The American Review of Public Administration Vol 30 Number 1


The Economics Of Public Administration

The Budget-Maximizing Bureaucrat: Appraisals and Evidence. By Andre Blais and Stephanie Dion (Eds.). Pittsburgh, PA: University of Pittsburgh Press, 1991. 366pp., Hardcover.

Handbook on Public Finance. By Fred Thompson and Mark T. Green (Eds.). New York: Marcel Dekker, 1998. 665pp., Hardcover.

Fiscal Administration: Analysis and Application for the Public Sector (5th ed.). By John Mikesell. Orlando, Fl: Harcourt Brace, 1999, 647 pp., Hardcover.

In reviewing these books, I noticed the remarkable influence of economics on public administration during the past two decades, which is particularly evident in the subfield of public budgeting. In fact, in discussing public budgeting, today I normally hear the term Public Finance, indicating economics used in connection with public budgeting, rather than the term Public Financial Management, indicating public management. Increasingly, professors who teach public budgeting have degrees in economics commonly combined with a public policy or public administration. In the not-too-distant past, this was not the case. Professors who taught public budgeting had a political science academic background with little or no knowledge of economics. Today, economics is a mandatory background for anyone teaching this subject.

Of the three books reviewed, the Andre Blais and Stephanie Dion book demonstrate how economics influences public administration theory. The Budget Maximizing Bureaucrat: Appraisals and Evidence is a must-read book because it clearly discusses the organization theory of William A. Niskanen (1971), who wrote Bureaucracy and Representative Government. In lauding Niskanen (1971), some say his book is “the most significant work yet produced by an
0economist on the role of bureaucracy” and that the book should “attain the status of a classic in the study of bureaucracy” (Mitchell, 1974, p. 1775). Indeed, Niskanen’s (1971) book is the most cited study on this subject (Bendor, 1988).

The impact of the Niskanen book us remarkable, especially in politically conservative circles. He intellectualized bashing the bureaucrat, which became the proper intellectual conservative elite thing to do, In turn, the media, politicians, and others scapegoated government workers for society’s problems with the radical fringe groups, in particular, chanting their hatred of bureaucrats.

What is important about the Blais and Dion book is that they used empirical information to test the Niskanen (1971) model that he based on public choice theory. Using empirical research done independently by several researchers on this subject, Blais and Dion found Niskanen’s (1971) theoretical model and his assumptions problematic. Niskanen (1971) makes two crucial assumptions in his theory. The first assumption is that bureaucrats attempt to maximize their budgets. A bureau is a nonprofit organization financed by an appropriation or grant from a sponsor, meaning a legislature in the case of government. In Niskanen’s (1971) theory, a bureaucrat is a senior career official in a bureau. Niskanen (1971) argues bureaucrats maximize bureau budgets because it benefits them due ti higher salaries, perquisites, reputations, power, patronage, output, ease of making changes, and ease if managing their bureau. Ninkanen argues a type of social contract exist between the top-level bureaucrat and the bureau employees. The employees support the bureaucrat, and the bureaucrat seeks higher bureau budgets, which increases the employees’ opportunities for promotion and enhanced job security.

The second assumption is that bureaucrats largely succeed is maximizing their budgets. Why are bureaucrats so successful? Niskanen argues that “the relative incentives and available information, under most conditions, give the bureau the overwhelming dominant monopoly power” (p.30). Politicians focus on reelection, and they do not view saving from bureau operations as personal income savings but as a political plus or minus depending on circumstances. Thus, unless a saving of taxpayer money becomes a popular issue for their reelection, politicians are largely indifferent to savings. Even if politicians find savings and increasing productivity useful politicians issues, often a lack of performance information from the bureaucrats that they or the public can understand handicaps them in making such arguments in political discourse.

Migue and Belanger (2974) amended the Niskanen (1971) model by asserting that bureaucrats concern themselves foremost with managerial discretion and that it is the discretionary budget that they seek to maximize. Niskanen (1975) conceded that Mingue and Belanger (1971) might also be correct. In the revised version of the Niskanen (1971) model, the bureaucrats still direct their efforts toward getting a larger bureau budget (Mingue & Belanger, 1974, p.46).

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