The Coherence of Political Action: A Case Against Independence. (Preliminary draft)

Because politicians have control rights in the first place, giving them further control may actually raise social welfare by introducing some coherence in public policies. We show that public ownership of an institution is a constrained optimum when (a) stakes of allocating public funds to the institution are high; (b) the distribution of electoral weight is not highly skewed either towards or away from the voters whose stakes depend on policies related to that institution. Furthermore, we consider the environment where the choice of the ownership structure is not entirely shield from political discretion. We show that in some circumstances it is optimal to choose public ownership ex-ante.