Congress, the Executive, and the problems of agency, a principal-agent approach to American foreign economic policy

by Anderson, Greg J.

This study applies a principal-agent model of economic theory to the American foreign economic policy process during the late 1980s and early 1990s. The importance of institutional change in the American policy process has long been noted by scholars from several disciplines. However, economists have more recently emphasized the dramatic impact of both formal and informal institutions on economic performance. Although interbranch, interest group, and bureaucratic politics models of political choice yield important insights into the policy process, a principal-agent approach goes further by demonstrating and explaining the necessary and reciprocal nature of the agency relationship between Congress and the Executive in the policy process. Furthemore, a principal-agent approach provides an economic rationale for policy outcomes in this period that are intentionally different from those that either branch of government could have created individually if given exclusive control over economic policy formation.