Too Many Things to Do: How to Deal with the Dysfunctions of Multiple-Goal Agencies

Abstract:     
All federal agencies must cope with the challenges of trying to achieve success on the multiple goals laid out for them by Congress, the President, or the public-at-large, with varying degrees of success. Recent economics and political science literature has laid out a theoretical framework that helps us understand why agencies might succeed in achieving some goals and fail in achieving other goals: Agencies will systematically underperform on goals that are hard to measure and that conflict with the achievement of other more measurable goals. The lack of information about these hard-to-measure goals means that there will be fewer rewards to agencies for any success on those goals. While agencies in theory might be able to overcome this lack of information problem through technological and organizational innovation (where feasible), in many cases agency missions, historical inertia, and the professional orientation of agency staff will interfere with innovation, as shown by a case study of the U.S. Forest Service. Having diagnosed the source of the problem, the paper then examines various options that principals (such as Congress) might have to address it. The paper first surveys a range of options that focus on changing the agency directly: having the principal take back some of the authority from the agency where difficult trade-offs exist, splitting agencies into components that pursue different goals, or mandating that the agency innovate in developing information about undervalued goals (and accordingly changing the agency's own internal culture). All of these direct efforts have their limitations: principals only have so much time and energy to make decisions themselves, splitting agencies is often not feasible, and agencies may be resistant to external cultural change (as shown by the limited impact of the National Environmental Policy Act, or NEPA). Another range of options involves having another agency monitor the decisionmaking agency to ensure minimal compliance with performance on one or more goals. This could include having one agency comment on the decisionmaking agency's performance on an undervalued goal (the "agency as lobbyist" model) or could extend to having another agency make legally binding determinations about whether the decisionmaking agency has met minimum standards for that undervalued goal (the "agency as regulator" model). The more stringent the inter-agency monitoring is - for instance, Fish and Wildlife Service's determination under the Endangered Species Act (ESA) that a project might jeopardize an endangered species, enforceable by outside groups through citizen suits - the more effective regulation might be at achieving minimum compliance on undervalued goals, but with the consequence of greatly increasing transaction costs (such as litigation). Thus, principals will not only have to trade-off agency performance among multiple goals, but will also have to trade-off among the various solutions they might try to use to address the problems of multiple-goal agencies.

Keywords: principal-agent relationships, environmental law, administrative law

Working Paper Series