A transaction cost approach to unilateral presidential action

Abstract

Presidents have two major assets at their disposal when seeking to alter policy: executive orders and legislative action. There are certain advantages and disadvantages to each course. Although presidency scholars have focused extensively on presidential efforts in the legislative arena, little attention has been paid to how a president affects policy through direct action. Because executive orders have been under-researched, there has been a dearth of theory development that adequately explains when presidents will act unilaterally through executive orders and when they will instead seek legislative avenues to policy change. This project develops a parsimonious theory grounded in the transaction costs framework that explains how a president chooses between seeking congressional action versus acting unilaterally through executive orders to accomplish policy change. The theory holds that when presidents desire policy change, they balance the transaction costs executive orders and legislative action present, selecting the course that presents the greatest benefit after accounting for the transaction costs present. After outlining the theory, I test my predictions using an original data set. Each executive order from 1946 to 2004 was read and examined for policy content. Unlike most prior studies of presidential use of executive orders, this study only includes orders that affect policy in the data analyses. The series of empirical tests provide support for my theory: Presidents consider the transaction costs that executive orders and the pursuit of legislation pose and take the action that maximizes their utility when seeking policy change