Administrative Procedures, Information, and Agency Discretion

Author(s): David Epstein and Sharyn O'Halloran

Source: American Journal of Political Science, Vol. 38, No. 3 (Aug., 1994), pp. 697-722
Published by: Midwest Political Science Association
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Administrative
Procedures, Information,and
AgencyDiscretion*

David Epstein, Departmentof Political Science, Columbia University

SharynO'Halloran, Departmentof Political Science and School of
Internationaland Public Affairs,Columbia University

Thispaperinvestigates thedesignof administrative

procedures whenpolicyconse-
quencesare uncertain. In general,whendecidinghowmuchdiscretion to delegate,legisla-
torsmusttradeoffinformational gainsfromagencyexpertiseanddistributive lossesfrom
bureaucraticdrift.We showthatwhenCongresshasbothex postagendacontrol andaccess
to information,it willdelegatea largedegreeof discretionaryauthorityto all agencies,
regardlessof differencesin policypreferences.
This "discretionary
floor"risesas future
eventsbecomemoreuncertain. We further showthatthepossibility
ofcoalitional or
drift,
changing preferences of themedianlegislator,maylead eitherto "hard-wired" agencies
withlittlediscretionaryauthority agencieswithlargediscretionary
or "soft-wired" powers
to setpolicy.

Introduction
Recentstudiesofbureaucracy focuson themeansbywhichpolitical
actorscan controlagencydecisionmaking.Working froma principal-
agentframework, thisliterature
examineshowagencystructure, appoint-
mentpowers,interest groupaccess, and administrative procedureskeep
bureaucrats in linewhenexercisingdelegatedauthority. However,one
straightforward methodforinfluencing bureaucratshas thusfar been
overlooked:directly limitingagencydiscretion.Thisis somewhat surpris-
ing,sinceall delegationsof authority mustinvolvesomerestrictions on
policymaking powers.Ofcourse,themoreCongresslimitsdiscretion, the
less flexible
theagencyis whenresponding tochanging circumstances.
In
thispaper,we examinethistrade-off betweencircumscribing wayward
bureaucrats andgivingthemthelatitude toreacttounforeseen contingen-
cies. We showthatwhenlegislators have a richset ofongoingcontrols
overagencyactions,theywilldelegatea largeamountof discretionary

*Thispaperwas presentedat theMidwestPoliticalScienceAssociation,Chicago,

15-18April1993.The authorswouldliketo thankKathleenBawn,ChuckCameron,Chris
Canavan,ThomasHammond, JohnLondregan,
KeithKrehbiel, MathewMcCubbins, Roger
Myerson, BarryWeingast, at ColumbiaUniversity
and seminarparticipants andtheStan-
fordGraduateSchoolofBusinessforhelpful comments and suggestions. dis-
All standard
thegenerousfinancial
claimersapply.The authorsacknowledge oftheINDEECO
support
FacultyResearchGrant.

AmericanJournalofPoliticalScience, Vol. 38, No. 3, August 1994, Pp. 697-722

C 1994 by the Universityof Texas Press, P.O. Box 7819, Austin,TX 78713-7819

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698 David Epstein and Sharyn O'Halloran

authority, regardlessof the policydifferences betweenlegislativeand

executiveactors.We thenextendour findings to thegeneraldesignof
administrative proceduresunderuncertainty and to theimpactof coali-
tionaldrifton delegation.
Legal theorists, congressional scholars,and economists have all re-
centlyaddressedhow rationalactorscan controlthebehaviorofagents
towhomtheydelegateauthority. Administrative lawexaminestheproce-
duralmechanisms thatrestrictbureaucratic decisionmaking(Mashaw
1990);congressional researchfocuseson therelation betweenfloorvoters
andcommittee members(Krehbiel1991; Cox and McCubbins 1993);and
economictheory looks at firms' relations
hierarchical among owners, man-
agers,and workers (Alchian and Demsetz 1972; Holmstrom 1979;Miller
1992).In general,thisliterature emphasizestheimpossibility and even
undesirabilityofperfect control duetoproblems ofasymmetric information,
monitoring costs,and inherent uncertainty aboutfuture conditions.
Whenappliedto congressional delegations ofauthority to theexecu-
tivebranch,thissetofissuescan be framed intwoways.Ifthedelegation
of authority is to bureaucracies, thecentralquestionis howdemocrati-
cally electedpolitical actors can controlunelectedbureaucrats.If the
is
delegation to the president, centralquestionis how Congresscan
the
reapthe advantages ofexecutivedecisionmaking without abdicating con-
In
troloverpolicy. eithercase, by delegatingpower, legislatorscan mini-
mizetheinefficiencies of legislativelogrolls(Lohmannand O'Halloran
1994),take advantageof policyexpertise(Martin1992),and keep their
workloadmanageable(Ripleyand Franklin1984). These advantages,
however,mustbe weighedagainstthecostsof"agencylosses": slippage
and shirking.'
Whoeverthe recipientof delegatedauthority maybe, two general
categories of administrative control have been analyzed. The firstcate-
gory, ex ante controls, concerns issues of agency design. Whatare the
procedures, including reporting and consultation requirements, whichan
agencymustfollowto makepolicy?Who are theagency'skeyconstit-
uentsand how willtheyinfluence decisionmaking?Whatstandardsor
criteriamustan agencyconsiderwhen promulgating regulations? In
whichexecutivedepartment willthenewagencybe located,andhowfar
downtheorganizational ladderwillpoliticalappointments reach?These
are all questionsthatlegislators mustanswerwhendrafting theauthoriz-
inglegislation.
The secondcategoryconsistsofongoingcontrols, thoseinstitutions

'See Milgromand Roberts(1992)foran excellentoverviewof theprincipal-agent

literature.

