Congressional Oversight Overlooked: Police Patrol vs. Fire Alarms

1
Congressional Oversight Overlooked Police
Patrol vs. Fire Alarms

• Mathew McCubbins
• Thomas Schwartz
• AJPS, 28 (1) 165-179 February 1984

2
To what extent has Congress neglected its
oversight responsibility?

• Common sense approach
• Despite a large and growing executive branch,
  Congress has done little or nothing to oversee
  administrative compliance with legislative goals.
• Congress has largely lost control of the
  executive branch.
• Congress has allowed the executive branch not
  only to grow but to grow irresponsible (stylized
  fact).

3
The authors question this common sense

• What has appeared to scholars to be a neglect of
  oversight, they argue, really is a preference for
  one form of oversight over another, less
  effective form.
• The authors develop a simple model of
  congressional choice of oversight policy. In
  fact, they model the choice by policy makers of
  an optimal enforcement strategy, given
  opportunity costs, available technology, and
  human cognitive limits.

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The Model

• Congressional oversight policy concerns whether,
  to what extent, and in what way Congress attempts
  to detect and remedy executive branch violations
  of legislative goals.

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Two forms or techniques of oversights

• Police Patrol
• Centralized, active and direct. At it own
  initiative, Congress examines a sample of
  executive-agency activities with the aim of
  detecting and remedying any violations of
  legislative goals and, by its surveillance,
  discouraging such violations.

6
Two forms or techniques of oversights

• Fire-Alarm
• It is less centralized, and involves less active
  and direct intervention than police patrol
  instead of examining a sample of administrative
  decisions, Congress establishes a system of
  rules, procedures and informal practices that
  enable individual citizens and organized
  interest-groups to examine administrative
  decisions, to charge for violations and seek
  remedies from agencies, Courts and Congress
  itself.
• Congresss role consists in creating and
  perfecting this decentralized system and,
  occasionally, intervening in response to
  complaints.

7
Precaution

• This distinction between police-patrol and
  fire-alarm oversight should not be confused with
  the distinction between formal (regular) and
  informal (incidental) oversight.
• Both can involve direct and active surveillance
  rather than response to alarms

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Assumptions

• Technological
• Congress can choose either form of oversight,
  police-patrol or fire-alarm, or a combination of
  the two, making tradeoffs between them in two
  circumstances
• When writing a legislation
• Sunset reviews (police-patrol)
• Public hearings (fire-alarm)
• When it evaluates an agencys performance
• Oversight hearings to patrol for violations
• Wait for alarm to signal for violations

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Assumptions

• Motivational (reelection or blame shirking
  models)
• Legislator seeks to take as much credit as
  possible for the net benefits enjoyed by his
  potential supporters whose support can help him
  win reelection. Likewise, he seeks to avoid as
  much blame as possible for the net costs born by
  his potential supporters.

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Assumptions

• Institutional
• Executive agencies act as agents of Congress and
  specially of those subcommittees on which they
  depend for authorizations and appropriations.

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Three consequences

• Congressmen tend to prefer fire-alarm oversight
  to police-patrol because the former provides much
  credit than the latter for three reasons.
• Under police-patrol, legislators time is largely
  wasted, so they incur opportunity costs
• Under police-patrol, legislators examine just a
  sample of executive actions. So, they are likely
  to miss violations that harm their potential
  supporters and opportunities to claim credit.
• Much of the fire-alarm costs are borne by the
  citizens and interest groups rather than by
  congressmen themselves

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Second consequence

• Congress will not neglect its oversight
  responsibility
• Fire-alarm oversight serves congressmens
  interests at a little cost.
• Others bear most of the costs.
• When potential supporters complain of a
  violation, a congressman gains credit if he/she
  eliminates the cause.

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Third consequence

• Congress will adopt an extensive and somewhat
  effective policy of fire-alarm oversight while
  largely neglecting police-patrol oversight.

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Literatures misperception

• Complexity
• Because public policy issues are so complex,
  Congress has had to delegate authority and now is
  unable to oversee.
• Good government
• Delegation is a Congress attempt to divorce
  policy from politics better served by an
  unaccountable bureaucracy. Thus there is no
  necessity of over sighting something
  nonpolitical.
• Decentralization
• Because congressional decisions are made on the
  subcommittee level with narrow jurisdiction,
  general oversight tend to be weak.

