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Book Review

on

THE PUBLIC SECTOR

Concepts, Models and Approaches

By

Jan-Erik Lane

Md. Ahasan Uddin Bhuiyan Dept. of Public Administration

University of Dhaka

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The Public Sector: Concepts, Models and Approaches

By Jan-Erik Lane

The Third Edition

SAGE Publications, Feb 28, 2000

368 pages

Introduction : In the book “The Public Sector”, Jan-Erik Lane discussed entirely about

various aspect of Public administration. He traced back the root of Public Administration and

illustrated the long of it to come till Public Choice phase. He entirely gave glance at the organograms of the government, reform initiatives to cope with politico-economic global stance as well as suggestions about the acceptance of the is and the tough meaning the

normative and theoretical part of administration . Besides, introduction and conclusion parts,

the book fourteen distinct chapters containing fourteen different issues.

As a part of my regular academic activities under the course “Public Administration : Theories

and Debates (PA-511)”, I was assigned by Dr. Ferdous Arfina Osman, my honourable course

teacher , to review the book “The Public Sector ” written by Jan-Erik Lane .

Hope, this review with will give a compact and clear notion about the book.

Chapter : Introduction- Public Institution and Interest

According to traditional public sector model, politicians’ pursued public interest as they were

in the normative side and effective bureaucrats implemented that. In liberal democratic society, economies are divided into public and private sector where public sector deals with

interest of total citizen and politics, bureaucracy etc. organization are related with that. On the

other hand, private sector deals with individual’s interest where market is related. Proper

policy making and implementation which is obstructed by unclear and ineffective structure

and principles.

In order to understand how public sector operates, information is as important as institution

and interest. Adequate and correct information needs to effective accomplishment of any kind

of programs. But it is shown that due to various difficulties, exact information is quite tough to

collect. Due to private motivation, there is no possibility to make shard distinction between

public and private role of administrators. They maximize private utility function besides public

role which cannot ensure efficiency. But these can possible through participatory decision

making and job satisfaction. Public sector runs through various types of institution, where it

has to maintain proper balance between “population and leaders”-“government and agencies”.

In the different chapters of this book, distinctions of traditional public administration and post -

public administration have been described elaborately. Lacking of old principles were

highlighted through new principles faults have been tried to minimize. Finally alternative

conceptual schemes have been modeled to ensure efficiency and equity.

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Chapter-1 : DEMARCATION OF THE PUBLIC SECTOR

h nIIetnaIc sihnsIincesIhhnhrn sIin hhtn search for the variety of meanings of 'public sector' by

focusing on the rationale of criteria that are employed to make a distinction between the public

and the private sectors. nW hat the expression 'public sector' stands forn ?An wedin hc gin hrn

dire eseh tnac n inrhe dnteaInct-

Definition 1: Public sector nn= Government activity and itsnconsequences.

Definition 2: Public sector nn= State general decision-making and its outcomes'

Definition 3: Public sector nn= Governmental consumption, investment and transfers

Definition 4: Public sector nn= Government production

rIitindire eseh tn iicdtnetn shn hh iionhrndisihoe e gn sIincasecintelinhrn e ieantiashh .nRaising problems such as- The problem of individual freedom; The allocation problem; The

distribution problem; The production problem; The ownership problem and the problem of

bureaucracy.

According to Jan-Erik Lane, there are two methods for thenconduct of affairs within the frame

of human society, that is, peacefuln cooperation among individuals. One is bureaucratic

management, then other is profit managementn .There is no compromise possible between

capitalism, the market system c dn socialism, communism, planned economyn .Hhwivihn ,the

two collective choice mechanisms - public budget-making and the market - have their own

areas, which may be combined without conflict.

Here he identified definition of various terms, including :-

Non-excludability : It implies market failure because it is only one side of the more general concept of non-appropriability or externality, which means that the price

mechanism cannot be employed to appropriate the full social benefits or charge the full

social costs.

Jointness : It implies market failure, because if everyone may consume a good or

service, then why charge a price if the marginal cost is zero?

Merit goods : The identification of merit wants opens up the possibility of extensive public policy-making to replace market behaviour and market outcomes.

Efficiency : Efficiency argument is supposed to govern the size of the public sector in the allocation interpretation, whereas the equity argument expressed in a social welfare

function is assumed to solve the problem of arriving at a size for the public transfer.