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 ADMINISTRATIVE PROCEDURES AND AGENCY DISCRETION 699

orprocedures thatcheckagencyactionson a regular basis.Theseinclude

instruments ofcongressional oversight,suchas directandindirect moni-
toring(McCubbinsand Schwartz1984;McCubbins,Noll, and Weingast
1987;Lupia andMcCubbins1993)andrenewing orwithholding appropri-
ations(Calvert,Moran,and Weingast1987).Theyalso includejudicial
oversightimplemented throughexistingadministrative law (Mashaw
1990)and presidential appointment powers(Calvert,McCubbins,and
Weingast1989;Spulberand Besanko1992).
Thus,all threebranchesofgovernment areinvolvedinongoingover-
sight,whiletheinstitutionaldesignquestionsareleftmostly tothelegisla-
tivearena.Ofcourse,thetwocategories arenotcompletely independent.
Forexample,ex antereporting andconsultation requirements mayfacili-
tatetheongoingoversight of agencyactivities.This is knownas "hard
wiring"agenciesor "deck stacking"(McCubbins,Noll, and Weingast
1987).One of thecentralfindings ofthisessay is thattheavailabilityof
ongoingcontrolsmakeslegislators morewillingto grantagenciesdiscre-
tionex ante.
Whatproblemsare theseex anteand ongoingcontrolsdesignedto
address?In simplestterms,theansweris bureaucratic theability
drift,
ofan agencyor otherexecutiveactorsto enactoutcomesdifferent from
thepoliciespreferred bythosewhooriginally delegatedpower.Thisphe-
nomenonis illustrated in Figure1. AssumethattheHouse, Senate,and
president pass legislationdesignedto implement policyX. Now assume
thattheagencyhas policypreference A.2 The agentmaximizes hisor her
utility
by setting policyequal toX', thepointin theParetosetclosestto
his or her ideal point.Even thoughthispolicyis not whatCongress
andthepresident originallyintended,thenecessarycoalitionto overturn
agencydecisionscannotbe formed.
Much of thediscussionof intricate designand admin-
institutional
istrativeproceduresrevolvesaroundanalyzingvariousways to mini-
mizebureaucratic drift(McCubbins,Noll,andWeingast1989;Spillerand
Ferejohn1992).Thereis, however,a muchmoredirectmethodofcircum-
scribingagencyinfluence thatavoidstheproblemof costlymonitoring:
explicitly
limiting thediscretion ofan agencyto moveoutcomesfromthe
statusquo. Thus,Figure2 is thesameas Figure1 exceptthattheagency
maymoveonlya limiteddistanceawayfromX. Outcomesarenowequal
to X", whichis muchcloserto Congress'soriginalintentthanX'.

2Agencypreferences maybe derivedfromprivatepoliticalvalues,personalcareer

or,all else equal,an aversionto effort.
objectives, thattheagency's
We assumethroughout
policyis observableto Congress.For a modelwheretheagency'spreferences
preferred
see Bawn(1993).
are uncertain,

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 Figure 1. BureaucraticDrift
P

A @>~~~~

Figure2. ControllingBureaucraticDriftby LimitingAgencyDiscretion

P

A
H

/ ~~~~~~~~~~~~~i

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 ADMINISTRATIVE PROCEDURES AND AGENCY DISCRETION 701

The example above illustratesthat agencies can be controlled

through limitson therangeofpoliciestheycan enact.In practice,such
limitson agencydiscretion are common,and theycomein manyshapes
and forms.Sometimesthelimitson discretion are definedveryclearly:
underthe 1934ReciprocalTrade Agreements Act, the presidentcould
reducetariffs on any itemup to 50%, and in 1975Congressrequired
theNationalHighwayandTraffic SafetyAdministration to setcorporate
averagefueleconomystandardssomewherebetween20 and 27.5 miles
per gallon.Congresscan also controlagencydiscretionindirectly, by
defining the criteriaby whichpolicyis made. The AgencyforInterna-
tionalDevelopment, whichadministers foreignaid programs, has 33 ob-
jectivesand 75 priorities and mustsendCongress288reportseach year,
and the 1986 SuperfundAct requiredthe Environmental Protection
Agency(EPA) to choose a clean-upmethodthatwas "cost effective in
boththeshort-andlong-term andthatprotected humanhealth."In each
of these cases, even whenthe criteriaspecifiedin legislationdid not
dictatea singlebest policy,theydid eliminatecertainpoliciesfrom
consideration.3
Of course,thereare coststo limiting agencydiscretion. One ofthe
reasonsthatbureaucracies are createdin thefirstplace is to implement
policiesin areas whereCongresshas neitherthetimenorexpertiseto
micromanage policydecisions.By restricting Congresslimits
flexibility,
theagency'sabilityto adjustto changingcircumstances. This trade-off
is capturedperfectly byTerryMoe (1990,228)inhisdiscussionofregula-
torystructure:
"The mostdirectway [to controlagencies]is fortoday'sauthorities to specify,in
excruciating detail,preciselywhattheagencyis to do andhowitis to do it,leaving
as littleas possibleto thediscretionary
judgment ofbureaucrats-andthusas little
as possibleforfuture authorities over,shortofpassingnewlegisla-
toexercisecontrol
tion.. . . Obviously,thisis nota formula effective
forcreating organizations.In the
interests of publicprotection,agenciesare knowingly burdenedwithcumbersome,
complicated, technically structures
inappropriate thatundermine theircapacityto
perform theirjobs well."

Thus,ourcentralquestionis howCongress,facedwithpossiblebureau-
designsan agencyflexibleenoughto meetchanging
craticdrift, circum-
stances.In otherwords,thereis a fundamental in designing
trade-off

3Thereis a debatein thebureaucracy as to whether

literature thecriteriadefined in
administrativeproceduresimplya singleoptimalpolicythatagenciesmustimplement.
Shapiro(1988)callsthis"synoptic"decisionmaking.We taketheless ambitious position
thatadministrativeproceduresdefinea set of possiblyacceptablepoliciesand a set of
clearlyunacceptableones.

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702 David Epstein and Sharyn O'Halloran

administrativeproceduresbetweeninformational gainsand distributive

losses.
In variousguises,discussionsofagencydiscretion permeatethebu-
reaucracyliterature.Statutoryrecognition of agencydiscretiondates
backtothe1946Administrative Procedure Act,whichcreatedthreecate-
goriesofpermissible agencyactions:rulemaking, adjudicatory hearings,
anddiscretionary actions(also knownas informal rulemaking).'Shapiro
(1988)equatesbureaucratic discretion withtheabilityto make"prudent"
policychoices.Levineand Forrence(1990)use theterm"slack" to indi-
cate thedegreeto whichagenciescan escape politicalcontrol;in their
model,bureaucrats can use theirfreedomeitherto further thegoals of
interestgroupsor to servethepublicgood. And as shownin Figure1
above,McCubbins,Noll,and Weingast(1989)definediscretion as those
actionsthatno politicalcoalitioncan overturn; discretionis thusequated
withthe limitsof bureaucratic drift.In contrast,we arguethatoften
Congressprefers to setex antelimitson agencydiscretion morestringent
thanthoseimpliedbytheirex postpowerto overturn agencydecisions.5
This paperdevelopsa formalmodelof agencydiscretion in which
Congresscan chooseto limitan agency'spolicylatitude.We investigate
a setting
wherelegislators, uncertainaboutthefuture, willdelegatesome
amountof discretionary authority to executiveagents.Our analysis
showsthatthereis a "discretionary floor,"a minimum amountofdiscre-
tiongivento any agency.In equilibrium, legislatorstradeoffagency
discretionand effectivedesign.
The paperis organizedas follows.In thenextsection,we presenta
modelof agencydiscretion and theninvestigate howchangesin thede-
greeand typeof legislators'uncertainty affecttheamountof discretion
legislatorsdelegate.Next we examinehow legislators, facedwiththe

4TheSupremeCourthas continuously maintained thatagenciesalwayshave some

degreeof latitudewhensetting policy.In writing themajoritydecisionin thewell-known
Chevroncase, forinstance,Rehnquist declaredthatagenciesexercisediscretion within
a
"gap" createdbyCongress(Chevronv. NRDC [467U.S. 837(1984)]).In fact,forCongress
to delegatepowerto an agencywithoutany limitson discretion whatsoever wouldbe
constitutionally
impermissible accordingtothe"nondelegation doctrine,"whichstatesthat
legislative
powerscannotbe delegatedto a privateindividual. Thus,constitutionalcon-
derivedfromtheseparation
straints ofpowersensurethatall delegation willbe tempered
by somelimitson discretion.
5Whatmakesthiscommitment credibleis thecourtsystem,whichwe assumecan
cheaplyandeasily(from Congress'spointofview)overturn agencytransgressions.Without
thecourtsas an enforcement mechanism, Congress'sthreatto vetocertainagencyactions
maybe unrealistic. Thus, legislatorsmustdetermine theoptimalrangewithinwhichto
commit themselvesto reversingbureaucratic
policydecisions.

