Bawn, Kathleen

Law and Contemporary Problems : a Quarterly Published by the Duke University, School of Law

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Bureaucratic Accountability for Regulatory Decisions: Comment on Lupia and McCubbins

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BUREAUCRATIC ACCOUNTABILITYFOR REGULATORY DECISIONS:COMMENT ON LUPIA AND McCUBBINSKATHLEEN BAWN*IINTRODUCTIONProfessors McCubbins and Schwartz coined the term "fire alarm" whenarguing that Congress's apparent lack of effort in directly monitoring bureaucrat-ic activity is not evidence of lack of control.1 Congress can rely on interestgroups and constituents to sound the alarm about agency misbehavior, and thisalone will deter some agency drift. Moreover, in establishing an agency'sadministrative arrangements, Congress can lower the costs of agency access forspecific groups, enfranchising the interests it wants to help. Problems exist withrelying on fire alarms, however. Fire alarms are, by definition, groups affectedby the agency's decisions. Their reports about agency decisions are notnecessarily credible.Professors Lupia and McCubbins address this credibility problem in theirmodel of the internal logic of fire alarms. They show that information aboutagency decisions can come from multiple sources that may or may not becredible. Sources may be credible for different reasons: because they take costlyactions; because they face penalties for lying (they have reputations to maintain);or because their preferences are known to coincide with the principal's.2 Lupiaand McCubbins's model is quite general, illustrating the variety of ways thatinstitutional arrangements provide Congress with information about agencydecisions.The authors make an important step toward modeling the design ofbureaucratic accountability. They show how the amount of usable informationCongress receives depends on institutional features, such as how difficult it is fora potential fire alarm to sound the alarm. These institutional features aredecided by Congress in the course of legislating administrative arrangements. Atrue model of bureaucratic design would imbed Lupia and McCubbins's modelof the informational consequences of bureaucratic institutions into a model ofcongressional decisionmaking about those institutions. The existing model in itsgeneral form may be too complex to be the second stage of a model ofCopyright © 1994 by Law and Contemporary Problems* Assistant Professor of Political Science, University of California at Los Angeles.1. Mathew McCubbins & Thomas Schwartz, Congressional Oversight Overlooked. Police Patrolsversus Fire Alarms, 28 AM. J. POL. SCi. 165, 166 (1984).2. Arthur Lupia & Mathew D. McCubbins, Designing Bureaucratic Accountability, 57 LAw &CONTEMP. PROBS. 91 (Winter 1994).LAW AND CONTEMPORARY PROBLEMSinstitutional choice. In particular, the information revealed depends on how theideal points of Congress, the agency, and the information sources are situated.This comment discusses a simple sub-case of Lupia and McCubbins's generalmodel, corresponding to a particular configuration of ideal points. It issomewhat different from the sub-case Lupia and McCubbins use to develop theirmodel. While the authors' sub-case is a good one for demonstrating the intuitionbehind the model, the one discussed below may, for two reasons, be moreappropriate for addressing questions about designing regulatory agencies. First,it is relatively simple. Second, it corresponds to the political environmentcharacteristic of regulatory policymaking.IIGENERAL FRAMEWORKThe essential features of Lupia and McCubbins's general framework are asfollows. Policies are proposed by the agency and can be blocked by Congress.Because of the agency's informational advantage, however, Congress does notknow the consequences of the agency's proposed policy. Interest groups canmake reports to Congress about the agency's proposal. Making a proposal or areport may or may not be costly. Congress does not know the agency's idealpoint. Other actors may or may not know each others' preferences. It may ormay not be costly for interest groups to lie or to find out the consequences of theagency's proposal.To illustrate the general model, Lupia and McCubbins consider the followingsub-case. Congress wants policy to change in the opposite way from what theagency wants. Interest Group One has the same preferences as Congress.Group Two's ideal point is the status quo. Everybody knows the location of thestatus quo. Congress does not know the preferences of the agency or of thegroup that shares its preferences. Everyone knows that Group Two likes thestatus quo best. Group TWo must exert costly effort to find out the consequenc-es of the agency's offer; Group One finds out costlessly. The latter group paysa penalty for lying to Congress about the