De Figueiredo, Spiller, and Urbiztondo: An informational perspective on adminsitrative procedures

De Figueiredo, Spiller, and Urbiztondo. 1999. An informational perspective on adminsitrative procedures. Journal of Law, Economics, and Organization 15:283-305.

MAIN GOAL: the authors would like to use a formal model to analyze the incentives and outcomes that different procedural environments generate, since administrative procedures (AP's) structure the interest group environment of government agencies, by determining who gets to participate and in what manner. They highlight the trade-off political principals must make between policy benefits and ex post inducements.

The APA has codified a set of administrative laws about rulemaking environment of federal agencies, in order to modify interest group representation for most federal agencies. Administrative procedures enable participation of interest groups that were previously unable to participate. According to McNollGast (positive political theory tradition), these new rules can be considered as control mechanisms for achieving greater compliance. In this article, the authors would like to explore these insights.

The author's model allows them to compare three potential interest group structures the principal might organize: a "neutral monitor," a single interest group whose preferences are aligned with the public official, or multiple groups with competing interests. Instead of "deck stacking," choosing interest groups whose interests are aligned with the official, he will always prefer more than one group (even if other groups are on the opposition side), since he will gain more information, quicker and cheaper. Thus this is "deck unstacking".

In the bulk of the paper, you will find various propositions and lemmas, but you will need your Greek knowledge to understand these.

THREE MAIN CONCLUSIONS:

1. Elected officials are concerned not just about distributional rents, but about informational ones, too; thus the use of procedures in some cases will result in worse outcomes for political principals on the policy dimension.
2. Sometimes politicians are better off being monitored by a biased group rather than a neutral one, since the biased group will bear a portion of the monitoring costs.
3. The political principal is strictly better off if multiple interest groups (including one in opposition to the politician) monitor, since this way, he will receive the greatest information at the lowest cost. More is better than less.

Because of informational disadvantages, administrative procedures help politicians obtain overall better outcomes (but not policies which are biased in their favor). Thus, political principals will optimally trade off the benefits of better policies with lower informational rents.