When hiring an adviser (he), a policy maker (she) has incomplete information about his preferences. Some advisers are good (their preferences are closely aligned to the policy maker’s), and some advisers are bad. Recently, some scholars have argued that the policy maker’s power to replace her adviser induces him to act more in line with her interests, so the adviser’s desire to influence future policy reduces his incentive to manipulate information. We show that the policy maker’s power to replace her adviser may harm her because this power may have an adverse effect on the behavior of good advisers.

incomplete information, policy decision-making, reputation, signalling, uncertainty
Positive Analysis of Policy-Making and Implementation (jel D78), Asymmetric and Private Information (jel D82), Search; Learning; Information and Knowledge (jel D83)
dx.doi.org/10.1016/j.jebo.2004.11.015, hdl.handle.net/1765/12272
Journal of Economic Behavior & Organization
Erasmus School of Economics

Wrasai, P.T, & Swank, O.H. (2007). Policy Makers, Advisers and Reputation. Journal of Economic Behavior & Organization, 62(4), 579–590. doi:10.1016/j.jebo.2004.11.015