Mattia Guidi (Collegio Carlo Alberto)

“A formal model of decision-making on independence and accountability of regulatory agencies”

abstract

This paper aims to analyse, in theoretical terms, the concepts of independence and accountability, and at theorizing their relationship. Until now, the literature has disregarded (or not highlighted to a sufficient extent) the existence of an inverse relationship between independence and accountability. The paper first reviews the literature on independence and accountability, exploring their connections and interrelations. It then theorizes the existence of a partial trade-off between independence and accountability, showing that, according to the most accepted definitions of the two concepts, the relationship between the two features is a negative one. It then presents a model of decision-making in which utility-maximising politicians choose the optimal level of independence and accountability. In this theoretical framework, both independence and accountability have a diminishing marginal utility for politicians. The model presented in this paper can be easily tested with cross-section data, and it allows to investigate the impact of both factors that are supposed to positively affect independence and factors that are supposed to positively affect accountability. Because independence and accountability are assumed to be linked by a trade-off, the paper argues that the decisional dilemma faced by politicians who establish (or reform) regulatory agencies is that of assessing pros and cons of each, and finding a proper balance.