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Understanding Bureaucratic Behavior, Implications from the Public Choice Literature by Bruce L. Benson. By Kyle Riach and Tim Shultz. Introduction. -Paper was designed to investigate the economic-based research relating to bureaucratic behavior.
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Understanding Bureaucratic Behavior, Implications from the Public Choice Literature by Bruce L. Benson • By Kyle Riach and Tim Shultz
Introduction -Paper was designed to investigate the economic-based research relating to bureaucratic behavior. -Realize that government has people with their own interests compared to the people
Bureaucrats • They rationally respond to incentives and constraints they face. • The academic and popular press focus on poor productivity in government and way to make the bureaucracy more effective
The expanding political power of the United States federal bureaucracy has produced a system where salaries are protected from political and economic influences and favor bureaucrats more than workers in the private sector who perform similar duties. • Follows literature from Niskanen and Tullock conducted in the 1960’s-70’s
Application of economic or public choice models: • Only individuals act and make decisions • These individuals recognize their alternatives, anticipate potential although uncertain outcomes, and try and maximize their well-being when looking at incentive and constraints • Information is scarce and costly to obtain so that the ability of citizens and their representatives to monitor and control bureaucracies is limited.
History • A patronage system was used in the United States until 1883 when it became clear that it cost too much to train and monitor these employees, and the patronage labor force became less responsive to political demands. • Congress voted to appoint positions based on ability, however to protect bureaucratic rank and file, they granted them tenure • This slowly lead to a change in the incentives bureaucrats have, making it more and more difficult for the government to motivate and manage them.
Incentives and Constraints for Bureau Managers • Niskanen stated that managers of bureaus have goals that are dependent on the relative size of the bureau. • He assumed that a utility maximizing manager could also be called a budget maximizer, if they are given the discretion and power they need. • Many bureau mangers are the only ones who know their bureaus true production function; they are the only ones who know the real cost to produce outputs. • For many bureaus, output is not measured
Niskanen’s Critics • Misque and Belanger (1974)- budget maximization will limit the amount of utility maximizing efforts, because bureaucrats will seek to take advantage of budgets with excess revenue • Niskanen changed his model so that income and special “perks” would be functions of the bureau output and the “discretionary budget.” • Breton and Wintrobe (1975)-said that a bureau’s bargaining power was too strong, and that a bureau’s sponsor had control over the bureau • Niskanen accepted their ideas but found that changing the model in this case wouldn’t work; he concluded that control of the bureau should be “imperfect”
Control Devices • Can be a creating a competing bureau that would keep tabs on their “competition” and report improprieties to expand their share of the political market. • This competition allows for the legislature to pick different bureaus for different output in order to get closer to their optimal goals • An oversight sponsor can control salaries in relation to bureau size (salary cap) • Most government outside U.S and Europe give the bureau a fixed budget with a set number of functions they need to perform • The U.S. Congress budgets amounts for salaries and expenses, limiting bureaucrats from having choices with funds.
Bureaucratic Discretion • Weingast and Moran(1983)-found through Federal Trade Commission responses to political demands that bureaucrats are effectively controlled by congress. • However, Johnson and Libecap (1994)- showed that while salary caps might weaken bureaucratic control the budget, they also weaken the incentives for bureaucrats to respond to political pressures. (links back to Niskanen’s original budget maximizing model)
Lindsay(1976)- found that while bureaus will perform measurable outputs to their superior’s desire, they will exploit unmeasurable outputs for personal gain. (e.g. Veteran’s Administration) • Bureaucrats are risk averse and have the ability to adjust output to avoid some risks. • There really is no model right now that fully explains the relationship between bureaucratic behavior and their oversight sponsors.
Discretionary Budgets • Kress(1989)-after the approval of Prop 13 in California which cut real revenues per unit of output, bureaucrats improved the efficiency of their offices and revealed minimum cost; yet the discretionary budget rose still when bureaucracy's size was at risk.
Bureaucratic Inefficiency • When state and federal contract out to private firms for services, there is a substantial increase in cost savings and quality. • This is a result of bureaucrats being more expensive per unit than their counterparts in the private industry
Bureaucratic Behavior • Utility-maximizing individuals use advancing up the bureaucratic hierarchy as a motivator while also seeking relationships with those who are part of the promotion process. • Tullock(1965)- “The man who is a success in most political systems has had to cut corners, to lie, or at least distort the truth, and the engage in some back stabbing.” • Efficiency declines as you go from the top of the hierarchy to the bottom.