Equity : The standard approach to equity is to argue that efficiency considerations are necessary but not sufficient for the derivation of a social state. Market cannot afford

these equity principles. So, we need political criteria that will inform us as to when it is

proper for a majority of citizens to implement a social welfare function against the will

of the minority.

nctidn h n c hvin dire eseh n sIin cesIhhn sIi n oi seh idn sIcsn on-appropriability and non-

subtractabilityn ,non-excludabilityn could notnpossibly be a sufficient criterionn .The criterion of jointness is a type criterion, not an amount criterion. Therefore, according to him, we must

move to a relative comparison of the pros and cons of each allocation mechanism. The mere

existence of market failure is not a sufficient condition for public sector programmes, because

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there may also be policy failure. Markets have their revenue logic but the revenue aspect of the

public household is much less impressive. The criterion of justice, specially for taxation

decision, may be interpreted in different ways, depending on the position taken with regard to

the troublesome concept of social justice.

The weakness of the micro-solution public policy ocmn drive outn markets if there is no

awareness of the danger of policy failure or the nweak financial restrictions on policy-making.n

One macro-solution could be to tie public sector growth to economic growth so that the

public-private balance will not be upset. A constitutional spending limitation decision would

curb those forces conducive to over-expansion in the public sector.

Chapter 2- Concepts of Bureaucracy

Referring Weberian model , Eric started this chapter with drawing the distinction between

bureau & bureaucracy, where the first one is characterized by economic inefficiency, irrational

operations and unambiguousness and the later one is delineated as a theoretical term, referring

to Max Weber’s ideal type of bureaucratic characteristics, such as- rationality, efficiency,

formal institutional structure, rigidity, impersonality, job specialization etc.

As it is known to all that, Weberian model laid the foundation of bureaucratic concept, but it

was hugely criticized by post Wrberian theorists for its dysfunctions. For example- bureau

officials don’t bother much about efficiency and productivity; over emphasis on technical

expertise would make experts extremely authoritative which may raise tension between

administrative personnel & professionals etc. Throughout this chapter such criticisms of

Weber’s ideal type of bureaucracy have been shown along with post Weberian concepts, by

referring bureaux (bureaucracy) in different terminology, as like-

“Bureaucracy as Bemtenherrschaft” (German term of “Bureaucracy”) suggests that,

instead of age-old public-private conflict, interpenetration of the public & private may strengthen “Bemtenherrschaft”. Public Interest Government (PIG) is another term here

to support public-private cooperation and to break traditional concept of bureaucracy.

“Bureaucracy as Chaos” basically referred to a post Weberain model named “Garbage

Can Model”. This model identified how bureaux fail when they don’t know what they want or how to go about doing things. It was a radical rejection of Weber’s model.

The point-“Bureaucracy in Economic Organization Theory” focuses on few special

problems regarding hierarchy, such as- public hierarchies can’t be seen as the most efficient way of handling the transactional problems involved in supplying public

services.

As a post Weberian theory, Public Choice Model has received attention in this chapter, which

emphasized on the strategic advantages of the bureaux and employed for the purposes of

opportunistic behavior. Another bureaucratic model was suggested by Niskanen, which

indicated for a shift towards less bureaucracy and more market operations.These studies don’t

corroborate the characteristic of size maximization of bureaucracy either, because “Growth” is

observed as risky factor for causing disaster in bureaux.

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At the end it is evident that, all models & concepts other than Weberian rationality model

refute the existence of the basic properties of bureaucracy and thus modern bureaucratic

behavior is characterized by- in efficiency, irresponsibility and wastage.

Chapter 3 -Public Policy Models

This chapter analyzes various available models of public policy making by dividing into those

that approach decision making and implementation as a function of the environment or

external factors and theories that model the policy-making as a result of internal processes.

Model choices can be based on criteria like simplicity or aesthetics, deductive power or

theoretical coherence or understanding in terms of social science models is achieved by means of a pattern type interpretation or in terms of the realism of their assumptions. Various models

of the policy process perform differently according to the evaluation criteria.

Rejecting or accepting model : Rejecting or accepting a public policy model it may be pointed out the type of situations where a model performs well and the situations where

it is inadequate.

Evaluating Model : Evaluating Model is a complex task as the models score on criteria such as deductive power, falsifiability, degree of confirmation, coherence, simplicity

and practical usefulness. Selection of evaluation criteria is not simple.

Demographic Approach : ‘Policy-making is a result of the environment’ this was the basic idea of policy analysis in the early period. Demographic Approach was supported

by many intellectuals till the mid-1970s, as early environmental studies scored high on

model evaluation criteria - the degree of empirical confirmation. But eventually it has

met with more and more criticism. In the demographic approach it was difficult to

identify both the dependent and independent variables. But it cannot be denied that,

while acknowledging its weakness from a theoretical point of view, the demographic

approach located an aspect of some types of policy-making. The demographic model

appears to satisfy data on cross-sectional or longitudinal variation in policy-making

concerning divisible goods and services.

