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Tuesday, June 21, 2011

Three Views of Bureaucracy (Part 2)

The Department for Administrative Affairs
I was recently reading an article about Greece’s debt crisis in one of the newspapers, when I came across the grimly hilarious story of the Lake Kopais project. A government agency was set up in 1950 to drain Lake Kopais to make way for a road. The project was completed in 1957 and Lake Kopais no longer exists. But the government agency charged with looking after it still does. It employs thirty people and regularly advertises job openings. Auditors confess they have no idea what the people who work there do.

Some time ago I was strolling with my wife and we walked past a building housing the Multiple Sclerosis Society. Or it might have been the Canadian Diabetes Society. I can’t quite remember, and it doesn’t really matter. I asked my wife rhetorically what she thought would happen if a cure was found for multiple sclerosis. Would the MS Society disband? I opined that they would probably find a new reason for existence. Too many people in the organization depended on the salaries it provided. My wife thought I was being cynical. She was probably right. But then again, there is much in this world to be cynical about.

Gordon Tullock

Gordon Tullock would agree with me. He would say that in the event of a cure being found for multiple sclerosis, the MS Society is likely to find a way of perpetuating itself. However, at least the MS Society has a laudably concrete goal. The goals of many bureaucracies are either ill-defined or open-ended. Tullock notes that many bureaucracies are founded upon a mistake: they are set up to attain an objective, but after awhile it becomes apparent that the objective is unattainable by bureaucratic means. An example might be the “war on drugs”. Most of the answers to the “drug problem” involve changing markets and incentives, not by imposing enforcement and expanding government power. However, once the inability becomes apparent, rather than dismantling itself, the bureaucracy simply changes its objective. In effect, it moves the goalposts. Perhaps some day, when it admits the war on drugs is lost, the Drug Enforcement Agency (DEA) will become the Drug Education Agency, changing its activities just enough to stay in business. What we are unlikely to see is the disappearance of the DEA altogether.

In addition to the “moving the goalposts” strategy of bureaucratic self-perpetuation in the face of failure, I would add the “mission creep” strategy in the face of success. An example of this would be where an agency is set up to, say, fund research into finding a cure for some public health problem, say disease X. If the bureaucracy is successful, rather than disbanding, it is more likely to extend its mandate into other areas, like a cure for disease Y. This could be justified on the grounds of its previous success in eradicating X. This would be likely to happen in the case of the MS Society. As a matter of fact, the historically-minded would note that many a government agency’s current activities bear little relation to the activities it was set up to undertake, and for which it was named.

Both “moving the goalposts” and “mission creep” are two aspects of a more general phenomenon we might call “bureaucratic drift”. Tullock sums this up:

“As an experiment, if one examines the original arguments for the establishment of almost any government bureau and compares these arguments with those that may be currently offered for the retention of this bureau, one is likely to find that a considerable shift has occurred in the specification of the objectives that the bureau is supposed to attain. The governmental bureau becomes the permanent fixture, with the objective continually changing. Over time the vested interests of the bureaucrats themselves become more and more important in justifying the organization, although this can never be the sole argument in discussion with outsiders.” (p. 204)

As a matter of fact, they may never discuss it candidly even among themselves. The teachers’ union I once worked for was ever fruitful in devising and lobbying for new programs and policies, professedly for the betterment of children’s education, even though most of these seemed perversely designed to gradually destroy education. But what every one of those programs and policies would be successful at is creating more well-remunerated jobs for dues-paying union members. This is one way in which schools have become institutions in which actually educating children has become a small sideline activity.

There was of course a tension here, for although the union’s original raison d’être is presumably to advocate for the material interests of its members, from an individual member’s point of view it can easily seem like proportionately very little of the union’s time is spent furthering this objective. Instead, it seems to spend more time advocating for its pet educational theories — as if there didn’t already exist a Ministry of Education for this purpose. The union I worked for walked a tightrope between making it seem to its members as if it was looking out primarily for them, while making it seem to the government that it was working for the schoolchildren of Ontario. In reality, it was working for itself, and it did this by alternating between these two modes of activity, gaining for itself a broader legitimacy through an expanded mandate.

