Bureaucratic Decision Costs and Endogenous Agency Expertise

Abstract

This paper analyzes the impact of bureaucratic decision costs on agency expertise. The analysis shows that the effect of the cost associated with adopting a new regulation (the enactment cost) on agency expertise depends on what the agency would do if it remains uninformed. If an uninformed agency would regulate, increasing enactment costs increases agency expertise; if an uninformed agency would retain the status quo, increasing enactment costs decreases agency expertise. These results may influence the behavior of an uninformed overseer, such as a court or legislature, that can manipulate the agency's enactment costs. Such an overseer must balance its interest in influencing agency policy preferences against its interest in increasing agency expertise. The paper explores the implications of these results for various topics in institutional design, including judicial and executive review of regulations, structure-and-process theories of congressional oversight, national security, criminal procedure, and constitutional law.

JEL Classification: D73, D83, K23, K32