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This chapter introduces readers to the modern theory of bureaucracy, which emphasizes that in all hierarchical organizations, bureaucrats are at the same time both the superiors of someone and the subordinates of someone else. Unlike traditional models of bureaucracy, the modern theory assumes that the relationships between superiors and subordinates in bureaus are governed by the neoclassical economics principles of exchange and trade instead of by the issuing of orders and directives. In the modern model, subordinates offer “informal services” to superiors, who make “informal payments” to subordinates. Both trust and networks are accumulated over time by rational individuals who wish to trade with one another, leading to the kinds of efficiencies that made the Nazi apparatus of murder so effective.
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The relationship between superiors and subordinates, which depends on whether the superiors are politicians, entrepreneurs, owners, managers, or employers and the subordinates are deputy ministers, directors, managers, or ordinary employees, is the central focus of the Breton and Wintrobe ( 1982: 1–2) theory of bureaucratic conduct.
This proposition breaks down at only the very top or the very bottom of a hierarchical organization (Breton and Wintrobe 1982: 2).
As Breton and Wintrobe ( 1982: 2) point out, this is a view characterized by the mantra “obey, carry out, and follow.” This particular view stands in stark contrast to an alternative view positing that subordinates do whatever they want, pursuing their own goals and objectives. Superiors hold no (or little) sway in this view, which is consistent with the mantra “disobey, do not carry out, and disregard” (Breton and Wintrobe 1982: 2).
The complexity, extent, and influence of such informal structures are all under control of bureaucrats (Breton and Wintrobe 1982: 5).
See McManus ( 1975) for the circumstance that arises when the value and/or quality of the goods or services traded are difficult to measure.
As Breton and Wintrobe ( 1986: 910) put it in their more recent study, “[b]ecause of the nature of the services provided and because of the properties of the resources used in these superior-subordinate exchanges, the largest fraction of them will not be spot transactions, but sometimes the payment and at other times the services rendered will come first, with varying lags between the two.”
The two circumstances are developed from Breton and Wintrobe ( 1982: 63).
Breton and Wintrobe ( 1982: 64) explain, alternatively, that “in these exchanges the quid pro quos cannot be defined in advance, not because of ill will but because those who demand informal services do not know, at the time the services are required, what they will be able to give in exchange and/or when they will be able to pay their suppliers … [t]hus, bureaucracies are characterized by numerous outstanding loans.”
See Breton and Wintrobe ( 1982) for more on this particular approach.
As pointed out by Breton and Wintrobe ( 1982: 109), the tradition of the Austrian School that is used to model the competition between bureaus emanates from the work of Carl Menger, Friedrich von Hayek, Ludwig von Mises, and Joseph Schumpeter, to name a few, with the most specific and detailed elements owing to Schumpeter ( 1955, 1975).
As Breton and Wintrobe ( 1982: 112) explain, “Austrians other than Schumpeter define entrepreneurship as alertness to opportunities. In their view, the entrepreneur sees or grasps opportunities; he does not create them.”
Examples of Schumpeterian competition in the public sector include the New Deal of the 1930s, social security, nationalized healthcare, and others, the ideas for which, in some cases, originated with citizens’ groups, academics, social critics, the media, and private business rather than with the bureaucracy or with politicians (Breton and Wintrobe 1982: 111–112).
Recall that in the Breton and Wintrobe ( 1982) model of bureaucracy, over any given policy, subordinates freely choose whether to exhibit efficient or inefficient behavior, a construct referred to therein as selective behavior. It is worth noting here that the principal-agent theory, which focuses on separation of ownership and control (Tirole 1988), also represents a source of friction and inefficiency in this context.
This means that growth in productivity, Δ Q, will be positively related to changes in vertical trust, Δ T V, and negatively related to changes in horizontal trust, Δ T H (Breton and Wintrobe 1982: 133–134).
See Hashimoto ( 1979) for an explanation of this conclusion in the traditional business context (i.e., employers and employees).
See Breton and Wintrobe ( 1982: 135–136) for an in-depth analysis of the costs to the organization, of promotions.
The modern public choice view of rent-seeking, which can be defined as the use of resources in the pursuit of government favoritism or privilege (Tullock 1967, 1989; Krueger 1974; Posner 1975), described by Mixon et al. ( 1994), Mixon ( 1995), Laband and McClintock ( 2001), Sobel and Garrett ( 2002), Holcombe ( 2016), also includes various in-kind forms of rent-seeking, such as fancy restaurant meals, chauffeur (limousine) services, escort services, massage services, sports arena suites, business patronage, and discounted real estate.
Whether productivity rises or falls following an increase in turnover (i.e., X) depends on whether selective behavior, as determined by promotions and perquisites, is primarily efficient or inefficient (Breton and Wintrobe 1982: 138).
This relationship mirrors that for turnover among subordinates in a bureaucracy (Breton and Wintrobe 1982: 139).
On the other hand, if behavior is mainly inefficient, then ∂ Q/∂ X A > 0, which means that productivity rises with turnover among the superiors in a bureaucracy (Breton and Wintrobe 1982: 139).
In fact, Crisp and Mixon ( 2011) indicate that a reversal of only 32,733 popular votes would, if correctly placed, have given McClellan a 117 to 116 Electoral College victory in 1864.
Mixon and Treviño ( 2002) detail a similar, though unsuccessful, attempt by British Prime Minister Winston Churchill to win the national election in 1945 by preventing, rather than facilitating, the soldier vote (in the field).
This figure is adapted from Crisp and Mixon ( 2011).
Despite the lack of assurances on either margin, it can be inferred that a substantial degree of trust and loyalty existed, at that time, between Lincoln and those subordinates who provided the informal services that facilitated his 1864 election victory.
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- The Modern Theory of Bureaucracy
Franklin G. Mixon Jr.
- Chapter 2
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