The Review of Austrian Economics, 15:2/3, 211–228, 2002.
2002 Kluwer Academic Publishers. Manufactured in The Netherlands.
The Legislator as Political Entrepreneur:
Investment in Political Capital
EDWARD J. L
Department of Economics, University of North Texas, Denton, TX 76203-1457, USA
Abstract. This paper applies the standard Austrian theory of capital investment to the standard interest group
model of legislator behavior. Distinguishing between reputational capital and representative capital as interdepen-
dent forms of political capital, I argue that legislator behavior (speciﬁcally roll call voting) can be explained as
entrepreneurial investment in political capital under uncertainty. I discuss several examples in which this approach
can potentially add predictive power regarding legislative voting.
Key Words: models of legislators, political capital, market processes
JEL classiﬁcation: D72, D81, B41.
This paper attempts to build on interest group theories of the legislator by introducing an
element of investment under uncertainty. In interest group models of the legislator, a net
political support function is maximized subject to opposition and time constraints. One area
of this literature has emphasized a broadening of this net-support model to incorporate the
importance of political capital to acquiring electoral support constituencies (Denzau and
Munger 1986). I discuss a way of building on this model by delineating two interdependent
but distinct forms of political capital-reputational and representative. I argue that there
is usually a tradeoff between these two forms of political capital, and that the terms of
this tradeoff are potentially obscured by structural uncertainty. This implies viewing the
legislator as an entrepreneur who invests in political capital under uncertainty. With roll
call voting as the choice variable, I apply the time structure of production model of capital
accumulation to conceive of the legislator as weighing the interests of constituent-voters,
organized interest groups, and party leaders against each other with each vote. I then discuss
how this formulation of the legislator’s decision problem may help extend our predictive
capabilities regarding the legislator. For example, legislators may have good reason to vote
contrary to their and their constituents’ true preferences, if doing so today is expected to
increase their political capital in the future. Also, because legislation on institutional changes
I would like to thank, without implicating, Peter Boettke and two anonymous referees for helpful comments.
Since these ideas formed while I worked on my dissertation, I would also like to thank, without implicating, Bob
Tollison and Tyler Cowen for their input and Leonard Liggio for his support during that time. I received valuable
research assistance from Hsui-Ju Yang. Finally, I thank the Earhart Foundation for its generous ﬁnancial support.
I am solely responsible for oversights and errors.