| Chapter 1: | Introduction |
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respectively. The final two sections present a brief overview of policy learning theory, setting the stage for further elaboration of the framework in the next chapter.
Principal-Agent Theory and Regulation
Principal-agent theorists posit that the implementation of regulatory policy is directly influenced by political actors seeking to exert control over bureaucratic agencies. Through legislative enactments, political “principals”—legislators, interest groups, and chief executives—delegate substantial decision-making authority to bureaucratic “agents,” allowing them to specify the details of regulatory policy. By delegating authority, however, principals lose direct control over policy outputs. This loss of control would not pose a problem if bureaucrats and principals indefinitely held the same interests, but they rarely do. Thus, principals must be concerned about bureaucrats taking advantage of delegated authority in order to design politically undesirable regulatory policies. Recognizing that some delegation is inevitable, principals seek out mechanisms to control or limit the choices bureaucrats make.7
According to principal-agent theorists, political control may be exerted through either ex-ante or ex-post mechanisms. Ex-ante control mechanisms relate to the institutional design features of the regulatory process. Principals seek to design an agency's statutory authority, organizational structure, and administrative procedures so as to ensure that bureaucratic decisions reflect established political preferences. For principals, however, the enactment of institutional design preferences is complicated by both practical and political considerations. For instance, although legislators might prefer to limit an agency's statutory authority, practical considerations—such as technical complexity—may make it necessary to delegate broad rulemaking powers.