A REVIEW OF OUR APPROACH

Our project has been to endogenize society's investment in the human capital of its citizens through modeling the political process of democratic competition. On the economic side, we initially chose an educational production function in which the human capital of the worker is determined by the human capital of his or her parents and the amount invested in his or her education. Later, we generalized this, and included the effect on the individual worker's human capital - or rather, his or her earnings - of the average human capital of his or her cohort, where 'cohort' can have either of two interpretations: those with whom he or she attended school, or those with whom he or she works. (In our model, these two groups are identical because only one generation of workers comprises the labor force at any given time; a more highly articulated model would distinguish between these two senses of cohort.)

On the political side, we constructed a model of party competition in which two parties form and compete on an infinite-dimensional space of policies, where a policy specifies precisely the taxes paid by every household, the transfers the household receives, and the amount invested by the state in the education of every child. We argued that the large policy space was necessary to model ruthless competition between parties – we might have also said realistic competition. Indeed, we later showed that it makes a difference to work on the large policy space because the results in a more traditional, unidimensional Downsian model are quite different from what occurs in our model.