The Governor’s Dilemma: Competence Versus Control
Forthcoming, Regulation & Governance
34 Pages Posted: 18 Dec 2018
Date Written: November 28, 2018
Most governance is indirect, carried out through intermediaries. Principal-agent (PA) theory views indirect governance primarily as a problem of information: the intermediary (agent) has an informational advantage over the governor (principal), which it can exploit for shirking, slacking or otherwise evading the governor’s control. But indirect governance creates an even more fundamental problem of power. Competent intermediaries with the expertise, credibility, legitimacy and/or operational capacity to achieve the governor’s goals are inherently difficult to control, even with complete information, because the policy benefits they can create (or the trouble they can cause) give them leverage over the governor. Conversely, tight governor control constrains these intermediary competencies. The governor thus faces a dilemma: if it emphasizes control, it limits intermediary competence and risks policy failure; if it emphasizes intermediary competence, it risks control failure. This “governor’s dilemma” helps explain important and puzzling features of indirect governance arrangements: why such arrangements are not limited to PA delegation, but take multiple forms; why particular governors choose forms of indirect governance that appear counter-productive in an informational perspective; and why indirect governance arrangements are frequently unstable, subject to repeated tinkering and changes of form.
Keywords: indirect governance, intermediaries, principal-agent, delegation, orchestration, cooptation, trusteeship, endogenous change
JEL Classification: D02
Suggested Citation: Suggested Citation