Disjointed Incrementalism : A less demanding model of decision-making has been outlined in the strategy of "Disjointed Incrementalism" advanced by Charles E.

Lindblom and others. Lindblom summarized the six primary requirements of the model

in this way:

Survey and evaluation of all alternatives which differ incrementally from

existing policies.

Only a relatively small number of policy alternatives are considered.

For each policy alternative, only a restricted number of "important"

consequences are evaluated.

The problem confronting the decision-maker is continually redefined: Incrementalism allows for countless ends-means and means-ends

adjustments which, in effect, make the problem more manageable.

Thus, there is no one decision "right" or solution but a "never-ending

series of attacks" on the issues at hand through serial analyses and

evaluation.

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As such, incremental decision-making is described as remedial, geared

more to the alleviation of present, concrete social imperfections than to

the promotion of future social goals.

Rational Decision-Making Model : This model is based on the reasoning of economists, mathematicians, and psychologists. It assumes that the decision-maker can

identify the problem, that the decision-maker’s goals, values, and objectives are clear

and ranked in accord with their importance, that alternative ways of addressing the

problem are considered, that the cost and benefits or advantages and disadvantages of

each alternative are investigated, that alternatives and their consequences can be

compared with other alternatives, and that the decision-maker will choose the

alternative that maximizes the attainment of his or her goals, values, and objectives.

Garbage Can Model : It was developed to explain the way decision-making takes place in organizations that experience high levels of uncertainty, what is described as

organized anarchy. This is caused by three things:

problematic preferences,

unclear and poorly understood technology and a high turnover of organizational positions.

The garbage can model doesn't see the decision-making process as a sequence of steps

that begins with a problem and ends with a solution. Instead, decisions are the outcome

of independent streams of events within an organization. These are problem points,

potential solutions, participants and choice opportunities. The organization is a 'garbage

can' where these streams are stirred. Major lacking of the garbage can model is it

scores high on model simplicity but is weak in terms of deductive power and

falsifiability. Its degree of empirical confirmation is contested whereas its practical

usefulness is not obvious.

Public Choice applies the theories and methods of economics to the analysis of political behavior, an area that was once the exclusive province of political scientists

and sociologists. As James Buchanan artfully defined it, public choice is “politics

without romance.” The wishful thinking it displaced presumes that participants in the

political sphere aspire to promote the common good. In the conventional “public

interest” view, public officials are portrayed as benevolent “public servants” who

faithfully carry out the “will of the people.” In tending to the public’s business, voters,

politicians, and policymakers are supposed somehow to rise above their own parochial concerns.

In modeling the behavior of individuals as driven by the goal of utility maximization—

economics jargon for a personal sense of well-being—economists do not deny that people care

about their families, friends, and community. They are the same human beings, after all. As

such, voters “vote their pocketbooks,” supporting candidates and ballot propositions they think

will make them personally better off; bureaucrats strive to advance their own careers; and

politicians seek election or reelection to office. Public choice, in other words, simply transfers

the rational actor model of economic theory to the realm of politics.

Ballot initiatives, referenda, and other institutions of direct democracy aside, most political

decisions are made not by the citizenry itself, but by the politicians elected to represent them

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in legislative assemblies. Such “pork barrel” projects are especially likely to gain a

representative’s endorsement when they are financed by the taxpayers in general, most of

whom reside, and vote, in other districts or states. Owing to the benefits of specialization and

division of labor, legislatures delegate responsibility for implementing their policy initiatives

to various departments and agencies staffed by career bureaucrats, who secure their positions

through civil service appointment rather than by democratic election.

However, it has to remember that all of these models of policy making are still in use and are

very useful. A mix and match/blend of the right characteristics of each that is suitable to the

environment and ecology of a country in question should be applied for best results.

Chapter-4 : IMPLEMENTATION MODELS

Attempts are now being made to integrate two of the major schools in implementation theory,

which are highly relevant to tackling the fundamental problems of implementation in order to escape the stalemate between the top-down approach and the bottom-up approach. The

solution offered is to make implementation almost indistinguishable from the general policy

cycle and to identify implementation with the learning over time that takes place in groups that

have an interest in policy-making.

Implementation, dictionaries tell us, is the accomplishment of objectives. There is no cause for

controversy here. According to one line of argument there can be no successful

implementation because the whole notion of implementation rests upon the idea of the

classical public administration model which is not suitable for implementation problems in the

era of big government. Another line of argument suggests that implementation cannot take

place because all policy processes constitute an unpredictable web of events as parts of an evolutionary process that refuses any specific goals or outcomes. The third mode of reasoning

is to focus on actual programmes and outcomes at the street level. Implementation is what

takes place at the bottom, that is, implementation is the execution of policies, nothing more or

less.