Before continuing, a word or two should be said concerning Gordon Tullock and the tradition in which he works. Tullock is a co-founder of the “public choice” school of economics and political theory. The distinct approach of public choice is to use the methods of economics to model non-market (e.g. political) decision-making. For example, rather than viewing the agencies of government as operating at the behest of a benevolent despot in order to provide services that benefit the common good, public choice begins with the assumption that individuals are self-interested. And since bureaucracies are collections of individuals, it would be strange if bureaucracies did not exhibit self-interested behaviour too. And the supposedly benevolent despot (i.e. the government) is also just another self-interested player in the game. Seen this way, we should expect bureaucracies to behave in ways that are irrational or perverse when seen from the viewpoint of the common good, but that are perfectly rational when seen from the viewpoint of their self-interest.

This approach is seen in the first of Tullock’s two books on bureaucracy, The Politics of Bureaucracy (1965). There, he uses the methodological individualism of public choice economics to examine the behaviour of individuals within a bureaucracy. Remember that previously I used the image of male peacocks’ feather to illustrate von Mises’ view of the selection pressures within bureaucracies. Tullock’s view is similar, but more nuanced. He begins with the analogy of a device that filters uranium 235 from heavier uranium 237. When it enters into a chamber, a gas that contains both U 235 and U 237 will pass through a filter. The filter is often not fine enough to stop some U 237 from passing through it, but nevertheless, at the end of the process, the resulting mixture will contain more of U 235 relative to U 237 than would be expected in an average amount of uranium. When the process is repeated, a little more U 237 is removed. After it passes through enough chambers, the result should be virtually pure U 235.

Similarly, a bureaucracy can be envisioned as a process with a number of chambers through which members pass. The contents of the chambers higher up in the chain tend to be composed of a certain type that has been selected for by the nature of the system, the U 235 of the bureaucratic structure. What is this type?

Beginning at the lower rungs of the bureaucracy, we can envision a mixture of people: some are purely self-interested and ambitious, some might be idealists who identify strongly with the putative goals of the organization, and other will have mixed motivations. It is natural to suppose that those who are highly motivated to pass up through the ranks (i.e. the self-interested and ambitious types) will be more likely to do so. It would be nice to think that every boss rewards competence, but in reality he is just as likely to reward those able to please him, either through unquestioning loyalty, charm, or something more intangible but equally unrelated to organizational goals. In deciding who to promote, the bosses are likely to look for what in civil service terminology was once called the “sound man”. The sound man is not always or even often the best man (or woman, as the case may be) for contributing to organizational goals. But he is often the best man for fitting in nicely with the boss’s own goals. Remember, everyone is presumed to be self-interested in this model, bosses included.

Now, this does not mean that bosses like to reward schemers and knaves. They want people they can trust and would not knowingly promote the dishonest. But in large bureaucracies, surveillance is costly, and bosses are often wise to avoid damaging morale by watching the activities of subordinates too closely, as most people don’t like being assumed to be dishonest. The long and short of it, as Tullock notes, is that “it is impossible to design a system that will select against the man of relatively low morals. This is because the intelligent but unscrupulous man will always assume the morally proper course of action if, in fact, this should be the one that is most likely to be successful” (p. 26). In other words, most of the time, a certain minimal level of moral conduct is required, and both knights and knaves can do well enough in such situations. However, when a situation arises where the unscrupulous action will be rewarded, the knights balk while the knaves rise to the occasion and are promoted accordingly. Thus, Tullock contends that bureaucracies select for people of relatively low moral character — not for monsters mind you, but for a certain moral flexibility. Over-scrupulous angels and under-scrupulous devils are weeded out in favour of minimally scrupulous “flabby devils” (to use Joseph Conrad’s term). The optimal bureaucratic type is she who can make herself trusted most of the time, while taking advantage of opportunities available through occasional immorality.

Besides selecting for low moral character, Tullock claims that bureaucracies also select for intelligence. As you move up the bureaucratic hierarchy you will tend to encounter proportionally more intelligent people than in the lower levels. For example, imagine a boss who prefers to promote subordinates who are less intelligent than himself. You might assume this would mean that dumb people will rise to the top. But this is not so. Although he may promote stupid people, the boss is just as likely to promote smart people that are good at playing stupid. Furthermore, over the long run, those whom the boss promotes will not always have him for a boss. They might eventually acquire a new boss who likes smart people. Thus, the smart person who was acting dumb can now act smart, while the dumb people cannot similarly switch gears. They will be weeded out. Even the boss who prefers dumb subordinates will occasionally need them to do smart things from time to time, and only the smart person can pull this off.

