Representative democracy and policy-making in the administrative state: is agency policy-making necessarily better?

This study focuses on how voters and politicians rationally select a preferred policy-making venue (Politician or Agency), and its implications for the principal-agent relationship between voters and politicians in a representative democracy. This study allows for incomplete information, as well as solving for the comparative static conditions pertaining to the extent that a politician's policy-making venue choices mirror those preferred by a representative voter. The comparative static results highlight when a politician (1) chooses the representative voter's preferred policy-making venue (Active or Passive Political Responsiveness); (2) is able to choose freely either policy-making venue without committing agency loss (Political Discretion); and (3) willing to deviate from the representative voter's preferred policy-making venue (Political Shirking). In contrast to the study by Spence, this study analytically demonstrates that one cannot infer that the benefits accrued from agency policy-making will necessarily exceed those from electoral institutions.