Delegation, Agency and Competitive Representation

Abstract

Traditional agency models focus on the conceptual line of delegation running from principal to agent. The more information about agents’ preferences and actions, the better able the principals to use selection and sanctioning to achieve desirable outcomes. Following this conventional wisdom, institutional transparency is viewed as an unequivocal good and representative democracy as built on delegation and control. However, this is an incomplete picture at best. Game-theoretic and case analysis shows that the elevation of the elected European Parliament as a legislative chamber coequal to the intergovernmental Council of the European Union may be a ruse to undermine lobbyist influence by diluting formal responsibility. Less transparency in decision-making may help align EU policy closer to broader societal objectives. The Commission, perhaps most heavily influenced by special interests, and not Council has lost clout in the legislative process as a result of the changes. In several generalized noncooperative formal settings with information asymmetries, delegation can work for principals only if the set of potential agents is diverse. Not only does selection dominate sanctioning as a control mechanism, but the very existence of compliance equilibria is contingent upon the a priori arrangement of candidate agents’ policy preferences relative to one another and to the principals’. The principal–agent relationship is dependent on and may be only secondary to between-agent competition. This insight has far-reaching implications for a number of research programs within political science. Schumpeter viewed modern democracy as a system where elites compete for the support of the masses. This conceptualization suggests a new path towards sustainable democratization. Building elite capacity in undemocratic conditions through institutionalized, if unfair, competition may be a more effective approach than parachuting fully democratic institutions in an unreceptive environment. Empirical analysis of over two hundred years of data shows that states with competitive political institutions, regardless of whether those are democratic, are most likely to develop and sustain full-fledged democracy.