Bureaucratic Decision Costs and Endogenous Agency Expertise

• Published in: Journal of law, economics, & organization economics, & organization, 2007-06, Vol.23 (2), p.469-498
• Main Author: Stephenson, Matthew C.
• Format: Article
• Language: English
• Subjects: Administrative agencies; Asbestos; Bans; Bureaucracy; Congressional investigations; Cost efficiency; Costs; Court costs; Criminal procedure; Delegation of authority; Economic costs; Economic regulation; Economics; Expected utility; Expected values; Government bureaucracy; Judicial review; Judicial reviews; Legislatures; National security; Police; Political science; Politics; Regulation; Regulatory agencies; Studies; Subsidies; Utilities costs
• ISSN: 8756-6222; 1465-7341
• DOI: 10.1093/jleo/ewm030

This article analyzes the effect of the cost that an agency must incur to adopt a new regulation (the "enactment cost") on the agency's incentive to invest in expertise. The effect of the enactment cost on agency expertise depends on whether the agency would regulate if it fails to acquire additional information about the regulation's effects. If an uninformed agency would regulate, increasing enactment costs increases agency expertise; if an uninformed agency would retain the status quo, increasing enactment costs decreases agency expertise. These results may influence the behavior of an uninformed overseer, such as a court or legislature, that can manipulate the agency's enactment costs. Such an overseer must balance its interest in influencing agency policy preferences against its interest in increasing agency expertise. The article discusses the implications of these results for various topics in institutional design, including judicial and executive review of agency regulations, structure-and-process theories of congressional oversight, national security, criminal procedure, and constitutional law.