It is helpful to distinguish between implementation or successful implementation as an

outcome, and the implementation process or how implementation comes about. Moving out of

the confrontation between the top-down and the bottom-up approaches the research on policy

implementation can be oriented towards either descriptive accuracy or nonnative efficiency.

Or one may place the emphasis on policy evaluation in order to sharpen the tools for

criticizing ongoing public programmes and suggest improvement. This tension between

descriptive interpretation of what actually goes on in policy implementation and the

employment of the whole battery of evaluation criteria is typical of the present predicament of

implementation studies.

The traditional version of implementation has largely been abandoned with its strong

underlining of the institutional division between the legislators in Parliament, governors in the

cabinet and implementers in the bureaucracy, a scheme based on the invalid separation of

politics and administration. Instead there is a set of approaches that analyse implementation

processes as interaction between players placed in different institutions, being connected in so-

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called policy networks. Comparative, cross-country studies of implementation reveal

interesting institutional differences, as some countries, for example the Scandinavian ones,

have attempted to institutionalize the process of state learning by the use of special

mechanisms such as the blue ribbon committees. Yet there is a limit to this descriptive

approach, as implementation analysis also involves crucial normative problems relating to

performance and effectiveness: cui bono? Public programmes have no rationale of their own,

no rights to existence as it were. They have been put in place for the accomplishment of

objectives.

Programme evaluation may be institutionalized in formal auditing procedures or it may be

done on an ad hoc basis. However, the refinement of the tools of implementation assessment in order to answer questions about outcomes and efficiency is as vital as the understanding of

what actually goes on when policy networks interact in various policy sectors.

Chapter- 5 : MODELS OF PUBLIC REGULATION

The two types of branches of government dealt with so far – public resource allocation and

public regulation - raise questions about leadership in the public sector. The implementation of

policies as well as the conduct of regulatory behaviour requires public managers. Thus, we

need to look at the logic of management and leadership in the public sector below the level of

government.To the distinction between public resource allocation and public resource

redistribution we have to add a third very important category: public regulation.

One may distinguish between two fundamental kinds of public regulation.

First, there is the old type of economic regulation that involves entry conditions as well

as price controls. The theory of natural monopoly has been regarded as providing the

reasons for the establishment of institutions that result in legal monopolies, as argued in

the theory of public utilities. It remains to assess whether there really is some

justification for economic regulations.

Secondly, a large set of product regulations stipulate how various kinds of goods are to

be both produced and delivered. They may involve directives that prohibit the use of

certain dangerous materials or the sales of products that are potentially harmful to the

consumer.

However, in the models of public regulation the problems of the invisible state have been

analysed. There exists a deep gulf between normative and positive models of economic

regulation where recently special interest group theory and the public choice school have

modelled regulatory behaviour in a way that is very different from public interest theory. It

opens up the route towards a theory of the public sector as an institutional web of directives -

laws and regulations - that may harbour the interests of various groups, not to say special

interests.

Models of public regulation raise questions about institutions that fail to achieve first-best

solutions. Under public policy, monopolies imply allocative solutions that fall to the left of the optimal solution, whereas a Niskanen budgetmaximizing bureau seeks allocative solutions to

the right of the firstbest solution. Whereas a legal monopoly could result in too little output at

too high a price, the Niskanen bureau allocates too much of public services at a cost that is

higher than their value. Thus, the Niskanen bureau is not a true monopolist, although it is the

sole provider.

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Finally, one may try to combine public regulation with public production as when the so-

called natural monopolies are organized as public corporations, inside or outside the public

sector, and are also the targets of public regulation as, for example, postal services. Such

public corporations are typically heavily staffed and thus highly visible.

Chapter-6 : THE LOGIC OF PUBLIC SECTOR REFORM

Public sector reform may be analysed as a step-wise process of moving from the ex ante

perspective to the ex post approach. There is no inherent necessity to move the entire distance,

as one may take a few steps and then halt. The most recent attempt is to replace authority and long-term contracting with bidding and short-term contracting.

The public sector is to be transformed into a set of internal markets, where politicians contract

with service providers. Whereas the earlier steps towards the ex post model appear to be in

agreement with findings from organizational research, the substitution of authority with

exchange seems to contradict transaction cost theory. And it does not resolve the perennial

problem of grounding the demand for public services in the preferences of the citizens.

The three chief objectives for public sector reform - efficiency, equality and savings - are all

strongly connected although they are conceptually distinct. Whereas the first two objectives

may require increased public spending, the last goal emphasizes that public spending must

decrease. Yet, much of what is going on under the label public sector reform remains first and

foremost institutional reform and not cut-back management. This applies more to the

allocative branch of government than to the redistributive branch, where savings are now considered most important even though they conflict with equality.

