What insights does bureaucratic theory give us about how government should be organised and what it should attempt to do?

Downs’s pluralist model of bureaucracy stresses the organisational limitations of a hierarchical bureaucracy.

1. Officials at each stage of a hierarchical command structure filter the information they pass upwards to defend their self-interest. Therefore the controlling authority never knows precisely what the bureaucracy is doing.
2. As a bureaucracy increases in size, its resources are increasingly consumed in internal management and control. Therefore fewer resources are available for task implementation.
3. Officials delay implementation of policies that affect them adversely, and accelerate those which benefit them. Since it is difficult to know the precise effect of many policies, this results in a marked resistance to speedily implementing any policy – the status quo is always preferable. Therefore the bureaucracy will always frustrate change.
4. Any attempt to impose control one large organisation tends to generate another. Therefore bureaucracies naturally tend to expand, as additional layers of management are created in an attempt ton control them.
5. Bureaucracies fight among themselves for resources and responsibilities. Conflict is inherently inefficient.

Niskanan’s theory of bureaucracy is based on the standard neo-classical assumption that rational individuals seek to maximise their individual well being. In a bureaucracy this is best achieved by increasing the size of the agency, since increased size leads to more prestige, more responsibility, higher remuneration, more perks and greater scope for promotion. Therefore, an individual bureau will seek to maximise its size (budget) within the constraints set by the controlling political authority. If the external authority is weak or fragmented, as is often the case in western democracies, or lacks detailed information on the costs faced by a department, then it can be relatively easy for a determined bureaucracy to increase its size.

Consequences of Bureaucracy

Bureaucracy may be seen as economic activity, since it uses inputs, processes them, and produces an output. However, virtually all economic processes ultimately exhibit diminishing returns to factor inputs, causing marginal benefits to drop below marginal costs. If rational bureaucracies have an incentive to maximise their budgets, and are subject to weak or fragmented political control, then it is highly likely that they will continue to expand their output of services, beyond the point where social benefits equal social costs, creating waste. In an extreme situation, a powerful bureaucracy may expand its output to the point where waste exceeds consumer surplus, and thus actively lowers social welfare.

The problems inherent in any hierarchically structured organisation almost guarantee that it is impossible to control a bureaucracy effectively. Information from the bottom of the hierarchy is so filtered by the time it reaches the top that it is devoid of all meaning, and orders from the top are so diluted by the time they reach the bottom that they are totally ineffective. Therefore, a weak political authority can neither direct the bureaucracy, nor know where it is heading, and all attempts to increase control over it result in its expansion.

Conclusion

Unless a bureaucracy is under firm political control at all times, in the absence of any commercial pressures, it will inevitably become less and less efficient at administering any given area of economic activity, and more and more skilled at obstructing policies it regards as disadvantageous. Given that political control is inevitably weakened every time that a new political agent is given responsibility for the department, it may prove to be impossible to keep a bureaucracy under firm control. Therefore, if radical inefficiency is to be avoided in government, the scope of activities that bureaucracies are responsible for administering must be severely curtailed. Where bureaucracies are permitted, the lines of political control must be very clearly drawn to ensure that there are clear chains of command, otherwise a bureaucracy may seek to weaken oversight by playing political agents against each other (See “Yes Minister” and ”Yes Prime Minister”). Essentially, this boils down to the Thatcherite critique of bureaucracy – all departments are too large, and too inefficient. Therefore, government should only seek to supply those goods/services which the free market is completely incapable/unwilling to supply – pure public goods.