stokes, Susan, ‘Introduction’, in Adam Przeworski, Bernard Manin and Susan Stokes, eds, Democracy, Accountability, and Representation (New York: Cambridge University Press, 1999)Google Scholar
Stimson, James A., Mackuen, Michael B. and Erikson, Robert S., ‘Dynamic Representation’, American Political Science Review, 89 (1995), 543–565CrossRefGoogle Scholar
92 Mughan, Anthony, ‘On the By-Election Vote of Governments in Britain’, Legislative Studies Quarterly, 13 (1988), 29–48CrossRefGoogle Scholar
93 House of Commons Library, Election Statistics: UK 1918–2007, Research Paper 08/12, pp. 38–45. See http://www.parliament.uk/documents/commons/lib/research/…/rp08-012.pdf, Accessed 5 April 2011.
95 Butler, David and Butler, Gareth, British Political Facts, 1900–1994 (New York: St. Martin's Press, 1994)CrossRefGoogle Scholar
96 Bawn, Kathleen and Somer-Topcu, Zeynep, ‘Government versus Opposition at the Polls: How Governing Status Affects the Impact of Policy Positions’, American Journal of Political Science, 56 (2012), 443–446CrossRefGoogle Scholar
97 Durbin, James and Watson, Geoffrey S., ‘Testing for Serial Correlation in Least Squares Regression, I’, Biometrika, 37 (1950), 409–428Google Scholar
Durbin, James and Watson, Geoffrey, ‘Testing for Serial Correlation in Least Squares Regression, II’, Biometrika, 38 (1951), 159–179CrossRefGoogle Scholar
98 Ljung, Greta and Box, George, ‘On a Measure of a Lack of Fit in Time Series Models’, Biometrika, 65 (1978), 297–303CrossRefGoogle Scholar
99 Newey, Whitney and West, Kenneth, ‘A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix’, Econometrica, 55 (3), 703–708CrossRefGoogle Scholar
100 Soroka, Stuart and Wlezien, Christopher, ‘Opinion–Policy Dynamics: Public Preferences and Public Expenditure in the United Kingdom’, British Journal of Political Science, 35 (2005), 665–689CrossRefGoogle Scholar
101 By asset, speech from the throne investment weights are distributed as follows: social policy (mean = 9.07, SD = 4.79), foreign and defence (mean = 43.55, SD = 9.57), macro-economic policy (mean = 18.62, SD = 5.25), environment and natural resources (mean = 10.00, SD = 3.74), and law, order and civil rights (mean = 7.58, SD = 3.36).
102 By asset, returns are distributed as follows: social policy (mean = −11.22, SD = 84.82), foreign and defence (mean = −9.18, SD = 29.63), macro-economic policy (mean = 29.46, SD = 344.90), environment and natural resources (mean = −1.45, SD = 11.89), and law, order and civil rights (mean = −72.54, SD = 282.07).
103 By asset, price signal uncertainty is distributed as follows: social policy (mean = 186.40, SD = 375.22), foreign and defence (mean = 51.55, SD = 52.39), macro-economic policy (mean = 595.99, SD = 641.42), Environment and Natural Resources (mean = 30.34, SD = 40.35), and law, order and civil rights (mean = 361.70, SD = 441.69).
104 By asset, factor instability is distributed as follows: social policy (mean = 3.25, SD = 1.89), foreign and defence (mean = 3.27, SD = 1.96), macro-economic policy (mean = 3.74, SD = 1.75), environment and natural resources (mean = 1.16, SD = 2.25), and law, order and civil rights (mean = 4.31, SD = 2.09).
105 By asset, manifesto investment weights are distributed as follows: social policy (mean = 15.40, SD = 3.69), foreign and defence (mean = 11.41, SD = 3.12), macro-economic policy (mean = 29.12, SD = 7.69), environment and natural resources (mean = 8.57, SD = 3.57), and law, order and civil rights (mean = 17.47, SD = 6.51).
106 King, Gary, Tomz, Michael and Wittenberg, Jason, ‘Making the Most of Statistical Analyses: Improving Interpretation and Presentation’, American Journal of Political Science, 44 (2000), 341–355CrossRefGoogle Scholar