Review 3: Bureaucracy and Public Economics, by William A. Niskanen (1994)

C. Lowell Harriss,
Columbia University,
Presidential Studies Quarterly, Vol. XXV, No. 4 (Fall 1995)

Presidents operate through and with bureaus. The White House has its bureaucracies. The author, now Chairman of the CATO Institute, has observed and studied and served in bureaucracies for decades. He is a highly esteemed professional economist. Clearly, he brings to this subject unquestionable competence and deep conviction about the importance of the subject.

Readers of this Quarterly can profit from this volume - by using it selectively. The book brings together materials written over a long period during which Dr. Niskanen has modified his beliefs but without indicating in the earlier chapters (most of the book) how his conclusions of the past differ from those of 1994. The latter appear in a closing chapter, “A Reassessment, January 1993." (While reading, I had checked numerous statements for possible quotation, some calling for question marks. Today, the author himself questions some of the earlier conclusions but without revising the original wording to alert the reader.)

The original analysis assigns crucial importance to the assumption that a dominating objective of bureaucrats is to maximize the bureau's total budget subject to the constraint that it will pay for providing what the bureau's sponsors expect. (p. 42) Using this and other assumptions, the author uses algebra and geometry to develop formal theories of operation. This long section (in effect reprinting Bureaucracy and Representative Government 1971, a classic but without the freshness of modernity) requires effort whose fruits may not seem adequately rewarding. Pages 189-223 and “A Summary Agenda", (pp. 227-230), however, warrant careful attention.

The forces of bureaucracy lead to spending that is too large and essentially impossible to manage in the true interest of the public. More competition among bureaus, better incentives in bureaucracy, more competition with the private sector, and a reassertion of “control of the review process by the President and the legislative representatives of the median voters" (p. 228) can serve; methods of employing them are proposed at one or another place in the volume.

The author reports the results of some empirical studies as of 1975 plus brief but telling references to recent work. He calls for more research with “focus on the characteristics of the political environment in which bureaus operate." (p. 281)

Dr. Niskanen concludes, justifiably, that his original work has proved to be constructive but not conclusive, i.e., stimulative of valuable and creative analysis but in itself requiring modification. The original analysis of bureaucracy needed to be supplemented by integration with the analysis of potential sponsorship, e.g., lawmaking and legislative and executive review. Governments overspend and are inefficient - but only in part because of the ways of bureaucracies. The political process also has a major responsibility. The relative importance of the two has not been measured. Most new research “should focus on the characteristic of the political environments in which bureaus operate." (p.281)

“My long career as a policy zealot (a zealot for efficiency) has led me to conclude that efficiency in government cannot be much improved without changing the basic institutions and processes that affect the demand for and the supply of government services." (p. 275) Most of this book may not, really, contribute much in practice to advancing toward better government. But the concluding sections deserve respectful attention by anyone seriously interested in promoting improvement in what has become a major element in the way we live - government."