Minimal squawking and government capture

We’re behind with real work* here at SC&T Headquarters**, so we’ll talk about papers I wish I had written.

The most recent issue of the American Economic Review has this really interesting manuscript on “minimal squawking.”

Leaver, Clare 2009. “Bureaucratic Minimal Squawk Behavior: Theory and Evidence from Regulatory Agencies.” American Economic Review, 99(3): 572–607.

This paper develops a model in which a desire to avoid criticism prompts otherwise public-spirited bureaucrats to behave inefficiently. Decisions are taken to keep interest groups quiet and to keep mistakes out of the public eye. The policy implications of this “minimal squawk” behavior are at odds with the view that agencies should be structured to minimize the threat of “capture.” An empirical test using data from US State Public Utility Commissions rejects the capture hypothesis and is consistent with the squawk hypothesis: longer PUC terms of office are associated with a higher incidence of rate reviews and lower household electricity bills. (JEL D73, L51, L97, L98)

*Read: my tenure dossier and my fantasy football picks
**Read: an extremely messy loft in downtown Los Angeles