In lieu of an abstract, here is a brief excerpt of the content:

CHAPTER 2 Reliable Decision Making and the Influence of Political Incentives In the months that followed the Challenger disaster, it was revealed that NASA had known about the problem of the eroding O-rings well in advance of the accident. Many commentators portrayed the decision to launch the illfated mission in light of such information as an irrational one. Performing a simple cost-benefit analysis would seem to support this notion. Given the high costs of a major failure-loss of shuttle and crew-and the relatively low opportunity costs involved in aborting the launch, the probability of mission failure need not be very high to justify postponing the mission. Are we left to conclude that one of the most technologically sophisticated agencies in the federal government was simply acting in an irrational manner at the time of the Challenger disaster? Part of the difficulty here is that in deciding how to allocate its efforts and resources, a bureau must consider many different factors. In most cases, agency decisions need to be sensitive to both the economic costs and the political incentives that form the organizational environment. Economic costs are the portion of the damage that can be measured directly in monetary terms or represent physical losses. For example, when NASA launched the unsuccessful Challenger mission in 1986, billions of dollars of equipment was destroyed. Even more important was the loss of life for the seven astronauts. Government cost-benefit analysis treats a human life as worth $2.6 million, while others argue that the value of life is incalculable and priceless; in either case, we can broadly agree that loss of life or limb represents an economic or physical cost of failure. These economic losses are a function of many variables , including the nature of the technology and the type of failure. It is important to note that these costs are not usually borne by the agency directly, but by its constituency. The agency does not remain unscathed, however, for there are often political costs associated with failure. These political losses-such as damage to reputation and influence-are the primary motivation for agency decisions. Although these losses are not directly measured in terms of dollars, political costs may have economic consequences, such as budget cuts. Furthermore, political costs are often correlated with the level of economic damage caused 17 18 Acceptable Risks by agency failure. When there are large economic costs associated with a failure, then the agency can expect greater political repercussions from its actions. Likewise, if the economic damage is minimal, then the agency generally receives little fallout from its erroneous decisions. There are a number of factors, however, that either moderate or intensify the political losses resulting from economic harm. Since political losses affect the agency directly, it is reasonable to assume that the bureau's activities are directed at minimizing these costs. It is important that we understand the political incentives that influence agency decision making. As noted in chapter I, resource limitations dictate that an agency strikes a balance between acceptable levels of type I and type II errors. How the agency allocates effort and resources to reduce each form of error is dependent largely on the political incentives an agency faces. This chapter provides a general discussion of the political factors that influence agency decision making. In the following chapter we will apply the lessons of this chapter by examining how political factors have influenced decision making at NASA and the FDA. An Agency's Cardinal Rule It is without question that bureaucratic decisions often have political implications . When an agency chooses to pursue a certain course of action, it tends to benefit some group of people while placing others at a relative disadvantage. As a result, there are many factors that bureaucrats must consider as they seek to make politically acceptable choices. But there is one decision-making principle that most agencies consider paramount: the agency should not be seen committing any visible failure. If we recognize the power and the implications of this simple cardinal rule, we gain immense understanding as to why agencies make many of the choices they do. This rule is not limited to a handful of public organizations; rather, it is applied by a wide variety of agencies. Social service agencies do not want to be found wasting large sums of money, nor do they wish to be seen as unresponsive to the needs of those who are in their charge. The National Park Service would...

Share