Biased politicians and independent agencies

Abstract

Some agencies derive legitimacy from their political independence: for example, political meddling in monetary policy is problematic, as politicians favor short-term electoral goals over long-term economic stability. Nevertheless, the process of agency reform, even for agencies that are thought to be independent, is seldom onerous and often follows standard legislative procedures. Furthermore, citizens frequently lack expertise to hold policymakers accountable for new bureaucratic policies. Why then do politicians abstain from exercising influence through agency reform? This article delineates an informational cost to agency reform. In issue areas where politicians are frequently biased and citizens cannot perfectly observe the quality of agency reforms, citizens assume that reforms serve the politicians’ self-interest and punish politicians for any reform at all. Agency independence then comes more from informational challenges than from institutional design. This article develops a formal model to explain when agencies are reformed and when they retain their independence.