Public sector reforms may involve both institutional reform and cutback management, but that

combination is not necessary. Public sector reforms may result in an increase in public

spending. Efficiency promoting reforms may not be conducive to a total lower cost, as

resources gained within one programme are be transferred to another programme. Only cut-

back policies reduce the size of the public sector, particularly if done in the social security

system.

Chapter-7 : PUBLIC MANAGEMENT, LEADERSHIP AND PRIVATIZATION

Public sector expansion has occurred in most nations during 20th century. The mixed economy

model, acclaimed as the OECD model for the future relations between the public and private

sectors, has stabilized at a mature level of about 50 per cent of total resources with roughly 50

per cent going to public consumption and investments and the other 50 per cent constituting

transfer payments, including a high service on the state debt in the average country entering the twentyfour nations in the OECD. Thus, the concept of public management started to be

incorpoeated.

There are two firm beliefs about how to handle the day-to-day and routine operations of public

institutions.

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The first thesis states that there is a science of public administration delivering clear and precise operating procedures. Whereas management would be appropriate for private

institutions, in particular profit-maximization ones, administration according to the

traditional public administration maxims would be the model for handling public sector

institutions.

The second thesis claims that an operational code for public institutions would have to devise management and leadership principles that are fundamentally different from

those that are employed in the private sector, that is, private leaders' management

maxims and discretion according to some kind of profit-maximization objective. What

are the arguments for and against

It is true that in a mixed economy, according to the model of the 'bargaining society', it may be

difficult to distinguish clearly between public and private leadership. Each appears to work

with a multiplicity of goals, facing a complex environment where several interests look for

participation and many rules restrict behaviour.

However, public and private leadership differ along two dimensions which reflect fundamental

differences between public and private management still in force in the mixed economy.

First, the goal orientation of public leaders tends to differ from that of private leaders. Whereas private leaders attempt to maximize or satisfy a private objective function,

public leaders have to face the notion of public interest. From this notion, however

vague it may be, follow certain consequences for their motivation - the ethics of Beruf.

Secondly, public leaders work in a more stable environment than private leaders. They

are not unaffected by hazardous events, sudden changes or long-term transformations

but they can rely upon the existence of a base that tends to remain rather fixed over

time.

Although, in general, public management models are replacing the traditional public

administrator role, the latter remains relevant for certain aspects of the public sector. The focus

on rules stems from the concept of the state as a Rechtsstaat. Whenever public authority is

exercised over individuals, justice and fairness demand that specific procedures are followed

in due process. Administrative law holds a strong position within public administration

because it regulates how cases are to be handled in state and local government. Constitutional

and administrative law are important ingredients in neo-institutionalism.

Finally, we need to take a closer look at the concept of interests as emphasized by the public

choice school and the concept of institutions as underlined in the new institutionalism.

Interests would constitute the motivation of actors whereas institutions would create part of the

environment for the conduct of public sector activities. The next three chapters discuss these

concepts.

Chapter 8 : ADMINISTRATIVE STATE Versus THE MANAGEMENT STATE

The discipline of public administration is challenged by the management paradigm derived

from the discipline of business administration. The rise of the management perspective reflects

the growing saliency of market values for the public sector. Combining the management

perspective with a focus upon the public sector results in the new paradigm: public

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management. The purpose of this chapter is to examine the pros and cons of public

management models.

The key issue of management paradigm is market drive. Market values have been on the

increase in terms of attraction and relevance since the early 1980s. They have called for

reforms in all the major parts of the public sector. It is orientated towards the production or

provision of goods and services in the public sector, calling for a different style of

organization and leadership: internal markets. The market philosophy suggests that the first-

best solutions in the economy can only be achieved by means of competition. It rejects the

rational planning model, moved on to the call for decentralization and an orientation towards

results, in order to end up in the radical call for the introduction of internal markets within the state and local governments, replacing Weberian hierarchy with short-term contracting and

bidding.

The writer argues that the new phrase- public management reflects the insertion of the

management perspective into the public sector. Efficiency is considered more important than

rule obedience, effectiveness comes before legality, flexibility and adaptation are more vital

than predictability and responsibility. If public operations can give a profit, then profitability is

a highly relevant objective besides the public interests that are served.

However, there are drawbacks in the transformation process. The public administration

framework cannot easily be replaced by the new management approach, as the former has

qualities not covered by the latter.

Chapter- 9 :THE PUBLIC CHOICE APPROACH

In chapter – 9 (THE PUBLIC CHOICE APPROACH) , Jan-Erik Lane gave a close look at the foundation of the public choice approach. The distinction between the is and the ought was

employed as a demarcation line between two types of social science theories: strictly

theoretical-empirical ones on the one hand and normative ones on the other. He started with

The Virginia School’s thought of Public choice approach.

