Political Agency, Oversight, and Bias: The Instrumental Value of Politicized Policymaking

We develop a theory of policymaking between an agent and an overseer, with a principal whose welfare is affected by agent-overseer interactions. The agent can increase the quality of policy outcomes through costly capacity investments. Oversight and agent bias jointly determine optimal agent capacity investments. We show that when oversight improves agent investment incentives the principal always benefits from an agent with biases opposite the overseer. Competing agent-overseer biases translate into higher quality policy outcomes than the principal could induce were she monitoring the agent. Effective oversight is necessary for these incentive effects. The results imply that political principals ought to consider the nature of the broader policymaking environment when appointing agents to make policy on their behalf and when designing managerial strategies aimed at motivating agents.