Are Bureaucrats Free of Cognitive Bias?

You would think so from reading most of the literature on normative behavioral economics.  Private actors make mistakes, but bureaucrats don’t.  (What bias is at work here?)

I was therefore happy to see this article seeking to address the issue of agency bias.   Here is the syllabus:

Behavioral economics (BE) examines the implications for decision-making when actors suffer from biases documented in the psychological literature. This article considers how such biases affect regulatory decisions. The article posits a simple model of a regulator who serves as an agent to a political overseer. The regulator chooses a policy that accounts for the rewards she receives from the political overseer — whose optimal policy is assumed to maximize short-run outputs that garner political support, rather than long-term welfare outcomes — and the weight the regulator puts on the optimal long run policy. Flawed heuristics and myopia are likely to lead regulators to adopt policies closer to the preferences of political overseers than they would otherwise. The incentive structure for regulators is likely to reward those who adopt politically expedient policies, either intentionally (due to a desire to please the political overseer) or accidentally (due to bounded rationality). The article urges that careful thought be given to calls for greater state intervention, especially when those calls seek to correct firm biases. The article proposes measures that focus rewards to regulators on outcomes rather than outputs as a way to help ameliorate regulatory biases.

Given James Buchanan’s passing, it is worth noting that this all just seems like a repeat of the old bias that assumed that market actors were self interested, but government actors were public interested.  Hopefully, we will start to see the statist bias in the behavior economics area start to be cleansed by shining light upon it.

For my prior thoughts on the subject see here and here.