Competence versus control: The governor's dilemma

Abstract

Most governance is indirect, carried out through intermediaries. Principal–agent theory views indirect governance primarily as a problem of information: the agent has an informational advantage over the principal, which it can exploit to evade principal control. But indirect governance creates a more fundamental problem of power. Competent intermediaries with needed expertise, credibility, legitimacy, and/or operational capacity are inherently difficult to control because the policy benefits they can create (or the trouble they can cause) give them leverage. Conversely, tight governor control constrains intermediaries. The governor thus faces a dilemma: emphasizing control limits intermediary competence and risks policy failure; emphasizing intermediary competence risks control failure. This “governor's dilemma” helps to explain puzzling features of indirect governance: why it is not limited to principal–agent delegation but takes multiple forms; why governors choose forms that appear counterproductive in an informational perspective; and why arrangements are frequently unstable.