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 ADMINISTRATIVE PROCEDURES AND AGENCY DISCRETION 703

of coalitionaldrift,set discretion,
possibility and finally,
we summarize
ourconclusions.Proofsof all propositions are providedin an appendix.
The Model:Ex AnteDiscretion
and an Ex PostVeto
In thetradition ofNiskanen(1971),manyformalmodelsofbureau-
cracyassumethatagencieswishto maximizetheirbudgets.Thislineof
inquiry usuallypresentscongressional-executive relationsin a principal-
agentcontext.Bendor,Taylor,andVanGaalen(1985,1987),forinstance,
deriveoptimalpunishment and rewardschemesforbureaucracies that
mustreportcost and benefitinformation to overseeingcommittees.
Banks (1989) and Banks and Weingast(1992)investigate the abilityof
agenciesto extractfunding fromCongresswhenthepossibility ofa costly
auditis available.Althoughwe do not adopta budget-maximizing ap-
proach,we do treatbureaucratic controlas a problemof mechanism
design:whenconstructing ex anteconstraints, Congressmustdevelop
rulesforagencybehaviorbeforeit learnsaboutpossiblefuturestatesof
theworld.Also, likethecostlyauditsin Banks(1989),legislators have
somemeasureofex postcontrolaftertheagencysetspolicy.
Anotherset of modelsadoptsa spatialapproachto the studyof
congressional-bureaucratic relations.FerejohnandShipan(1990),forex-
ample,investigate policyoutcomeswiththepossibility ofjudicialreview
and/ora presidential veto.Calvert,McCubbins,andWeingast(1989)ex-
aminediscretion in a multidimensional policysettingthatreducesto a
one-dimensional linejoiningtheideal pointsof Congressand thepresi-
dent.LohmannandO'Halloran(1994)analyzea modelinwhichauthority
todividea dollaris delegatedtoa president, possiblysubjecttolegislative
override,in orderto overcometheinefficiencies of legislativelogrolls.
Theyfindthat,all else equal, the moresimilarare policypreferences,
themoreauthority legislators willdelegateto thepresident.
Similarto thesemodels,we investigate legislators'ex antedecisions
aboutagencystructure in a spatialsettingwhenthefuture is stilluncer-
tain. Our motivation is capturedwell by Spulberand Besanko (1992,
126-27)."A crucialaspectoftheinstruments ofexecutiveandlegislative
controlover administrative agenciesis the timingof thecontrolaction
relativeto thesequenceof actionstakenbytheotherbranchofgovern-
mentandtheagency.The inherent restrictions
on timing imposedbythe
Constitution and administrative law are important determinants of the
combination ofinstruments a policy-makerwillemploy.... The adminis-
trativeagencyis established beforeeconomicparameters thataffect regu-
latoryoutcomes are observed, . . . while oversightcan take place after
have the opportunity
policy-makers to acquire information
fromthe

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704 David Epstein and Sharyn O'Halloran

agency."Adoptingtheseinsights, thegeneralsequenceof eventsis as

follows:Congressdesignsan agency,moreinformation aboutthe state
of the worldis revealed,agencieschoose policies,and thenCongress
exercisesex postcontrolsovertheagency'sdecisions.
The Model
We examinea gamebetweenthemediancongressional voterandan
executiveagent, withtypicalidealpointsas illustratedin Figure3. The
policyspace is X = the
9k1, real line.6
Without loss ofgenerality,
assume
thatCongress'sideal pointis C = 0 and thattheagenthas ideal point
A > 0. Preferences foreach playerare quadraticin finalpolicyout-
comesX:
Uc(X)= -(X-C)2= -X2;
UA(X) = - (X - A)2.
Outcomes depend on both policy (p) and the state of nature (w):
X = p + w. We presentthemodelin thisformto makeclearitslinks
withothermodelsofprocedural choice.Austen-Smith (1990)andGilligan
and Krehbiel(1987, 1989),forinstance,use a similarformulation, in
whichp is the systematic componentof outcomesand w is a random
component or shock.In ourmodel,X representstheoutcomethatwould
resultif the agencytook no action(p = 0) or if Congressvetoesthe
agency'sproposal.We assumethatw is initiallydistributeduniformlyin
therange-1 to 1: W- U[ - 1, 1].7
Congressmustdecide how muchdiscretion to givetheagent;call
thisvariabled. Afterthestateofnatureis revealed,theagentmayoffer
a policysuchthatIp I d.8Iftheagencywereto offer a proposaloutside
thisrange,we assumethatit wouldbe struckdownby thecourtswith
certainty.We thusmodeldiscretion as an explicitlimiton thescope of

6Byadopting a one-dimensionalmodel,we evadetheproblems ofpreference aggrega-

tioninherent inmultidimensionalsettings.
See Hammond andMiller(1985)fora discussion
of theproblemscreatedby incomplete information and expertisein a multidimensional
hierarchicalsetting.
7One couldthinkof X as a future stateoftheworldthatCongresscannotperfectly
anticipatewhenit establishesan agency.Or themodelcouldbe specified in termsof a
seriesof o's, each withthesamedistribution, whichare realizedovera periodof time,
withoutchanging theresults.For technicalsimplicity
we also assumethatA S 1, so there
is somestateoftheworldthatgivesthebureaucratic agenthisor heridealoutcome.
8Notethatifdiscretion couldbe specifiedas a function ofw, Congresscouldset a
discretionscheduled(X). In certainpolicyareas, thismaybe a realisticpossibility. In
manyothers,however,mandatesthatan agencyproducea specificoutcomeare worded
so generally(suchas ordering theuse ofthe"bestavailablecontroltechnology") thatthe
agencywillin facthavelatitudeto enacta widerangeofpolicies.