At the very beginning two parts of the chapter he discussed the Public Choice assumption of

Virginia Scholars . The public choice approach has been attacked by Virginia Scholars for not

being scientifically neutral and objective. It has been argued that its epistemological core

includes the acceptance of political values that correctly belong to a special ideology. Thus, the emergent public choice school would mix the is and the ought to the same extent as the

earlier prevailing political economy. Admitting that it is often difficult to distinguish the is and

the ought and that social science theories often are biased, it is still vital to maintain the

concepts of scientific neutrality and objectivity. It must be possible to employ the public

choice approach for the understanding of the public choice domain without advocating some

political ideology. He here identified some issues regarding public choice approach which are:

Self-interest maximization : The basic assumption in the public choice approach, the self-interest maximization hypothesis. In politics, persons tend to be members of

various formal organizations, be these political parties, interest groups or public

institutions. And with membership in large-scale organizations as the basis for political

action individuals become spokespersons for the ideology that formal organizations

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employ to state their rationale. He termed a theory about public motivation as the

'simplicity theory'. According to him, any person would have two types of evaluations:

selfish and vicarious. Thus, besides the two types of private or personal interests -

selfish ones and vicarious or altruistic ones - we must take into account interests related

to the existence of social costs and benefits.

Methodological individualism :Methodological individualism is the theory that social aggregates of whatever form - mere groups or huge formal organizations - are in reality

nothing but sets of human beings. Thus, the properties of social aggregates are

reducible to the properties of individuals. The reductionist hypothesis about the

construction of social reality has caused much debate about the nature of wholes. The

typical motivation assumption in the public choice perspective creates diff iculties when

public sector behaviour is to be analyzed.

Constitutional economics : he advocated for constitutional economics and create an environment of political exchange between individuals in a setting of political

institutions . The normative framework in the Virginia public choice interpretation

becomes very visible in the theory of economic constitutionalism. the idea of a

constitutional economics is not an analysis of reality but a mechanism for the

expression of political criticism.

In order to move to normative public choice theory he suggested for additional assumptions.

As the Virginia version of the public choice approach is not just a positive theory about the

public sector based on the two fundamental assumptions of utility maximization and

methodological individualism. Thus he arrives at two principles:

1 Public sector actors behave as if they maximize their own interests.

2 All social entities are fundamentally sets of individual actors.

The Wicksell state theory derived from considerations of efficiency in taxation and argued a strong case for a quid pro quo rule on an individual basis. Efficiency demands that each

citizen can balance the value and cost of a particular item on the state budget at the marginal.

Thus, he then states about two new principles:

3 Political interaction is to be based on voluntary exchange. 4 Politics as voluntary exchange requires the making of an economic constitution that is to

guide the relationship between the state and the individual.

It is obvious that the basic assumptions of the public choice approach - (1) and (2) above (p.

206) - do not imply or contain the fundamental principles of the Wicksellian state ideology.

This is not to say that one could not adhere to all four axioms without contradiction; the point

is only that the axioms be kept separate as (1) and (2) refer to the is whereas (3) and (4) deal with the ought.

The public choice approach as such cannot commit itself to any one special ethical doctrine

about social justice or a proper economic constitution, simply because the fundamental

problem involved here is the choice of ultimate values, a question which the social sciences

cannot resolve by means of their special methodology.

Chapter-10 : The New Institutionalism

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The institutionalist paradigm has grown as a reaction to the reductionist attempt to explain

how political organisations work by looking at non-political factors. This chapter critiques the

new institutionalism and asks whether its theories can help us to understand and model the

public sector. It criticises the holism of the new institutionalim, arguing that both interests and

institutions affect social outcomes. Furthermore it argues that both political and economic

interests need to be understood.

Traditional welfare economics has stated that market failures, such as economies of scale or

justice in the distribution of income and wealth, constitute the conditions for the making and

implementation of public policy. The new institutionalism argues that public institutions are not neutral and that institutions, loosely defined as the human-created constraints on

interactions between individuals, really do matter. In fact, institutions shape individuals wants

and preferences, as well as their behaviour.

The new institutionalism is a response to the need to be able to discuss the elementary forms

of political institutions without methodological rigour. Whilst the theory that public

institutions are as important as individual preferences is plausible, there are some difficulties

with the idea that institutions matter in the public sector.

In relation to sociological institutionalism: How do we single out political institutions from

the general set of institutions? New institutionalism argues that state is crucial in designing

those institutions, but the concept of the state remains undefined.