Entrepreneurial Competition • Includes general struggle for budgets as well as positions in the formal bureaucratic structure and the informal networks. • Strategies: • Changing information or commands as they make their way down the chain of command • Chaning the quality and quantity of information given to the media and other parties that would rival the bureau • Changing the speed of implementing policies
Informal Networks • Non-market institutions that ask for bureaucrats’ cooperation in exchange for information or benefits. (They try to avoid competition) • Networks require expected behavior • Bureau mangers also form informal networks within their offices, exchanging discretionary budgets for support within the office
Bureaucrats in a Dynamic Setting Bureaucrats have the ability to both implement and advocate policy Relative advantage in interest group competition Well informed Ability to appropriate lobbying costs Ready access to officials
Government Employee Unions • Play a considerable role in policy-making process • Ability to bring large numbers of voters to the polls • Contribute a large amount of funds to campaigns • Threaten to disrupt service that only they are legally allowed to provide • Selective distortion
Policy Advocacy: An Example • Creation of the FBN (Federal Bureau Narcotics) • 1914 Harrison Act established a Federal tax on narcotics • “Which to all intents and purposes, was established by the decisions of administrative officials of the treasury department” • In 1937 the Marijuana Tax Act was passed due to pressure from the FBN
War on Drugs • In 1984 the federal confiscation act was passed • All funds received from confiscations go directly to fund law-enforcement • North Carolina • When it became clear that law enforcement was using this law to circumvent state laws bureaucrats effected began to fight the law • In 1988 the Anti Drug Abuse Act was passed • But law enforcement advocates acted to overturn it and they were successful
Information • The release of both true and false information • 1937 marijuana legislation • Included remarkable distortions of the harm caused by marijuana, ignoring the findings of empirical inquiries
Bureaucratic Interests and the development of institutions • Bureaucrats are more than just policy advocates • Tullock states, “the individual member of a hierarchy is likely to feel, although possibly only subconsciously, that one of its major functions is that of supporting him personally” • The transformation from a spoils-system to a merit-based system
Due to the transformation the cost for unionizing federal employees dropped and the benefits rose • As jobs became more secure and the pools’ interest became more homogenous these benefits continued to grow • Unions began to act as interest groups, lobbying congress for legislative adjustments in civil service • As the unions grew the institutional environment was meant to reflect employees interest
Federal Mandate to make it so federal wages are comparable to wages in the private sector • Biasing of surveys • Successful lobbying also resulted in promotions and pay increases not based on productivity but based on job-tenure • All benefits received come at the price of the time put into obtaining these benefits and the funds used to pay for these benefits
Conclusions • Johnson and Lidecap suggest, “the major finding ... is that the president and the Congress are unlikely to make sweeping changes in the civil service system.” • This is the result of the political power of government employee unions
In addition to political strengths that prevent bureaucratic reform most control devices will have offsetting reactions • If you allow a large number of bureaucrats=high elasticity for the demand of bureaucrats • One result could be a greater efficiency • The likely result would be increase in power for bureaucrats resulting in even higher benefits
Another Example • Privatization or contracting out of bureaucratic jobs • In the right conditions this would result in a high demand and increased efficiency • In reality this is not probable • Bureaucracies are politically powerful interest groups • These interest groups regularly oppose contracting out • Tactics include: miss information campaigns, threats of violence, and disruption of the political process
Constraining Political Actions: The Only Solution • Tullock’s first proposal was decentralization • Greater emphasis on local governments where voters have more control • Result in higher competition between state and local bureaucracies • However trends are leading towards greater centralization
Second proposal • Significant reduction in total activities attempted by the government • For a country like the USA this would be very difficult • In actuality this is much like privatization and bureaucracies would have control to prevent this
The real problem with bureaucracy is unquestioned acceptance of the belief that government can solve most perceived problems, which allows bureaus to be established and expanded. Even when a problem is apparent there often are “non-bureaucratic methods for coordinating the activities of human beings” (Tullock)
Questions • Do you know of a government that functions with very little inefficiencies? • Would taking away tenure from bureaucrats cause them to be more efficient?