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 ADMINISTRATIVE PROCEDURES AND AGENCY DISCRETION 705

Figure3. Ideal Pointsof the Actorsand a Sample Value of

the State of the World (X)

_Imu I I II_
-1 C A 1

possibleagencyactions.By increasingd, Congressgivestheagencymore

leverageto adjustextremerealizationsofw,butit also allowstheagent
to moveoutcomescloserto theidealpoint.Aftertheagencychoosesa
policy,Congressobservesbothp and w.9It thendecideswhether or not
to vetotheagency'sproposal.The entiresequenceofeventsis shownin
Figure4.
A strategyforCongressis a pair{d, V}, whered E 91 is theamount
giventheagent,and V: 9t - {0, 1} is a function
of discretion relating
policyproposalsto veto decisions.If a proposalp is vetoed(V = 1),
thentheoutcomeis w; otherwisetheoutcomeis p + w. A strategy for
the agentis a functionp: &k1x --, 1tellinghimor herwhatproposal
to makeas a function of w and theamountof discretionthathas been
given. Let +(p) = p + w if V*(p) = 0, and +(p) = w otherwise.Also,
let iT(d,w) = {x E X such that Ix - I - d}.
DEFINITION 1: A BayesianNash equilibrium
consistsof strategies
{d*, V*} andp* suchthat:
1. V*(p) = 0 iffUC(P + w) > UC(");
2. p*(d, w) E argmaxpE,(d,) UA(O(p));
3. d* E argmaxd E EUc(p*(d, w)),
wherethe expectationin Condition3 is takenwithrespectto the
priordistributionofw.
Condition1 statesthatCongresswillaccepttheagent'sproposalonly
ifitgivesCongresshigherutility
thanZ. Condition 2 statesthattheagent
maximizesutilitysubjectto Congress'soptimaldecisionrule V*. And
Condition3 statesthatCongressgivestheagentdiscretion so as to max-
afterw is revealedand theagentproposesp*.
imizeits expectedutility

9Inmanysimilar modelsofincomplete information, Congressmusteithermakepolicy

choiceswhilestilluncertain abouttheireffects (Gilliganand Krehbiel1987;Epstein1993)
orperform costlyauditsto gainthisinformation (Banks1989;Cameron,Segal,andSonger
1993).We assumethatthrough firealarms,policepatrols,andthelike,Congresscan gain
thenecessaryinformation at low cost. This is certainlya strongassumption,whichwe
relaxin a relatedstudy(Epsteinand O'Halloran1993).

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706 David Epstein and Sharyn O'Halloran

Figure 4. Sequence of Events

Congress Sets State of the Agent Sets Congress

Discretion(d) World Is Policy (p) Accepts
Revealed (w) or Rejects

Note: w + p = X.

Results
The analysisof Conditions1 and 2 is straightforward. At the last
step,Congresswill accept the agent'sproposalonlyif it producesan
outcomeno farther awayfromCongress'sidealpointthanw.10Knowing
this,theagentwillmakea proposalthatis withina distanced ofw and
as close to A as possiblewithouttriggering a congressionalveto.Thisis
standard analysisformodelswithan ex postveto, 1I exceptthattheexecu-
tiveagencyis constrained in thepoliciesit can enact.
The solutionto Condition3 is, however,surprisingly complicated.
As shownin the appendix,derivingthe optimald involvescheckinga
numberofdifferent possiblesolutionsforconsistency to obtaina unique
d* foreveryvalue ofA. The resultof thesecalculationsis summarized
in:
PROPOSITION 1: DISCRETIONARY FLOOR
i. When the agent's preferences are near Congress's,discretion
declines as A moves fartheraway fromC: 0 - A - 1/3 > d* =
1 -A.
ii. Whentheagent'spreferences arefarfromCongress's,discretion
is constant:1/3 - A - 1 > d* = 2/3.
in Figure5. WhenA = 0, Congressand
Proposition1 is illustrated
theagenthave identicalpreferences. In thiscase, d is set to 1; thatis,
theagentis givenfulldiscretion to setpolicy.The agentactsas a perfect
and willalwaysimplement
representative Congress'sidealoutcome.As
A becomesgreaterthan0, thepreferences of Congressand theagency
beginto divergeand theagent'sdiscretion is reduced,up untilA = 1/3
andd = 2/3.Atthispoint,theequilibrium reachesa "discretionary floor,"

"i0nmodelswherep is observablebutX is not,thisdecisionis madewithrespectto

Congress'supdatedbeliefsaboutw. Sincebothp andX are observableinourmodel,this
decisionis madewithcertainty.
"RomerandRosenthal(1978)is theclassicexample.

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 ADMINISTRATIVE PROCEDURES AND AGENCY DISCRETION 707

Figure5. EquilibriumAmountof Discretionas a Functionof the Agent's

Ideal Point

1-

2/3
DiscretionaryFloor

0
A
1/3 1

withd remainingconstantat 2/3 as A increases from1/3 to 1. This result

contrastswith O'Halloran (1994), where Congress has no ex post veto
and discretiondeclines monotonicallyas the agent's preferencesbecome
more extreme.'2
Our equilibriumis similarin some ways to the equilibriaof incomplete
information models of legislativedelegation(Gilliganand Krehbiel 1987,
1989; Epstein 1993). In those models, the medianfloorvoteris willingto

12This discretionary otherthana uniform

flooralso holdsfordistributions distribution
on w. For instance,withlinearlydeclining densities(a "tent" distribution),
probability
floorat d = I/2.
thereis a discretionary

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708 David Epstein and SharynO'Halloran

cede committees somedegreeofparliamentary as longas the

privileges
idealpointsofthetwoactorsare not"too farapart."In particular, our
modelis similarto Gilliganand Krehbiel(1989),in whichthefloorcom-
mitsto usinga closed rulewithsomeprobability beforethecommittee
issuesitsrecommendations. An increasedprobability ofa closedruleis
analogousto increasing agencydiscretion in ourmodel.In Gilliganand
Krehbiel(1989),the probability thatthe committee willbe assigneda
closedruledecreasesmonotonically as thepolicypreferences ofthecom-
mitteeand thefloordiverge.
Combinedwiththeresultsof O'Halloran(1994),we can gainsome
intuition
as to whythediscretionary floor(theflatregion)in ourequilib-
riumexists.In O'Halloran(1994),legislatorshave no ex post agenda
control,and discretiondeclinesas preferences diverge.In Gilliganand
Krehbiel(1989),unlikeourmodel,legislators cannotdirectlyobservethe
hiddenvariable(w) whentheymaketheirpolicydecisions,so theyhave
no ex postinformation. Thus,it seemsthatprocedural or informational
advantagesalone are insufficient
to establisha minimum levelofdiscre-
tion.Onlywhenlegislatorshave bothinformation and agendacontrol
willtheypermit agents,eventhosewithextreme preferences,toexercise
somedegreeofdiscretion. The implication, then,is thatas agenda con-
trolincreases and informationasymmetriesdecline, Congress increases
ex ante policy discretion because ongoing controls can minimizethe
problemsof bureaucraticdrift.
ComparativeStudies
Using the resultsfromO'Halloran(1994),we can compareCon-
withand without
gress'sutility an ex postveto.As shownin theappen-
dix, Congressis alwaysmade betteroffwithan ex post veto,and the
advantagesofagendacontrolincreaseas policydifferences becomemore
extreme.'3Withoutan ex post veto, Congressgivesoutlying agencies
verylittlediscretion,and so legislators
are unprotectedfromfutureun-
certainties.Withan ex post veto,Congresscan give the agencymore
latitudeto correctforunfavorable realizationsofw.
thisanalysisforthe executiveagent,we showthatas
Replicating
preferences becomeextreme,theagentalso prefers thatCongresspos-
sess an ex postveto. The logichereis straightforward:agentswithex-
tremepreferences are givenmorefreedom to setpolicywhenlegislators
retainan ex postvetothanwhentheydo not.These resultsare summa-
rized in:

as theagency'spreferences
13Thus, becomemoreextreme,
Congress a legisla-
prefers
tiveveto,evenifitis notcostlessto implement.