Is an institution a set of behaviours or a set of rules, or both? Do they comprise action

phenomena, as well as normative, cognitive and symbolic orders? The new institutionalism risks over-emphasizing the formal aspect of organised collective action.

In relation to Economic neo-institutionalism: The two key components of this theory are

interests (goals and preferences) and transaction costs (the costs of engaging in exchange) but

the concept of transaction costs remains unclear.

One problem in the analysis of the public sector is to understand the balance between interest

theory (that tries to understand the interests that people or groups try to furthe r through

political institutions) and the new institutionalism. In relation to this: Sociological neo-

institutionalism argues that public institutions are as important as individual interests or

preferences, and that institutions determine interests. However, social outcomes should be

understood as depending on both interests and institutions, so it is essential to distinguish

between institutions of a social system and individual preferences.

Understanding that rules and norms on the one hand, and the interests that motivate people on the other, are two fundamental components of a social system, and that both politics and

economics affects interests as well as outcomes, should be the starting point.

A radical separation between politics and economics is unjustified. Both the market and

individual interests offer rules for interaction between people and institutions.

Chapter-11: EFFICIENCY, EFFECTIVENESS AND EVALUATION

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In this chapter he discussed about evaluation, in particular effectiveness and efficiency in

Public sector management.In this regard, two kinds of deliberations are involved here:

standards for evaluating public sector programmes as well as normative criteria that identify

good or just public policy.

Efficiency and effectiveness equation : Efficiency in the sense of productivity is measured

by means of longitudinal data covering output and cost measures for a decade or two.

Efficiency is a matter of comparisons over time. Effectiveness, on the other hand, may be

approached in a direct way, by asking whether

a programme currently reaches its goals. The measurement problems in relation to

productivity and effectiveness may be approached by means of a series of performance equations. Given a certain level of service quality we can establish inefficiency in two ways:

social efficiency versus bureau efficiency. The distinction between inner or outer efficiency, or

productivity and effectiveness, may be stated in a system of equations. That is :

Productivity or inner efficiency: Input/Costs xOutput/Input, whichgives us Output/Costs.

Effectiveness or outer efficiency: Effects/Output x Benefits/Effects, which gives us

Benefits/Output.

Combining the two equations we have: Output/Costs x Benefits/Outputs, which gives

us Benefits/Costs.

In order to make hypotheses about inefficiencies in public programmes amenable to scientific

test in relation to specified sets of data author of the book suggest a number of distinctions.

First, we must distinguish between social efficiency and bureau or programme efficiency. The

best way to increase bureau or programme efficiency may be to insert more quasimarket

institutions into the public sector.

Administrative inefficiency may be interpreted as a process phenomenon - bureaucratization -

to be revealed by means of a longitudinal approach. Or administrative efficiency may mean

that economies of scale in the administrative function are seized upon - a cross-sectional

interpretation (shown below).

Figure : Modes of bureau efficiency

Service inefficiency may be regarded as a residual when the amount of cost variation that

stems from variations in external conditions of the choice of service level (quality or quantity)

has been recognized. But there are other equally valid evaluation criteria, for example, social

justice, which we shall now consider.

Relative cost comparison : A system of relative cost comparison may form the basis for

systematic and continuous evaluations of the costs and performance records of public

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organizations. The new idea is that similar organizations should be compared by means of

standardized indicators and that the outcome of the evaluation should be tied to the budgetary

process, punishing the high spenders and low performers as well as rewarding the high

performers and low spenders. Thus, decentralization may be combined with three-year

budgetary frames and performance scanning.

Size hypothesis : The size hypothesis is an example of a theory that relates the structure of

organizations to their context. Size of an organization is related to several structural properties

such as functional specialization, role specialization, standardization and formalization.

Furthermore, size is a conspicuous property in public sector organizations. What is important

to underline here is the fact that a systematic employment of the size principle could be used to enhance administrative efficiency within both national government entities and local

government entities.

Asymmetry theory : He finally focused on bureau asymmetry theory. The production

asymmetry occurs in public resource allocation proper due to the absence of efficiency criteria

guiding the interaction between the interests of various producer groups like bureaucrats or

professionals, on the one hand, and consumer groups, on the other, looking in vain for clear

measures of effectiveness or productivity. According to the asymmetry theory the modern

state rests upon a fundamental confusion of the two basic functions of budgeting: resource

allocation and redistribution. The welfare state and its programmes have no basis whatsoever

in the rationales for the use of the budget instrument, that is, provision of public goods proper

and the rectification of market failures. Choice is to be government choice so that everyone

gets the same service for the same price. The reason for this is the strong position of producer

groups.