However, when Tullock says that bureaucracies select for intelligence, he does not mean that having more smart people filtering up through the system will make the bureaucracy that much more efficient. This is because the “intelligence” in question has more to do with understanding what will please superiors than with understanding how best to carry out the functions of the bureaucracy — two quite different things. And remember, as it selects for intelligence, bureaucracy is also selecting for low moral quality. The end result is clever careerists who aren’t overly concerned about how much value they add to the organization but are very concerned with what value they get out of it.

The bulk of the rest of The Politics of Bureaucracy is devoted to the internal perspective of either the individual “reference politician” within the bureaucracy who seeks to advance up the hierarchy, or to the “sovereign” or boss, who does the managing and promoting. The latter encounters inevitable limitations on his surveillance and information processing capabilities. He can’t know everything or be everywhere all the time, so the larger the bureaucracy, the less he can know about what goes on, and the more time subordinates devote to activities to which the boss is either indifferent or opposed. To get around this problem, competent supervisors develop strategies to gain knowledge of what everyone is up to while minimizing the time and resources he must devote to this task. For example, rather than rely on his direct subordinates for information, he may develop a relationship with one or more people far down in the hierarchy, so that he has eyes and ears on the shop floor or the mailroom, thereby bypassing his dependence on direct inferiors who have every incentive to tell him what he wants to hear rather than what he needs to hear. Of course, what he is often looking for is information that will help his own career, not primarily information that will help the organization run more efficiently. In all, much of The Politics of Bureaucracy reads like Machiavelli’s Prince for bureaucrats.

In Economic Hierarchies, Organization and the Structure of Production (1992), Tullock deals with the inefficiencies that result from the dynamics of bureaucracy and its growth. As we saw in the previous post, Galbraith took note of the fact that bureaucratic structures are not confined solely to the public sector, but that large profit-making corporations have their bureaucracies too. This seemed to put the lie to von Mises’ notion that there is a strict demarcation between efficient profit management and inefficient bureaucratic management. For his part, Tullock doesn’t deny that business can be bureaucratic. However, he notes that corporations are subject to a kind of pressure that government agencies are not: when a corporate bureaucracy becomes bloated and inefficient the corporation in question becomes a takeover target. And when it is taken over, the new owner is most likely to realize efficiencies (i.e. profit from its investment) by shedding excess workers and streamlining operations.

Thus, on this point Tullock is somewhere between von Mises and Galbraith. Like Galbraith, he doesn’t deny the existence of private sector bureaucracies, though unlike Galbraith, he doesn’t see bureaucracy as something relatively benign. But more in the vein of von Mises, Tullock believes in a fundamental difference between public sector and private sector bureaucracies: the latter must sooner or later bow to the pressure to become efficient. This will happen either through the company getting its own house in order, or else through another company doing it for them. But Tullock’s process is messier: any bureaucracy, whether corporate or governmental, will display the same kinds of inefficiency, the only difference being that the former have a rough mid-course correction imposed on them from time to time.

Some Concluding Thoughts

Although I recognize many of my own experiences in these accounts of bureaucracy, I can also say that some realities are overlooked. For example, it is simply not the case that all members of a bureaucracy are exclusively or reliably self-interested. Some are. But many are willing, at least under the right circumstances, to undergo considerable self-sacrifice to achieve their organization’s goals, often because they identify personally with those goals.

Of course very few of us are completely altruistic. Most of us have mixed motives for the things we do and the choices we make. If I have a choice between accepting a position with organization X whose goals I identify with, or one with organization Y whose goals I despise, other things being equal I am more likely to work for X. This indicates that self-interest isn’t the whole story. The relative role of self-interest in my motivations will be indicated by how much of a pay premium Y would have to offer to get me to work for them instead of for X.

Also, times have changed somewhat since these accounts were written. Due to calls for retrenchment in public finance, many public sector bureaucracies experience budgetary pressures under which even private sector organizations would buckle. In many respects, the university faculty I work in carries out its functions under almost crippling austerity. This is not to say that they never misallocate resources, for sometimes it seems that they would be willing to spend $10,000 in order to save themselves $5,000 in the name of fiscal economy. My point is that some of the pressures that von Mises and Tullock believed made private sector bureaucracies more efficient than public sector ones can be brought to bear on the latter too.


GALBRAITH, John Kenneth. The Affluent Society and Other Writings, 1952-1967. New York: Library of America, 2010.

MISES, Ludwig von. Bureaucracy. Indianapolis: Liberty Fund, 2007.

TULLOCK, Gordon. Bureaucracy (Selected Works, Vol. 6). Indianapolis: Liberty Fund, 2005.

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