Expertise, Subversion, and Bureaucratic Discretion

This paper examines a legislature's delegation of policy making authority to an imperfectly controlled, expert bureaucrat. The legislature can reduce the bureaucrat's expertise advantage through costly investigations of its own before delegating. Further, the bureaucrat is granted discretionary bounds by the legislature, but can subvert legislative dictates by stepping beyond them at some cost. I analyze the interaction of preference divergence, investigation cost to the legislature, and subversion cost to the bureaucrat on the decision to delegate. The model shows that, because of the equilibrium effect of subversion on discretion, bureaucrats will want subversion of legislative dictates to be difficult, while legislators want it to be relatively easy. It also highlights an indirect effect between preference divergence and discretion: preference divergence leads the legislature to become more expert on policy matters, which leads it to delegate less.