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Alternative explanation

• What appear to be a neglect of oversight can be
  explained as a preference by congressmen for
  fire-alarm over police-patrol oversight.
• Scholars have focused only on a single for of
  oversight they have looked only for
  police-patrol oversight, ignoring the fire alarm
  activities.

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Effectiveness of Fire-Alarm Oversight

• The authors do not contend that the most
  effective oversight policy is likely to contain
  no policy-patrol features, only that fire-alarms
  techniques are likely to predominate
• They also do not contend that a predominant
  fire-alarm policy is more likely to serve the
  public interest, only that it is likely to secure
  greater compliance with legislative goals.
• A external complain gives Congress the
  opportunity to spell out its goal more clearly
• Police-patrol miss many violation because it
  works with a sample of cases

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Criticisms

• Citizens harmed by violations of legislative
  goals are not always represented by organized
  groups and, hence, cannot always sound a loud
  alarm to secure a redress of grievances.
• Fire-alarm oversight tends to be Particularistic
  because it emphasizes the interests of
  individuals and interest-groups than those of the
  public in general. In other words, they tend to
  be decentralized and incentive-based oversight
  policies.

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Authors response

• Nowadays even disadvantage groups often have
  public spokesmen.
• Congress pass legislation, as part of its
  fire-alarm policy, that help disorganized groups
  to act collectively.
• Constituency-services provide voice for
  individual citizens against administrative
  agencies
• If fire-alarm can be biased in many ways, it is
  also true with police-patrol.

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Implications How bureaucratic discretion
increased?

• The ostensible shifting of legislative
  responsibility to the executive branch may simply
  be the responsible adoption of efficient
  legislative techniques and the responsible
  acceptance of human cognitive limits both
  facilitated by the fire-alarm system.

20
Implication the choice of regulatory policy

• When it decides for regulatory issues, congress
  tends to choose one of two types of regulatory
  instruments command-and-control and
  incentive-based instruments.
• Paradoxically, Congresss very preference for
  fire-alarm oversight entails a preference for
  command-and-control regulatory policy.

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Conclusion

• The widespread perception that Congress has
  neglected its oversight responsibility is a
  widespread mistake.
• In fact, a decentralized and incentive-based
  control mechanism, fire-alarm, has been found
  more effective.

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Learning from OversightFire Alarms and Police
Patrol Reconstructed

• Arthur Lupia
• Mathew McCubbins
• JLEO, 10 (1) 96-125 April 1994

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Introduction

• This article is about the consequence of
  delegation
• When are delegation and abdication equivalent?
• What are the conditions under which delegation to
  the bureaucracy produces more effective
  governance?

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Delegations drawback

• Bureaucrats that possesses both expertise and
  policy-making authority can also take actions
  that makes legislators worse off than if they had
  never delegated.
• In this case, the act of delegation is equivalent
  to abdication

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Objective

• The authors depart from previous scholarship
  (bureaucratic dominance versus congress
  dominance) by deriving, as opposed to assuming,
  conditions under which legislators can adapt
  successfully to bureaucratic expertise.

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Two forms of oversight

• Police-patrol
• Centralized and direct approach to overcome
  hidden knowledge.
• It is likely to be an effective way for
  legislators to track bureaucracies. However it is
  also likely to be very costly in terms of time
  and resources.
• Fire-alarm
• Relatively passive, indirect and decentralized
  however, has cost advantages since the third part
  bears the costs of learning about bureaucratic
  activities.

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To understand the consequences of delegation

• It is necessary to determine the conditions under
  which legislators can learn from police-patrol or
  fire-alarm.
• It is important to bear in mind that people who
  are given the opportunity to play the role of
  fire-alarm are also given an opportunity to
  benefit from their ability to deceive
  legislators.
• In short, false alarms are always possible!

