A Test of the Political Control of Bureaucracies Under Asymmetric Information

Abstract

How does the informational role of interest groups interact with institutions when politicians seek to control the bureaucracy? In 1992, Banks and Weingast argued that bureaucrats hold an informational advantage vis-à-vis political principals concerning policy-relevant variables, and that when it is prohibitively costly to audit, the agency may over- or understate the extent of a public problem. This is less likely to happen if there is a low-cost monitoring technology and if interest groups can monitor the agency's choices. I test this hypothesis using data on bureaucratic statements that estimate the importance of a number of hazardous waste problems from a group of state-level environmental agencies. The results provide evidence for the Banks—Weingast hypothesis.