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Bureaucracy
& Inequality
BPV_APEC Public Economics
Jan Řezáč
04/11/2014
BPV_APEC Public Economics: Public Choice

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Lecture outline
nBureaucracy in Weber (normative)
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n
nBureaucracy in Niskanen (descriptive)
n
n
n(In)equality in the world
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Where does a bureaucracy come from?
nVincent de Gourmay (1765)
nBureaucracy suggest routinized and constrained behavior, and inefficiency.
nFrench bureau + Greek κράτος (kratos)
nWebster’s dictionary:
n„large group of people who are involved in running a government but who are not elected“
n„system of government or business that has many complicated rules and ways of doing things“
nPolitical science:
nGovernance through public offices, that consists of appointed, but not elected officials,
hierarchically structured and dependent on legitimate authority
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What is a bureaucracy?
nway of organization and management of public service
ncontinuous task fulfilling according to objective rules (no matter what political party governs)
nhierarchic structure
nsubordination & superiority
npublic offices behave like “non profit organizations”
nfinanced by a stable structure of subsidies
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n
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nThe empty hospital - Yes Minister - BBC comedy
n
nhttp://youtu.be/Eyf97LAjjcY
n
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Max Weber (1864-1920)
nGerman sociologist, philosopher and political economist
nWell know for the influence on social theory and theory of state
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nGave baseline to modern theory of bureaucracy
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Weber – social actions
nAffectionate action
nbased on emotions
nused by charismatic authority
n
nTraditional action
nbased on habits
ntraditional authority
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nRational action
nclear perception of targets
nrational-legal authority and structure = bureaucracy
n
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Weber‘s bureaucracy
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nBureaucracy is described as:
nhierarchic organization
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nwith almost military discipline
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nfollows precise and detailed inter rules, which also guarantee accurate and regular function
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n
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Weber‘s bureaucracy
nDecision making based on:
n
1.Rigid definition of functions and responsibility
2.
2.Stable rules and procedures
3.
3.Formal accuracy in details
4.
4.Top-down delegation of power
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Weber‘s bureaucracy
nOptimal bureaucrat behavior
nFollow contemporary rules and orders
nRules and orders are crucial for efficiency and success of the bureaucracy
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Weber‘s bureaucracy – sum up
nBureaucracy is hierarchic organization rationally coordinating work of many individuals among
large scale of administrative tasks.
n
nBureaucracy, according to Weber, is ideal rational management.
n
nIs based on precise objective rules, which cannot be influenced by a political power.
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Check on „ideal rational management“
n„At any one time some agencies are expanding and others stagnating. New agencies will set up in
competition with established bureaus. And complex hierarchical battles between agencies are
constantly in progress.“
n
n
nGet some patients - Yes, Minister - BBC
n
nhttp://youtu.be/x-5zEb1oS9A
n
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William A. Niskanen (1933-2011)
nAmerican economist
n
nOne of the creators of Reaganomics
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n1971: Bureaucracy and Representative Government
n
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Niskanen’s bureaucracy
nBureaucrat is a rational individual, like everyone else.
nMaximizing his utility
nf(U) = {income, reputation, number of subordinates, social status, budget size, benefits and
delights}
nFor bureaucracy is typical effort for continues growth of influence and size of the bureau
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Bureau characteristics - Niskanen
nOfficials cannot use the difference between income a spending for themselves – no motivation for
cost minimization. nIncome of the bureau is not based on demand and supply. nThe outcome of the
bureau is difficult to measure and compare.
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n
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Class activity
n
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Government failures
1.Limited information
nConsequences of many actions are difficult to foresee
nOften the government doesn’t have information it needs
2.Limited control over private responses to its actions
3.Limited control over the bureaucracy
nThe government issues decisions but it’s up to government agencies (bureaucrats) to implement them
nHave you heard of any examples of sabotage?
4.Limitations imposed by political processes
nInfluence of interest groups
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nIf the right people don't have power - Yes, Prime Minister - BBC
n
nhttp://youtu.be/gmOvEwtDycs
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Capital in the 21st Century
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nWritten by Thomas Piketty
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n700 pages long book filled with statistics
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nAn unlikely bestseller
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R or G?
nr = return on wealth
ng = economic growth
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What is higher? R, or g?
nIn the period 1914 – 1970, g was substantially higher.
n
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nBut in the long term, the period around two world wars seems like an exception.
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nPiketty argues for r > g
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If r is higher than g, what are the implications?
nRich get richer.
nInequality on the level of the 19th century
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n
n
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Is that a problem?
n„Rising tide lifts all boats.“
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nPossible remedies for inequality bring a lot of troubles on their own.
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nHeirloom tax, capital gain tax.
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