Understanding Bureaucratic Behavior, Implications from the Public Choice Literature by Bruce L. Benson

1
Understanding Bureaucratic Behavior, Implications
from the Public Choice Literature by Bruce L.
Benson

• By Kyle Riach
• and Tim Shultz

2
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

3
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

4

• 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 1960s-70s

5

• 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.

6
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.

7
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

8
Niskanens 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 bureaus
  bargaining power was too strong, and that a
  bureaus sponsor had control over the bureau
• Niskanen accepted their ideas but found that
  changing the model in this case wouldnt work he
  concluded that control of the bureau should be
  imperfect

9
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.

10
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 Niskanens
  original budget maximizing model)

11

• Lindsay(1976)- found that while bureaus will
  perform measurable outputs to their superiors
  desire, they will exploit unmeasurable outputs
  for personal gain. (e.g. Veterans
  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.

12
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.

13
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

14
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.

15
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

16
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

17
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

18
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

19
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

20
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

21
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

22
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

23

• 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

24

• 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

25
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

26

• In addition to political strengths that prevent
  bureaucratic reform most control devices will
  have offsetting reactions
• If you allow a large number of bureaucratshigh
  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

27
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

28
Constraining Political Actions The Only Solution

• Tullocks 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

29
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

30

• 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)

31

• http//search.japantimes.co.jp/cgi-bin/eo20100211a
  1.html

32
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?