Public choice economists and political scientists, after nearly four decades of examining the economics of political and social choice, have begun to consider the potential impacts of legislative term limits. Recent work in the area includes that of Adams and Kenny (1986), Reed and Schansberg (1990 and 1994), Zupan (1990), Schansberg (1994), Will (1992), Fund (1992), Becker (1990), Dick and Lott (1993), and Benjamin and Malbin (1992).
Many of these studies produce conflicting results. Becker (1990), for example, points out that with only an unrealistic view of human nature could one predict that limiting the right to continue a job would improve job performance (i.e. legislative performance); however, it is more likely that congressmen will take less interest in their work by limiting legislative tenure or terms. Zupan (1990) points out that there are serious "last-period" control problems (i.e. "political shirking") when congressional representatives do not face a reelection constraint, which will be exacerbated with the implementation of term limits. Some writers state that term limits would discourage challengers, who would then wait until the incumbent's limit was reached - thus equating term limits with term guarantees (see Benjamin and Malbin, 1992).
Others believe that term limits will produce greater competition. Schansberg (1994) and Reed and Schansberg (1994) find that continuation rates from elections after 1976 are significantly different from preceding periods; in fact, the last four Congresses have been characterized by very high survival rates, implying long stays in office. They state that such long stays in office are due to special interests, who would have less incentive to support incumbents under term limitations. This action would reduce disparities between campaign expenditures, making election contests much more competitive (Reed and Schansberg, 1994). Their study also provides evidence that while shorter terms in office "unambiguously reduce the value of holding office," term limits could potentially increase the value of holding office because the opportunity to become a leader in the House (very valuable) is made easier. The effect of political performance will be determined by the dominant incentive (Reed and Schansberg, 1994: 85-86).
There are moral hazard and adverse selection consequences involved. On one hand, when the value of office increases, one expects candidates/incumbents to work harder to win votes (moral hazard). Those candidates who most highly value a short timespan between election and nomination to Party leadership positions will be more likely to run for office under term limits. Those who find the prospect of shortened congressional careers too costly will be less likely to run for office (these incentives may also vary from state to state). The adverse selection in favor of "non-professional" politicians is cited by many proponents of term limits as more likely to prevail (Reed and Schansberg, 1994: 86, note 12). In addition, these economists provide evidence of higher Congressional turnover and a reduced Democratic advantage in the House (along with a potential increase in the quality of legislation passed) as a result of term limits.
The present paper provides an examination of Congressional term limits from a history of economic thought perspective. Borrowing from the ideas of Jeremy Bentham (1789) and Edwin Chadwick (1829, 1859, 1862, 1866, and 1887), this study points out that the gap between the public interest and the private interest within political markets creates an opportunity for term limits to serve as an artificial identification between these competing ends. These ideas have been the subject of much public choice literature and serve as a precursors to modern-day thought in this area.
It is now well-known that this divergence creates political incentives for deficit spending in democracies (see Nordhaus, 1975; Crain and Ekelund, 1978; Holcombe, 1983), as well as rent seeking and resource transfers in competition for monopoly rents that politicians often control (Tullock, 1967, 1989; Tollison, 1982; Mixon, Laband, and Ekelund, 1994; Laband and Sophocleus, 1992). …