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 ADMINISTRATIVEPROCEDURES AND AGENCY DISCRETION 709

PROPOSITION 2: PREFERENCES OVER A LEGISLATIVE VETO

i. For all A, Congressprefers to have a legislative
veto.
ii. For sufficientlylargeA, theagentalso prefers thatCongresspos-
sess a legislativeveto.
Proposition 2 suggeststhatexecutivebranchactorswillnotalways
disagreewithcongressional restrictionson theirauthority.A goodexam-
ple is thegenesisoffasttrackapprovalprocedures fortradeagreements.
From1967to 1974,Congresshad refusedto extendthepresidentany
authority tonegotiateinternational
tradeagreements. TheNixonadminis-
trationrequestedbroad authority to beginmultilateral to
negotiations
reducetariff and nontariff
barriers.In a bidto wincongressional support
forhisproposal,Nixonincludeda possibleone-housecongressional veto
overproposedtradeagreements. The SenateFinanceCommittee coun-
teroffered a two-houseapprovalprocedure instead,underwhichthepres-
identsubmitsan implementing bill. This legislationis thensubjectto
committee considerationand a closed rulefloorvote in each chamber.
Thus, Nixon realizedthatgivingCongressan ex post veto over trade
proposalswas thepriceto pay forsomeamountofpolicylatitude.

Uncertainty, and Discretionary

Asymmetry, Authority
We nowturnto thequestionofhowchangesinthescopeandnature
ofuncertaintyaffecttheoptimallevelofdiscretionary Uncer-
authority.
taintyin our modelis capturedby the factthatw mayfallanywhere
between- 1 and 1. As notedabove, in equilibrium
Congressstructures
bureaucraciesto trade offan agency's abilityto correctextremerealiza-
tionsof w withthehazardsofgivingbureaucratstoo muchdiscretion.
First,whatwould happenif the entirerangeof possiblestatesof
naturewereexpanded,therebyincreasing legislators'uncertainty
about
futureevents? We now assume that w - U[ -R, R] and treatR as a
variable.The magnitude
ofR represents
therangeofoutcomesthatcould
resultwithno agency action. As shown in the appendix, as R increases,
theamountof discretion givento theagentalso increasesforanyvalue
of A. The originaldelegationlevels, and those afterR has shiftedto
R' > R, are illustratedin Figure6.
One way to interpret thisresultis thatas thefuture becomesmore
uncertain,all else beingequal, Congressbroadensthescope of agency
decisionmaking.Anotherinterpretation, though, in
is thatthedifference
preferences betweenCongressand the executiveshouldbe measured
relativeto the degree of uncertaintyin the policy environment;that is,
an agentis an outliernotifIC - A I itselfis large,butratherifitis large
relativeto therangeofpossiblealternatives. The amountofdiscretionary

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710 David Epstein and SharynO'Halloran

Figure6. Change in EquilibriumWhen the Range of PossibleStatusQuos

Becomes Larger

R'

2R'/3

2R/3
DiscretionaryFloor

0
A
R/3 R

authoritythatlegislatorswilldelegate,then,dependson theoutcomes
thatmightresultwithoutagencyintervention and on the costlinessof
bureaucratic miscues.Hence, new policyareas, salientpublicissues,
and areas in whichtheconsequencesof ill-formed policyare politically
disastrous(as inairlinesafety)shouldprovokeCongresstodelegatemore
powerto executiveagents.
In thebasic model,we assumethatC = 0, whichimpliesthatthe
expectedoutcomeis equal to Congress'sideal point.This assumption
may be suspect;in manycases Congressdelegatespowerbecause it
fearsthat,on average,policieswillbe skewedheavilyin one direction

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 ADMINISTRATIVEPROCEDURES AND AGENCY DISCRETION 7II

or another.For instance,Congresspassed the 1934ReciprocalTrade

Agreements Actlargelybecausethestatusquo (the1930Smoot-Hawley
TariffAct)was seen as too protectionist.
Legislatorssubsequently
gave
thepresidentthepowerto reducetariffs up to 50% by executivedecree
alone.
To modeltheeffectof an asymmetric rangeof possibleoutcomes,
we allowtheleft-and right-handboundariesoftherange,RL andRR, to
shiftin either direction,by amounts ARL and ARR 14 The equilibrium
amountof discretionin thisnew settingdependson thedistanceof A
fromC. If A is relativelyclose to C, 0 < A < 1/3,then discretionmay
eitherincreaseordecrease,inaccordancewiththerelativevaluesofARL
andARR. For instance,whenbothRL andRR moveto theleft,Congress
expectsthatifno further actionsare taken,outcomeswilltendto be to
theleftof its ideal point.This corresponds,forexample,to Congress's
anxietythatin themid-1930s thestatusquo in tradepolicywas too pro-
In thiscase, our modelpredictsthatdiscretion
tectionist. willincrease
as expectedoutcomes(theexpectedvalue ofw) becomemoreextreme.
But if 1/3< A < 1, so thattheagency'sidealpointis withintheflat
partofFigure3, thenonlychangesintheleft-hand boundary(thatclosest
to Congress'sideal point)have any impacton whetherthe agencyre-
ceivesmoreor less authority. If theleftboundarymovesawayfromC,
thentheagencywillreceivemoreauthority. Ifitmovescloser,theagency
willreceiveless. Thus,foragenciesalreadyat thediscretionary floor,
onlychangesin uncertainty at the boundarynearestCongress'sideal
pointhavea marginal impacton discretion.
Theseresultsaresummarized
in:
PROPOSITION 3: THE EFFECT OF CHANGES IN UNCERTAINTY ON AGENCY
DISCRETION
i. As the range[-R, R] becomeslargersymmetrically, Congress
givestheagentgreateramountsofdiscretion.
ii. Whentheboundarieschangeasymmetrically,
a) ifA - 1/3and ifthechangein theleft-hand boundaryis large
relativeto thechangein theright-handboundary,thendiscre-
tionwillincrease;
b) ifA > 1/3,thendiscretion increasesiftheleft-hand
boundary
movesfurther to theleftanddecreasesifitmovesto theright.
To understandthe implicationsof Proposition3, consideragain
the case of tradepolicyand assume thatCongressis relatively
more

14Weassume that the shiftsare small enough not to change the basic natureof the
equilibrium.

