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A Primer on Public Management

A Primer on Public Management. Center for Democracy, Development, amd the Rule of Law Summer Fellows Program. “It’s not the business plan but the execution”. --attributed to Goldman Sachs. The Scope of State Functions.

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A Primer on Public Management

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  1. A Primer on Public Management Center for Democracy, Development, amd the Rule of Law Summer Fellows Program

  2. “It’s not the business plan but the execution” --attributed to Goldman Sachs

  3. The Scope of State Functions Addressing externalities Education, environmentRegulating MonopolyOvercoming imperfect information Insurance, financial regulationSocial Insurance Providing pure public goods Defense, Law and order Property rights Macroeconomic management Public healthImproving equity Protecting the poor Intermediate Functions Industrial policyWealth redistribution Minimal Functions Activist Functions X-axis

  4. Two Dimensions of Stateness Strength of State Institutions Scope of State Functions

  5. Stateness and Efficiency Quadrant I Quadrant II Strength of State Institutions Quadrant III Quadrant IV Scope of State Functions

  6. The Stateness Matrix France Japan United States Strength of State Institutions USSR Turkey Brazil Sierra Leone Afghanistan Scope of State Functions

  7. USSR/Russia USSR 1980 Strength of State Institutions Russia 2010 Russia 2000 Scope of State Functions

  8. China China 2011 Strength of State Institutions China 2005 China 1978 Scope of State Functions

  9. New Zealand 2000 Strength of State Institutions 1990 1981 Scope of State Functions

  10. Why is Public Administration So Difficult? • Central issue of all organizational theory is delegated discretion • All organizations need to delegate authority • To take advantage of local knowledge • To respond quickly • But delegation means loss of control

  11. Two Approaches to Organizational Theory • Economists’ approach • Man is homo economicus • Incentives matter • Principal-agent framework • Social capital approach • Man as social animal • Norms and bonding over incentives

  12. Principal-Agent Theory: Private Sector Shareholders Board of Directors CEO Senior Management Workers

  13. Principal-Agent Theory: Public Sector The People President Legislature Bureaucracy Implementing organizations

  14. How is the Public Sector different from the Private Sector? • Public agencies not allowed to retain earnings • Public agencies can’t reallocate factors of production • Public agencies must follow goals not of their own choosing • Public agencies not subject to market discipline

  15. Making the public sector more like the private sector • New Public Management (NPM) • Adding an exit option and competition • Vouchers, school choice • Wage decompression • Separating the policymaker from the implementer • Public expenditure tracking surveys

  16. What these innovations have in common • All can be subsumed under principal-agent framework • Use a monitoring-and-accountability framework • All try to affect agents’ incentives • All try to mimic market mechanisms • But: Do they work?

  17. Limitations of Principal-Agent • If you can’t measure, you can’t hold accountable • Multiple principals • Principals want contradictory things • Public agencies are monopoly suppliers that can’t go out of business

  18. Public Sector Outputs Quadrant I Quadrant II Low Specificity High Quadrant III Quadrant IV Low Transaction volume High

  19. Monitorability of Public Sector Outputs Aircraft maintenance Telecoms Central banking Railroads Highway maintenance Low Specificity High Foreign affairs Court systems Primary school teaching University education Preventative medicine Guidance counseling Low Transaction volume High

  20. Finally, • Human beings are not simply homo economicus • Are social animals as well • Motivated by pride, self-respect, group solidarity, other norms • Importance of social capital

  21. A Third Type of Capital Physical Capital Human Capital Social Capital

  22. Networks of Trust

  23. A Corporate Culture

  24. Trust networks critical to flat organization...

  25. CEO Design Design Personnel Manufacturing Manufacturing Marketing Final Product And to Outsourcing

  26. Where does social capital come from? • In traditional societies: • Kinship, shared culture, repeated interaction • In modern societies • Education, particularly professional education • Shared goals and standards • Leadership!

  27. Education Reform • Economic approaches • Vouchers, school choice • Testing and individual accountability • Social capital approaches • Raise salaries; improve professional standards • Fundamentally a political issue • Teachers’ unions, low incentives to solve issue

  28. Community-Driven Development • Program design • Designed to foster social capital • Bypasses traditional institutions • Relies on participation and bottom-up input • Problems • Expensive and highly labor intensive • Encompasses ambitious social engineering goals

  29. Conditional Cash Transfers • Transfers to poor require school attendance • Programs designed for sustainability • Goal is increased human capital • Often built-in evaluations (Progresa/Oportunidades) • Problems • Programs develop their own constituencies • Can be used in clientelistic ways

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