mppo - 1 - control of bureaucracy
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8/8/2019 MPPO - 1 - Control of Bureaucracy
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MPPO: Agency Theory
John Burns
PPA/HKU
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Outline
Theories of control of bureaucracy
Rational choice approach
Agency theory
± Critique
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Theories of control of the
bureaucracy What is the bureaucracy?
Assumptions of this approach
±
Politics and administration are separate anddistinct
± Politicians should control the bureaucracy
Domains: mission, policy, administration,
management
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Who controls the bureaucracy?
Bureaucracy
± Street-level bureaucracy; highly autonomous
Politicians
± Assumed by democratic theory
Interest groups (Capture theory underminedby deregulation; e.g., telecoms in HK)
Clients (Capture theory undermined byempirical cases; e.g., cutting CSSA in HK)
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Collusion: US bureaucrats in bed
with oil industry From 2002-06 19 US Interior Dept employees
who oversaw oil drilling on federal land had
sex and used illegal drugs with workers of
energy companies where they were
conducting official business
Employees socialized with and received a
wide array of gifts and gratuities from oil andgas companies.
Source: SCMP 12 Sep 2008.
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Is the bureaucracy out of control?
Empirical evidence from US says no(Frederickson & Smith, p. 32, 35) Finding: Bureaucracies are responsive to politicians and public
opinion
What about HK? ± Pre 1997; 1997-2002; since 2002 (Principal Official
Accountability System [POAS])
Yet, agency theory assumes that control of
bureaucracy is a major issue ± Bureaucracy hoards information, seeks autonomy,
shirks
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How to view the nature of human
beings?
Altruistic, public spirited, etc or
Rational
±
Seek to protect own interest, especially in conflictwith the interests of others
± Utility maximizing
Boundedly rational
± Limited information
± Limited capacity
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Former RTHK official guilty of fraud
Former RTHK assistant programme officer has
been found guilty of fraudulently claiming
HK$116,200 in copywriting fees from RTHK in
the names of her mother and brother.
SCMP 16.5.2008
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Agency problems at RTHK
November 2007 Former DJ Roland Leung Yik-lun convicted of conspiracy todefraud over HK$10,600 in bogus claims for scriptwriting and research fees.Pleads guilty and ordered to perform 150 hours' community service.April 2005 Former programme co-ordinator Cheung Kin-man, 27, and friends HoYuen-yi, 34, and Yu Siu-kei, 35, are convicted of conspiring to defraud RTHK of
HK$740,000 by rigging tenders for production contracts. They receive suspendedtwo-year jail sentences.December 2004 Former senior programme officer jailed one year after earningmore than HK$400,000 from renting out a flat bought with government subsidies.October 2002 Richard Tsang Yip-fat, former head of classical music channel Radio4, found guilty of two counts of misconduct in public office. He is given a four-
month suspended sentence for disguising pay rises to two employees as paymentsto freelance workers.October 2002 Former head of RTHK new media section Amy So Tik-kar receivesdisciplinary action for not following rules on expenses claims.July 2002 Former producer George Mak Che-kin receives 16-month sentence for cheating the station out of almost HK$250,000.
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Rational choice
Assumes rational self-interest is the primarymotivation of purposive action ± Individual utility maximization
Know preferences; can rank them; if given a choice will choseoption that fulfills preferences at least cost
Individuals pursue their goals in most efficient manner given costly inf ormat i on
Individuals are foreword looking anticipate the effects of their actions and actions of others on their welfare
±
Methodological individualism All collective decisions and actions are aggregation of
individual decisions and actions
Collectivities have no properties of their own
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Rational choice assumptions about civil
servants
Seek to maximize own utility, not neutrally
competent
Want to maximize own life time income, power,
leisure
Lack perfect information, so are incapable of
effectively pursuing public interest even if some
altruism
Have no policy preferences
How w ell does thi s pi ctur e fi t civi l ser v ants in HK?
