Strom: Agency and Parliamentary Democracy

Strom. 2001. Agency and Parliamentary Democracy. in Delegation and accountability in parliamentary democracies. Strom, Muller, and Bergman, eds. Oxford: Oxford University Press.

Abstract

Using principal-agent theory, Strom examines the ways in which principals control their agents in parliamentary systems. Because the nature of this regime-type means that a single principal delegates to a single agent (or to non-competing agents), and a single agent is responsible to a single principal, ex post controls are less effective (i.e. problems with hidden information and hidden action are more likely to arise since no comparisons across agents are possible). Instead, ex ante controls are put into place to make ex post controls less necessary. These controls include an intense screening process (climbing the party ladder) and a contract design that ensures that agents' interests are highly compatible with their principals.

Strom analyzes differences between delegation in parliamentary and presidential regimes, concluding that presidential regimes are more reliant on ex post controls for preventing agency loss, while parliamentary regimes more reliant on ex ante controls. In a presidential regime, you might elect a dunce (an "outsider"), but you'll have good institutional checks (ex post controls) on his actions; in a parliamentary regime, MPs are thoroughly screened before becoming Prime Minister (ex ante controls), but you have fewer institutional checks incase the PM turns out to be a doofus later.

For a very similar argument, see also Strom (2000), "Delegation and accountability in parliamentary democracies."

Type of delegation chain in parliamentary democracies

1. Indirect delegation - voters do not directly choose the prime minister and his cabinet. Voters choose legislators, legislators choose the chief executive and cabinet, the chief executive and cabinet choose the heads of different departments, and finally the cabinet members work with the civil servants. (Think of this in contrast to the "direct" delegation in presidential systems, in which voters directly delegate to both the legislature and to the executive by electing each separately, and these agents then delegate as a collective principal to the bureaucracy).
2. Singularity - there is a single agent for each principal and vice versa. There is an absence of competition among agents, and agents are not empowered to check one another. Agents have mutually exclusive jurisdictions (think of this in contrast to the checks and balances in presidential systems, and to the fact that presidents and Congress serve as a collective principal to the bureaucracy.).

Delegation

Sources of "Agency Loss"

Agency loss refers to the general problems that arise from delegation. It has two types:

1. Adverse selection - because of hidden information, principals do not fully know the competency and/or preferences of their agents.
2. Moral hazard - because of hidden action, principals cannot fully observe the actions of their agents.

Preventing Agency Loss

Following Kiewiet and McCubbins (1991), Strom notes two general ways to combat agency loss: ex ante (before) and ex post (after).

Ex Ante Controls:

1. Contract design - establish institutional mechanisms for ensuring principals and agents have shared goals and interests
2. Screening and selection - mechanisms for sorting out good agents from bad ones

Ex Post Controls:

1. Monitoring and reporting - principal watches after agent, or agent reports on his activities
2. Institutional checks - 3rd party alerts principals when agents act out (fire alarms)

Parliamentarism versus Presidentialism

Delegation in Parliamentary Systems

Parliamentary institutions favor ex ante controls over ex post controls:

1. Parties - provide a mechanism for aligning preferences of principals and agents along the singular chain of delegation (i.e. "contract design"). Also a strong screening mechanism given that climbing through the party ranks is a long, difficult process.
2. Internal candidate selection - again, moving up the hierarchy allows for screening and selection by testing agents over and over again before they move up the ladder.

Delegation in Presidential Systems

Presidential systems favor ex post instruments:

1. Institutional checks: Checks and balances
2. Monitoring and reporting: Police patrols and fire alarms

Efficiency: The beauty of parliamentarism

Bottom line: the advantages of having a parliamentary system is efficiency, while the disadvantage is lack of transparency. Given the sacrifice of ex post control mechanisms for limiting agency loss, ex ante mechanisms are abundant and strong in this type of system.