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7I2 David Epstein and SharynO'Halloran

thanthepresident.15
protectionist IftheviewsofCongressandthepresi-
dentare,nonetheless, similar on tradeissues,suchas mightbe thecase
underunified government, then Congress willmeasureitsdelegations of
powerdepending on whether itexpectsthatthestatusquo is likely to be
or too freetrade.On theotherhand,ifthepreferences
too protectionist
of Congressand the presidentare dissimilar, as in the case of divided
government, legislatorsfearthatthestatusquo willproveto be too pro-
andthepresident
tectionist, willuse thisopportunity to greatlyliberalize
trade.Theseconsiderations ledCongress to reduce thepresident's discre-
tionin the 1991extensionoffast track authorityby extractingpromises
fromPresidentBush thatthe upcomingNorthAmericanFree Trade
Agreement wouldnotresultin environmental degradation and wouldin-
cluderetraininggrantsforlabor.
DeckStacking
CoalitionalDriftand Discretionary
Another issuediscussedin thedelegation is thepossibility
literature
that futureCongresses may grow to have differentpreferences. As the
median voter changes, so will the manner in which ongoing oversight
is exercised.Denoted "coalitionaldrift,"thisfactorhas a numberof
implicationsforpresent-day legislatorsdesigning bureaucraticstructures.
For instance,coalitionaldriftreducesthevalue of politicians'services
to interestgroupsbecausefuturelegislators mayundopresent-day poli-
cies."6This timeconsistency problemreducesthe rentslegislatorscan
extractfortheirservices.
Furthermore, Shepsle (1992) contendsthatdecreasingcoalitional
driftcomesonlyat theexpenseofincreasing bureaucratic drift.His rea-
soningis as follows.In orderto checkrunawaybureaucracies, legislators
muststructure agencydecisionmakingto be responsive to congressional
demands.However,thisensuresthatfutureCongresseswillbe able to
influence policyoutcomes,thereby exacerbating theconsequencesofco-
In ourlanguage,ex antedecisionsaboutbureaucratic
alitionaldrift. struc-
tureare intimately linkedwithissuesofongoingoversight.
Therearetwopossibleconsequencesofcoalitional drift.First,coali-
tionaldriftmayresultinfutureCongressespassinglegislation thatrede-
finesan agency'sgoals, structure, or rule-making procedures.If it is
easy forfutureCongressesto pass new legislation, thenno amountof

15Lohmannand O'Halloran(1994)arguethatthiswillgenerally be thecase, as the

president and can bettertradeoffthegainsand losses from
has a nationalconstituency
changesin tradepolicy.
16AsShepsle(1992)pointsout,thesemaybe theverysamelegislators whoare en-
actingcurrentpolicies,onlyundera different
setofpressures.

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 ADMINISTRATIVEPROCEDURES AND AGENCY DISCRETION 7I3

present-day safeguards can avoidthiseventuality.However,thetransac-

tionscosts to passingnew legislationmaybe quitehigh.'7If so, then
limitson agencydiscretion (smallvaluesof d) can addresstheproblem
ofbureaucratic driftwithout theproblemsofcoalitionaldrift
intensifying
because discretionary limitsspecifiedex ante in statutescannotbe
changedwithout passingnewlegislation.
Ongoingcontrols,on theotherhand,relyon futurelegislators for
enforcement. This leads to the secondconsequenceof coalitionaldrift.
Anyagendacontrolleftto Congress,suchas an ex post veto,maybe
enforced bylegislators withpreferences fromthoseenacting
different the
Thispossibility
originallegislation.'8 maylead present-day to
legislators
make the agencyas imperviousas possibleto politicalcontrol.Moe
(1989,313) suggeststhattheseconsiderations led Congressto structure
theEnvironmental Protection Agencywitha maze of
"painfully listsofspecific
explicitgoalsandcriteria, substancestobe regulated,exact
deadlinesforagencyactionandgoal attainment, detailedproceduresto be followed
in setting
and enforcing citizensuitsas a checkon agencyinaction,and
standards,
pervasive opportunitiesforjudicial review. . . . By imposingstrictrequirementsand
deadlineson theagency-eventhough,giventhedaunting technicalcomplexity of
theissues involved,theycould notbe surethattheserequirements and deadlines
weretechnically orfeasible-theyreducedthelikelihood
justified thatresurgentbusi-
nessand state-local couldsomedayturnagencydiscretion
interests to theirownad-
of coalitionaldriftby
vantage."Thus, legislatorsmay respondto the possibility
"stackingthedeck" or "hardwiring"agenciesin favoroftheenacting coalition.If
togiveagenciesmoreorlessdiscretion,
theseconcernsleadlegislators thenwe might
deckstacking."
speakof "discretionary
theconsequencesofcoalitional
We investigate driftbyextending our
modelto twoperiods.The firstperiodreplicatesthebasicmodel:legisla-
w is revealed,theagencychoosesa policy,
torsset agencydiscretion,
andthenlegislatorshavetheoptionofexercising theirex postveto.The
secondperiodis the same, exceptthatthe preferences of the median
member ofCongressmayhaveshifted. Legislators withpossiblydifferent
preferencesthantheimplementing coalitionnowhavetheopportunity to
exercisean ex postvetooveragencyactions.
assumethatwithprobability
To modelthispossibility, q legislators'

17Moe(1989,285) assertsthat"thechoicesaboutstructure thatare madein thefirst

periodwhentheagencyis designedandempowered witha mandate, arenormallyfarmore
enduring thanthosethatwillbe madelater.. . . Mostof thepushing
and consequential
andhaulingin subsequent yearsis likelyto produceonlyincremental change."
also playan important
'8Theseconsiderations rolein modernanalysesofthejudicial
statutes:
ofcongressional
interpretation lawsina manner
courtsthatinterpret from
different
maynotbe overturned
intent
theiroriginal iftheenacting a
coalitionno longerconstitutes
See EskridgeandFerejohn(1992)fora fuller
majority.
legislative treatmentoftheseissues.

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7I4 David Epstein and Sharyn O'Halloran

preferences in period2 willbe C2 ? 0, andwithprobability (1 - q) they

willbe - C2. Thenas theabsolutevalue of C2 rises,legislators become
moreuncertain aboutfuturelegislative
preferences.As q increases,legis-
latorsexpectthatfuture preferences willleanmoretowardthepresident's
viewpoint. Let Uc(pu;d) be theexpectedutility ofa legislatorwithideal
point0 whentheagenthas discretion d and themedianmemberofCon-
gresshas idealpoint,u.19For a givenlevelofdiscretion now
d, legislators
havetwo-period expectedutilities:
EUc(d) = Uc(O,d) + qUC(C2, d) + (1 - q)UC(-C2, d).
then,is to be maximizedwithrespectto d. Legislative
This function,
preferences
overdiscretion in thissetting
are givenas follows:
PROPOSITION 4: IMPACT OF COALITIONAL DRIFT ON AGENCY DISCRETION
i. Whenthe agent'spreferences are near Congress's,coalitional
drift
has no impacton theoptimalamountofdiscretion.
ii. Whentheagent'spreferences are farfromCongress's,theopti-
malamountofdiscretion declinesas future
Congressesmoveto-
wardthe executiveand risesas futureCongressesmoveaway
fromtheexecutive.
Proposition4 statesthatdiscretionarydeckstacking mayoccur,but
onlyifcertainconditionshold.First,thepreferences oftheagencyand
Congressmustbe sufficiently farapart.Second,Congressmustexpect
thatfuture willhave preferences
legislators closerto thoseoftheexecu-
tive thantheydo at the momentwhenthe agencyis created.20 If the
preferences offuture Congressesdo becomeclosertothoseoftheexecu-
tive,then,ineffect, leadstocollusionbetweenthelegisla-
coalitionaldrift
tiveand executivebranchesagainstthewishesoftheenactingcoalition.
In thiscase, reducingagencydiscretion minimizes distributional
losses
fromsuchcollusion.
resulting
On theotherhand,it is also possiblethatcoalitionaldriftcan work
intheoppositedirection. Ifthepreferences ofCongressandthepresident
are expectedto movefarther apart,thenCongresswillgivetheagency

