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Policy Makers, Advisors, and Reputation

Author

Listed:
  • Phongthorn Wrasai

    (Department of Economics, Erasmus Universiteit Rotterdam)

  • Otto H. Swank

    (Department of Economics, Erasmus Universiteit Rotterdam)

Abstract

This discussion paper resulted in an article in the 'Journal of Economic Behavior and Organization' (2007). Volume 62, pages 579-590. When hiring an adviser (he), a policy maker (she) often faces the problem that she has incomplete information about his preferences. Some advisers are good, in the sense that their preferences are closely aligned to the policy maker's preferences, and some advisers are bad. Recently, some scholars have argued that the policy maker's power to replace her adviser induces the adviser to act more in line with the policy maker's interests. The idea is that the adviser's desire to put a stamp on future policy reduces his incentive to manipulate information. This paper shows that the policy maker's power to replace her adviser may harm her. The reason is that this power may have an adverse effect on the behavior of good advisers.

Suggested Citation

  • Phongthorn Wrasai & Otto H. Swank, 2004. "Policy Makers, Advisors, and Reputation," Tinbergen Institute Discussion Papers 04-037/1, Tinbergen Institute, revised 09 Dec 2004.
    • Handle: RePEc:tin:wpaper:20040037
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    References listed on IDEAS

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    12. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
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    Citations

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    Cited by:

    1. Martin Mosler & Niklas Potrafke & Markus Reischmann, 2019. "How to Handle the Fiscal Crisis in Greece: Empirical Evidence Based on a Survey of Economic Experts," Fiscal Studies, John Wiley & Sons, vol. 40(3), pages 375-399, September.
    2. Petra Ahrweiler, 2017. "Agent-based simulation for science, technology, and innovation policy," Scientometrics, Springer;Akadémiai Kiadó, vol. 110(1), pages 391-415, January.
    3. Li, Ming & Tymofiy Mylovanov, 2009. "Credibility for Sale: the Effect of Disclosure on Information Acquisition and Transmission," Working Papers 09008, Concordia University, Department of Economics, revised Oct 2009.
    4. Roland Hodler & Simon Loertscher & Dominic Rohner, 2010. "Biased experts, costly lies, and binary decisions," IEW - Working Papers 496, Institute for Empirical Research in Economics - University of Zurich.
    5. Shun-ichiro Bessho & Kimiko Terai, 2013. "Fiscal restraints by advisors," Economics of Governance, Springer, vol. 14(3), pages 205-232, August.

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    More about this item

    Keywords

    Reputation; Signalling; Uncertainty; Policy decision-making;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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