The John M. Olin Center

Paper Abstract

Untitled Document

51. Laurence Tai, A Reverse Rationale for Reliance on Regulators, 06/2013.

Abstract: The standard justification for agencies is that they can obtain information that political leaders are unable to access. This paper develops a model illustrating the opposite logic, that agencies may prevent leaders from acting on or receiving information that leaders would otherwise obtain and use for decision-making. This dynamic can occur when the key information comes from an outside entity and when the agent, based on his policy preferences, is able to induce this outsider to produce higher quality information than the leader can. The model suggests that agencies may be designed to mitigate regulatory capture focused on elected officials, and that disclosure patterns that might appear to indicate agency capture instead facilitate this design. Also, when the agency is at risk of capture, stronger ethics rules may be more effective than increased transparency in combating capture. The FDA drug approval process is offered as a practical application of the model.