In our recent book, Gary Miller and I argue that our governance arrangements are a fragile equilibrium. Politicians suffer from their own form of moral hazard – especially with regards to the long-run maintenance of the economy. So the powers of regulation and macroeconomic management are often held by independent agencies.
Those agencies also face their own form of moral hazard, so we argue that they can bind their hands by following professional guidelines for the practice of those powers. (We hope for the same kind of hand-tying when we ask a doctor for treatment recommendations.)
This is, of course, a fragile equilibrium. Most political scientists focus on bureaucratic shirking. We think an equal threat is political intervention in the professional development of good policy.
Policy isn’t just a political process. Yes, much of policy is political – much to the chagrin of economists and engineers. But politics isn’t the totality of policy.
So there is a social cost to political intervention in independent agencies. Those agencies certainly aren’t perfect. Many don’t like their decisions. But governance is better when professionalized experts can operate – at least in the long run.
Watch Janet Yellin’s testimony for hints about the future of that relationship.