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Do bureaucrats have policy
preferences?
y Policy preferences of administrators likely tobe moderatey Civil service attracts the risk averse;y Top officials select out extremist juniorsy In spite of policy preferences, incentives & sanctions
influence actual behavior y What if
y Police salaries were completely determined by fines,traffic tickets and the like
y Hong Kong?y Radio Television Hong Kong (RTHK); Environment;
Highways?
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Criticisms of rational choice
Elegant, logical
But
±
Doubts about assumptions Incomplete assumptions (individuals sometimes
altruistic)
As normative theory equates market with democracy
± Mixed empirical support
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Criticisms of rational choice
What are bureaucrats maximizing? Are budget maximizers, but dont benefit from this
Some studies have found bureaucrats to be budget minimizers Or maximize control over budget, not absolute size of budget
How responsive are bureaucrats? Evidence that bureaucrats are highly responsive to
politicians and public opinion (e.g., withdrawal of consumption tax proposal in HK)
Assumptions too narrow, fail to recognize thatbureaucrats may seek to maximize the publicinterest, professional or ethical norms, or avariety of group motivations that threatenmethodological individualism
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Alternatives to rational choice
Public service motivation (PSM)
± an individuals predisposition to respond to
motives grounded primarily or uniquely in public
institutions
± Motive such as altruism, public spiritedness, care
for others
For research see Perry and Wise (1996).
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PSM
Individuals may join public organization for
variety of reasons
± Rational
Working in public sector advances self interest
± Normative
Working in public sector is good or ethically correct
± Affective Working in public sector is emotionally fulfilling
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Research on PSM
People with higher PSM scores tend to seek jobs in
public sector
PSM correlated with job satisfaction in public sector
People with higher PSM scores tend not to be
motivated by more material rewards
Implications for us
±
Will typical agency strategies be effective if assumptionsabout motivation are wrong?
See Gabris & Davis in Hays, Kearney, Coggburn (2009)
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Still
Assumption that individuals (including civil
servants) maximize their own utility is widely
held
We recognize that the assumption doesnt fit
reality perfectly
We recognize that we are si mpl if y ing r eal i ty in
a search f or ex planat i ons f or civi l ser vi ce
behavi or
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Agency theory
Sees principals (supervisors) and agents
(subordinates) in a contractual relationship
characterized by
± Conflicts of interest (because each is self-
interested)
± Information asymmetry (e.g., doctor and patient)
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Principals and agents in HK
Assumed motives want to maximize income
+ leisure (some research support in HK)
General lack of policy preferences
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Agency problems
Principal (supervisor) depends on agent toimplement policy
But agent may not do it because of conflicts of interest between them ± Hidden information (adverse selection)
± Hidden action (moral hazard)
So, principals (supervisor) takes action (adoptsstrategies) to reduce these problems
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Supervisor responses
Careful selecting, monitoring, sanctioning,
tolerance
Designing incentive systems to reduce agencyproblems, that is, encourage working and
reduce shirking
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These actions entail agency costs
Costs of selection and monitoring officials
Costs of ex post corrective devices (rewards,
sanctions, legislative direction)
Costs of any noncompliance that produces adifference between the policy enacted and asimplemented
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Critique of agency theory
Assumption of single principal is unrealistic
± Multiple principles (which is primary? Unclear)
± Possibility of goal conflict among principles(agents choose among different principal goals?)
So, bureaucrats build coalitions, look for support for apolicy
Incentive for bureaucrat to leak or share information(so not pure information asymmetry)
So, information asymmetry may not be as common asagency theory assumes
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Critique
Supervisors also have their own information,expertise advantages
± Consider AOs and technical experts
± So, level of information between principals and agentscan vary
Why assume goal conflict?
± Principals and agents may or may not agree onpolicy why assume disagreement?
± Principals and agents may cooperate
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Critique
Should treat information asymmetry and goal
conflict as independent variables something
to be investigated and empirically verified.
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Conclusion
In spite of criticisms, agency theory offers a
useful analytical framework
± Often is information asymmetry
± Often is goal conflict
± If there is, what implications does this have for the
behavior of civil service?
We use agency theory in this course but aremindful of its limitations
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