19Notice are calculatedfromtheviewpoint

thatutilities withidealpoint
ofa legislator
thenotionthatlegislators'
zero. This reflects utility are derivedfromthoseof
functions
supporting groups.For instance,environmentalists
interest wantedtightcontrolson the
EPA to circumvent thepossibility in thefuture
thatlegislators might notbe so inclinedto
supporttheirpositions.
20Moe(1989) arguesthatboththeseconditionsheld whenthe EPA was created.
Congressional and executivepreferences overthe strength variedwidely,
of regulations
andlegislatorswerewellawarethattheagencywas beingcreatedat a moment ofuniquely
highenvironmentalist power.

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 ADMINISTRATIVE PROCEDURES AND AGENCY DISCRETION 7I5

morelatitudethanotherwise.The possibility of coalitional"antidrift,"

as we call it,has notbeen mentioned in theliterature, butit is a logical
consequenceofthislineofreasoning.Here,theenactingcoalitionreacts
notto thepossibility ofcollusionbutratherto thepossibility thatfuture
Congresseswillbe too obstructionist.Thus,they"softwire"theagency
givingitgreaterleveragein dealingwithfuture oppositionalCongresses.
Furthermore, Proposition4 states that these considerations will
comeintoplayonlyifthepreferences ofCongressandtheagencydiverge
widely(i.e., whenwe have reachedthediscretionary floor).If not,then
although thepossibilityof coalitionaldriftmakestheenactingcoalition
worseoff,theycannotimprovetheirprospectsby changing discretion.
Thus,combinedwiththeearlierresultsfromProposition 1,therearetwo
qualitatively different
discretionaryranges.In the first(0 - A S 1/3),
discretionis responsiveonlyto changesin thepreferences oftheagent;
in thesecond(1/3- A - 1), discretion is responsiveonlyto changesin
thepreferences ofCongress.
Conclusion
The motivation
forthispaperwas to examinethenatureofex ante
bureaucraticconstraints
givena richset ofongoingcontrols.In particu-
lar, we investigated
the possibilityof limiting
agencydiscretionas a
meansofcontrollingbureaucraticdriftwhenlegislatorshavebothex post
agendacontroland access to information. Similarto previousstudies,
we foundthatdiscretion decreasesas thepreferences of Congressand
theexecutiveagencymoveapart.Butwe also observeda "discretionary
floor,"belowwhichdiscretion does notfall.Ourmainconclusionis that
as agenda control increases and problems of asymmetricinformation
decline, Congress willdelegate a minimumlevel of ex ante discretionary
authorityto an agency, regardless of differencesin policy preferences.
Our analysisalso uncoveredsome surprising implications
forthe
coalitional-bureaucratic
drifttrade-off.Shepsle's (1992) conclusions,
whichassumedthattheresponseto coalitionaldrift was alwaysto create
a moreindependent agency,were shownto holdonlyin certaincases.
We demonstrated thatwhenthepreferences of Congressand thepresi-
dentare similar,coalitionaldrifthas no effecton theoptimalamountof
delegation.Whenpolicypreferences diverge,we foundinstanceswhen
Congressdecreases agencydiscretionto correctforcoalitionaldrift,
thereby hardwiringtheagencyto followa certainpolicycourse.How-
ever,thereis also the possibilityof coalitional"antidrift"(the policy
stancesof Congressand the executivemove apart).In thiscase, the
enactingcoalitionsoftwirestheagency,givingit greaterflexibility with
whichto combatfutureCongresses.

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7i6 David Epstein and Sharyn O'Halloran

The implicationsofouranalysisforthedesignofexecutiveagencies
can be summarized as follows.Agenciesare structured to balancethe
needforflexibility and bureaucraticexpertiseagainstthedesireto limit
policyslackand bureaucratic drift.All else beingequal, legislators will
increasediscretionary authoritywhentheirpolicypreferences are similar
to thoseoftheexecutivebranch;whenthereis moreuncertainty in the
policyenvironment; whenlegislators retainongoingagendacontrolover
theagency'sactions;whenlegislators are relativelywellinformed; when
it is probablethatthe statusquo is skewedmorein favorof Congress
thantheexecutive;and whencongressional-executive conflict is likely
to increase.
Ourconclusionsalso speaktolargerquestionsofinstitutional design.
If agentsare to be ensuredof some latitudeto respondto unfavorable
events,Congressmustretainsome meansby whichto gatherinforma-
tion,suchas "firealarms"and directoversight hearings,and someform
ofagendacontroloveragencyactions,suchas an ex postvetoor budget-
aryauthority. Ratherthanseeingthesecontrolsas inhibiting agentsfrom
performing theirjobs well,one shouldrealizethattheyarea precondition
fortheagentto haveanydiscretion whatsoever. Theyarepartofa larger
trade-off,wherebylegislatorsgive bureaucrats discretionto set policy
butretainsomecontroloveragencyactions.
Manuscriptsubmitted21 June 1993
Final manuscriptreceived30 November 1993

APPENDIX
Proof of PropositionI
Recall thatin the closed rule offergame withoutdiscretionarylimits(i.e., Romer and
Rosenthal, 1978), outcomes are as follows:
Range of X Outcome

-1A w -A A

OAwX A
O I
A 1 A

Withlimitson discretion,the outcomes become:

Range of X Outcome
- I -< --<-A min[w + d, A]
-A wS
X 0 min[w + d, -X]
O 1
maXdA X
A w
X- I max[w - d, A]

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 ADMINISTRATIVEPROCEDURES AND AGENCY DISCRETION 717

Thus,Congress,foranygivenvalueofA, willsetd to maximize:

-A O
EUc= U
Uc(min[w + d,A])f(w)dw + I Uc(min[ + d, -c])f(c)dc

A I (1)
+ A UC(w)f(w)dw + A Uc(max[w - d, A])f(w)dw.

