Abstract

All federal agencies must cope with the challenges of trying to achieve success on the multiple goals laid out for them by Congress, the President, or the public at large. Recent economics and political science literature provides a theoretical framework that helps explain why agencies might succeed in achieving some goals and fail in achieving others: Agencies will systematically underperform on goals that are hard to measure and that conflict with the achievement of other, more measurable goals. While agencies in theory might be able to improve their ability to measure performance through technological and organizational innovation, in many cases agency missions, historical inertia, and the professional orientation of agency staff will interfere with innovation. Principals (such as Congress) have various options to address this problem. Some options focus on changing the agency itself: (1) having the principal take back decision-making authority from the agency; (2) splitting agencies into components that pursue different goals; or (3) mandating that the agency innovate in developing information about undervalued goals. All of these intra-agency efforts have their limitations: Principals only have so much time and energy to make decisions themselves; splitting agencies is often not feasible; and agencies may be resistant to external cultural change. Another range of options involves having another agency monitor the decision-making agency to ensure minimal compliance with performance on one or more goals. This could include having one agency comment on the decision-making agency's performance on an undervalued goal (the "agency as lobbyist" model) or could extend to having another agency make legally binding determinations about whether the decision-making agency has met minimum standards for that undervalued goal (the "agency as regulator" model). The more stringent the inter-agency monitoring is, the more effective regulation might be at achieving minimum compliance with undervalued goals, but with the consequence of greatly increasing transaction costs such as litigation. Thus, principals will not only have to trade off agency performance among multiple goals, but will also have to trade off among the various solutions they might try to use to address the problems of multiple-goal agencies. Adapted from the source document.

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