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Puzzle

• If police-patrol is costly and fire-alarm is
  disingenuous, then legislators may be unable to
  adapt to the potentially deleterious consequences
  of bureaucratic expertise. Thus, delegation and
  abdication may well be equivalent!
• The authors argue that even running such risks,
  it is not sufficient to equate delegation with
  abdication

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Conditions for learning

• Levitator's ability to observe costly action by a
  bureaucratic agent who possesses expertise
  actions speak louder than words
• The existence of a cost associated with making
  particular statements penalty for lying as the
  potential loss in a valued reputation for
  honesty. If the penalty is large enough, than one
  can infer that a statement must be true.
• Similarity of preferences over outcomes between
  politicians and information provider

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Theory

• When legislators can create the conditions for
  learning, they can create incentives for
  bureaucrats to act in accordance with legislative
  interests.
• In the absence these conditions for learning, the
  prospect of such legislative discipline
  disappears and delegation has the same
  consequences as outright abdication.

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Consequences of delegation two key issues

• Agenda control
• If agents offer just recommendations (take-it-or
  leave-it) versus fait accompli
• The extent of agency expertise
• It is assumed that bureaucrats possess knowledge
  about their policy choices that legislators do
  not.
• Oversight is the cornerstone of legislative
  efforts to efface bureaucratic expertise.

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A model of delegation and police-patrol oversight

• Multistage, single shot game between two players
  a bureaucratic agent and a legislative principle.
• The agents task is to propose change in policy
  at a certain cost.
• The legislative principals task is to choose
  between agent policy proposal (offer) or the SQ.
• The location of agents ideal point may be known
  only by the agent (agents private information)
• Police-patrol oversight represents the
  principals decision to take costly action that
  informs it about the location of the agents offer

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Learning from police-patrol oversight

• If the A expects the P to engage in
  police-patrol oversight, then the A knows that
  the P will have the ability to distinguish
  proposal that are better or worse than the SQ.
  Thus, the only way that the A has to recover
  its proposal cost is to make a proposal that is
  better for the P than the SQ. As a result,
  employing police-patrol ensures that the
  consequences of delegation are positive for the
  principle.
• In contrast, when does not expect the principal
  to undertake police-patrol oversight, the
  consequences of delegation for the principal can
  be detrimental.
• The benefits from police-patrol oversight are
  highest when the principal is uncertain about
  which of SQ or the O will provide a larger
  payoff.

34
Learning from costly effort

• In general, one person can learn about a second
  persons hidden knowledge by observing the choice
  that the second makes when some of the second
  persons actions are costly.
• That is the choice made by the person must be
  sufficient valuable to the second person so that
  the expected gain from this choice outweighs the
  costs
• The presence of observable and costly action can
  improve the consequences of delegation for the
  principle

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The Model of Fire-alarm Oversight

• Although police-patrol oversight is costly,
  fire-alarm may mislead legislators.
• How can one differentiate lying from truthful
  fire-alarms?
• The authors model situations in which legislators
  receive signal from informed parties (bureaucrats
  or constituents).
• The agent may or may not have the same policy
  preferences of the principle
• A single fire-alarm chooses whether or not to
  signal the principal about the consequences of
  agencys policy.
• The principal then decides to accept or reject
  the agents proposal.
• If the principal obtains enough information from
  oversight activities it can influence the
  consequence of delegation (i.e. policy choice).
  Otherwise, delegation is equivalent to abdication.

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The Model of Fire-alarm Oversight

• Fire-alarm oversight is not always beneficial to
  Congress unless constituents and interest-groups
  are not lying. The assumption that the statements
  by the fire-alarm will always be informative to
  Congress is not true.

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Conditions for learning from fire-alarm oversight

• The existence of penalties for lying on the
  fire-alarm
• If expected payoff of lying is larger than of
  telling the truth, a penalty of lying can reduce
  fire-alarms incentive to lying.
• The perceived degree of similarity between the
  fire-alarm and the principals preferences can
  reduce the incentive for misleading.
• The agent is more likely to tell the truth.

38
Conclusions

• The ability to learn can make the principal
  discern better or worse proposal by the agent and
  this prevents the agent making a worse proposal.
• The conditions for learning from fire-alarms can
  be generated by the structure and process of
  bureaucratic decision-making and the process of
  oversight itself.
• That is, the legislators ability of designing
  institutions that produce these conditions
  affects the whether delegation is more effective
  governance or is equal to abdication