The firstintegrandin equation(1) willbe equal to A whenever d ? 1 + A, and the

secondwillbe equalto - X whenever d S 2A. Similarly, thefourthintegrandwillbe equal
toA whenever d 2 1 - A. To fullyspecifytheintegral inequation(1), then,thereare six
cases to consider:
Case 1: d3 1 + A and d 3 1 - A;
Case 2: d 1 + A and d S 1 - A;
Case 3: 1 + A ? d ? 2A and d 1- A
Case 4: 1 + A ? d3 2A and d 1- A
Case 5: d S 2A and d 1 - A;
Case 6: d 2A and d 1 - A.
Note thatCase 2 is internallyinconsistent; it willbe deletedfromthe
therefore,
analysis.The strategy
following is to derivetheoptimalamountofdiscretionforeach of
theotherfivecases and thencheckthesolutionagainsttheassumptions aboutd relative
toA. OnlyforthosevaluesofA wheretheassumptions remainvalid.
holdwillthesolution

Case 1: d ? A + 1

EUC = -I 2f(w)dw - A
(- w)2fi()d
(d- A (c)dfo) -
)2f A2f(o)dw

2A _
C.

Thisexpression
does notdependon d; itrepresents fromgiving
Congress'sexpectedutility
theagentinfinite Futurepossiblesolutionswillbe checkedagainstEU? as a
discretion.
baseline case.

Case 3: A + 1 ? d 3 2A and d 1- A

EUC I (f + d)2f(o)dco f A2f(c)dc - IA )2f(w)dw

A (-)f2f(,,)dw -f A2f(W)dco

aEUC (A + 1 - d)(A - 1 + d)
ad 2
d* 1 +A or 1 -A

solutionis 1 - A. We nowcheckthesolution
ForA ? 0, theappropriate forconsistency:

2A d z2A - 1-A A - I;
3,

d A + Iz1 -A A + 1 A 30;

1 -A S dz I -A I -A.

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7I8 David Epstein and Sharyn O'Halloran

these conditionsimplythatthe solutionis valid for0

Collectively, S A S 1/3, and
EUc > EU? forall valuesofA.

Case 4: A + 1 2 d 2 2A and d < 1 - A

The solutionforthiscase is thesameas forCase 3, sincetheonlydifference

is the
secondinequality,
whichis satisfiedbyd* derivedabove.

Case 5: 2A ? d and d 2 1 - A

EUC = 7d(w + d)2f(w)dw - f dl

(-w)2f(w)dw - J(w)2f(w)dw
- A2f(w)dw;

aEUC 1 3d2
=-d +-
ad 2 8'
2
d* = or 2.
3

Givenourassumptions aboutthedistribution
ofw, theappropriate
solutionis 2/3. We now
checkthesolutionforconsistency:

2A 2 d > 2A - 32@ A > I;

3 3'
1
d 2 1-A -2 -A > A
3 3'

Thus,thissolutionholdsforall A andEUc
1/3, > EU? forall valuesofA.

Case 6: 2A 2 d and d I - A
d/2~~~~f0
>
A
EUC = f(d + d)2f(o)do - f (-co)2f(w)dw - I (w)2f(c)dc

A+d I
- f A+2f(w)ddw - (w - d)2f(w)dw;

aEUCV _A+
A2 7d2
=~ R - 2d +

16 ? VI112A2 + 32
d*= 14

withtheassumptions
For no valueofA is eitherofthesesolutionsconsistent aboutd.
Thus, the solutionis completely by Cases 3 and 5, whichtogether
characterized
specifythat

1 - A for OA
d=
2 A
for 1. QED

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 ADMINISTRATIVE PROCEDURES AND AGENCY DISCRETION 719

Proof of Proposition2

i. Substituting
theoptimald* intoCases 3 and 5 gives:

EU =A2(4A-3) for 0>A -3 and

18A3 - 27A2 I I
EUc = for - -<A -<1.
3 ~~~~3
From O'Halloran (1993), the expected utilityforCongress withoutan ex post veto is:
A2(2A - 3)
EUc = 3

Simple arithmeticproves thatCongress is always betteroffwithan ex post veto.

ii. The agent's expected utilitywhenCongresshas no ex post veto is:

EUA = -f
A-d
(w+ d - A)2f(W)dw - f
A+dI
(0)2f(w)dw - (w - d - A)2f(w)d;

4A3
= - whentheoptimald * is substituted
ford.

Withan ex post veto, the agent's utilityis:

5A3 1
EUA = -
3 for O A S-3, and

9A3 + 27A2-3A +1 1
EUA =-
54
for - A
~~~~3 1.
Utilitywithan ex post veto exceeds utilitywithoutan ex post veto at A = .40733. QED
Proof of Proposition3
i. ForO A R/3,d* =R -A. For R/3 A R,d* = 2R/3.
In eithercase, ad*/dR > 0, so discretionincreases as the rangeof possible
values of w becomes larger.
ii. Substituting- 1 + ARL for -R and 1 + ARR forR in Case 2 above yields the
following:

EUc A-dR
I
fARd
( + d) 2f(w)dw - f -A-A 2fw d- -A w2f(w)dw
f-A

A A
(W)2f((,) d -fA+d A
2f(w)fd+
- (W - d)2f(w))dw.
A A+d

This yields an optimaldiscretionlevel:

4 - 2ARL + 2ARR - ((2ARL - 2ARR - 4)2 - 8(2 - 2p2 - 2ARL + ARL + 2ARR + AR2))
d*= L4
4

This functionis convex in ARR for fixedARL and passes throughthe point (0, 0). Thus,
the optimalamountof discretioncan eitherrise or fallforsmall changes in the boundaries
dependingon the relativemagnitudesof ARR and ARL.

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720 David Epstein and SharynO'Halloran

iii. Substituting
RL for -R and RR forR in Case 5 above yieldsthe following:

EUc= fd(/ + d)2f(w)dw - f (dI)2f(w)dw

- A - RR
(e,) 2f(X) dwt A A2f(wl) d.

This yieldsan optimaldiscretionlevel d* = - 2RL/3,whichdepends onlyon RL. QED

Proof of Proposition4
For 0 S A 1/3,the expected utilityof a legislatorwithideal point0 is:

UC(C2) = -f
A-d
-I
(w + d)2f(w)do
2C2-A
- f2
A-d
A2f(w)dwx - f c2
2C2-A
(2C2 - w)2f(w)dw

_ Wf 2f(W) -d A2f(w)dw;
C2

EUc = Uc(O) + (1 - q) UC(- C2) + q UC(C2);

aEUc (A + 1-d)(A-1 + d)
ad 2
d* = + A or 1 - A, asbefore.
For '/3S A S 1, the expected utilityof a legislatorwithideal point0 is:

UC(C2)= (w + d)2f(w)dw -_ J W)2f(w) dw - df (w)2f(w)

-dJ
'-1 ~ ~ ~ ~ 2/(2C2
C2-d2C2
_

- JA2f(w) dw,

EUc= Uc(O) + (1 - q)UC(-C2) + qUC(C2);

aEUC -2C2 + 4- 2C2d - 8d + 3d2+ 4C2dq

ad 4
8 + 2C2 - 4C2(1 - q) - (- 12(4 - 2C2) + (-8 - 2C2 + 4C2(1 -
q)2)1/2
d*= 6

Consider the functiond* - 2/3,which is the differencebetween the optimal amount of

discretionwith and withoutcoalitional drift.For fixed C, this functionis decliningin q.
For q > '/2,it is risingin C, and forq < '/2it is decliningin C. QED

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