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February 19-1 - Poli 100 Notes Formal Institutions All...

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February 19, 2007 Poli 100 Notes Formal Institutions All formal institutions share some characteristics (bureaucracy) Hierarchy Job Specialization Formal rules U.S. Constitution muddles this at the highest level of gov’t Separation of powers Implied powers The result is institutional conflict (otherwise known as checks and balances) between branches of gov’t. The Principal-Agent Problem Formal Institutions face Principal-Agent problems Principals hire agents to perform tasks intended to meet the principal’s goals but: Agents have their own goals Agents must focus on institutional maintenance rather than institutional mission. Agents have specialized information (Reagan vs. EPA) Monitoring problems/costs Principals make trade-offs between monitoring costs and compliance costs. Principals try to set incentives for agents to induce desired behavior.
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