agency's proposal.The difference in costs faced by the two interest groups has a naturalinterpretation as the difference between organized and unorganized interests.The organized interest has enough expertise to understand the consequences ofthe agency's proposal. Because it expects to have a stake in future policydecisions, it suffers a penalty if it damages its reputation by lying. Theunorganized interest must invest in learning if it wants to understand theagency's proposal, but it does not have a reputation to worry about.IIIWHOSE PREFERENCES ARE MoRE EXTREME?This scenario with one organized and one relatively disorganized interestgroup describes regulatory politics. The two information sources are the two[Vol. 57: No. 1Page 139: Winter 1994] COMMENT ON LUPIA & MCCUBBINSgroups affected by regulatory decisions: the beneficiaries and those who pay thecosts. These groups could represent organized producers and unorganizedconsumers, polluters and those who suffer from pollution, or existing firms andpotential entrants. The characterization of the interest groups in Lupia andMcCubbins's sub-case is thus appropriate for thinking about the design ofregulatory agencies.Consider the arrangement of ideal points, however. In Lupia andMcCubbins's sub-case, the support of the distribution from which the informationsources' ideal point are drawn lies between the ideal points of Congress and theagency. However, if the two interest groups represent the winners and losersfrom regulatory decisions, the ideal points of Congress and the agency will beless extreme than those of the interest groups. Legislators' preferences derivefrom the interests of constituents and support groups because of the desire to bere-elected.3 Agency preferences similarly derive from external sources-thepreferences of elected officials and interest groups. 4  Because legislatorsrepresent diverse constituencies and agencies face conflicting preferences, theideal points of Congress and the agency will almost always lie in between thoseof the two fire alarms. An additional reason why Congress's ideal policy isunlikely to be more extreme than the interest groups is that Congress is a groupof individuals whose collective decision reflects bargaining and compromise.IVBELIEFS ABOUT INTEREST GROUP PREFERENCESIf we continue to consider Congress's two outside sources of information tobe the potential winners and losers from regulatory decisions, we can narrow therelevant sub-cases in terms of information structure as well as preferenceconfigurations. As noted above, the first point is that interest group preferenceswill generally be more extreme than an agency's or Congress's. The secondpoint is that if we know this, so does Congress. For this reason, sub-cases inwhich Congress associates positive probability with the interest group having lessextreme preferences than itself are not often relevant to the accountability ofregulatory agencies.In fact, Congress is less likely to be uncertain about interest grouppreferences than about the status quo. Given that legislative preferences on apolicy dimension derive from how the policy affects interest groups andconstituents, legislators usually know the preferences of any group they careabout helping. On the other hand, if status quo is the outcome of current policy,legislators may not know its precise location. For example, Congress is lesslikely to be uncertain about the Sierra Club's or the National Coal Association's3. DAVID MAYHEW, CONGRESS: THE ELECTORAL CONNECTION (1974).4. See Roger Noll, The Political Foundations of Regulatory Policy in CONGRESS: STRUCTURE ANDPOLICY 462, 479-82 (Mathew D. McCubbins & Terry Sullivan eds., 1987); see also WESLEY MAGAT ETAL., RULES IN THE MAKING: A STATIsTIcAL ANALYSIS OF REGULATORY BEHAVIOR (1986).142 LAw AND CONTEMPORARY PROBLEMS [Vol. 57: No. 1preference on the dimension of stringency of air quality standards than it isabout the precise consequences of current policy.VCONCLUSIONLupia and McCubbins's model shows how Congress can gain informationabout agency decisions from outside sources of information. The amount ofinformation transmitted depends not only on institutional parameters, such as thecosts of making proposals and reports, but also on the configuration of idealpoints. For this reason, the model's predictions about how Congress tries todesign bureaucratic accountability will only be as good as the assumptions aboutthe preferences of the players. The most promising configurations of preferencesfor Lupia and McCubbins to consider are those in which the ideal points ofCongress and the agency are known to lie between those of the fire alarms.

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Bureaucratic Accountability for Regulatory Decisions: Comment on Lupia and McCubbins

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