CHAPTER 12: INSTITUTION AND EFFICIENCY IN THE PUBLIC SECTORS

In this chapter, the writer discussed about the logic of public sectors contracts from the point

of view of the efficiency problems in public sectors by the short term and long term

contracting. For this he identified following crucial issues:

GOVERNANCE FORMS AND FEEICIENCY: Efficiency is indeed a powerful set

of criteria for evaluating governance forms or institutions. Efficiency or governance

forms in the analysis of efficiency in order to under the how the public sectors work.

We know that, efficiency in the public sectors is about outcomes. It ensures public

resources allocation by means of public regulatory scheme that entrust an entrepreneur

with the task of supplying the good and services. The basic form problems for

government is to device allocate and regulative institutions that result in efficiency outcomes. There are two mechanism or governance forms – short term contracting and

long term contracting.

Short term contracting: short term contracts consist when transaction costs are

low and governance form long-term contracts – when transaction cost is high.

Yet, the institutions based upon long-term contracting like the bureau suffer

from the problems connected with asymmetric information, which is conducive

to inefficiency.

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Long-term contracting: For long term contracting, public regulation will be

inefficient due to little quantity supplied at too high a price. The inefficiency of

public resources allocation as well as public regulation services problem both is

created by asymmetric information.

Short-term contracting or long-term contracting in the public sector measuring rod of

contractual success or failure is efficiency. Public contracts pervading the state and local

governments entail questions about the two kinds of the efficiency, inner efficiency and

productivity and outer efficiency or effectiveness. When contracting agents to carry out the

tasks in public sector the principal designs a governance system which gives the agent

incentives to act in order to enhance objectives set by the principal. The principal agent perspective involves a search for mechanism that allows the principal to the monitor.

CHAPTER 13: ETHICS AND NORMATIVE POLICY MODELS

In this chapter, writers discussed about normative policy approaches and moral concept of

social justice. The concept include :

Normative policy approaches: Normative policy approaches is a tools of government

to enhance justice in society by redistribution income from those who have to the

haves-note s. Redistribution may also relate to goods and service, meaning that public

allocation has redistributive implication. But we should know, state cannot solve the all

problems of the society and also can not ensure social justice. This time state faces

problems-which problem name is distribution problems.

Rawlsianism theory of social justice: Rawlsian is an economist; he gave the idea

about redistribution problems and social justice. He said, we can solve the problems by

the theory of justice. A theory of justice solve the distribution problems by this concepts-

a. The liberty principal

b. The fair opportunity rule

c. Pareto-optimality

d. The different principal which maximize production, to share of the least

advantage.

Here we emphasis on the solution that may be deprive from theory of justice- theory of justice

tend to be determinate and difficult to implement government action then state solve social

problems by the maximizing total utility or safeguarding individuals rights to primary goods.

It may seem self-evident that government ought to maximize the graters happiness of the

greatest members. However, theory of justice is not easy to implement, because government

needs to know the relationship between the possession of happiness creating factors like

money and intensity of happiness.

Chapter 14- New Public Management: The Basic Ideas

This chapter delineates the basic ideas of New Public Management (NPM), which emerged in

early 1980s and has developed rapidly in the 1990s. It was based on two main assumptions-

Demand must be separated from supply

Competition is mandatory in supply.

NPM transformed public governance into following ways-

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NPM denied the Weberian distinction between government & private firms and combined them together.

It emphasized on massive scale of contractualism in order to enhance governmental efficiency. Here “contractualism” means, shift of governance mechanism from the

employment of people in immortal organizations to the use of 2-10 years contracts for

enhancing government’s efficiency.

It diminished the use of administrative law.

Unlike Weberian long-term bureaucrats, government hired CEOs for 2-5 years, who

replaced the legal personnel.

Incorporation of public enterprises into joint-stock companies.

Advantages of NPM:

NPM increased efficiency & productivity.

It reduced governmental costs.

It assured higher contractual transparency.

Disadvantages of NPM:

NPM reduced the trust in professional organizations.

It deducted democratic accountability because, public discourses became hidden within countless contracts.

It increased transaction costs.

Chapter-Conclusion : What are the Policy Sciences?

Finally, reffering H.D. Lasswell, the pioneer of Policy Sciences, Jan-Erik Lane analyzed the

whole policy analysis process. The process include:

The Policy Orientation : According to Lasswell the policy orientation includes three elements:

(1) methods of the policy investigation;

(2) results of policy study; (3) the findings which contributions to the intelligence needs of the time.

The policy analysis process must ensure proper collection of data and provide

interpretations of the policy problems at a given point - policy problems being 'the

fundamental and often neglected problems which arise in the adjustment of man in

society', in the 'world revolutionary process of the epoch'.

Optimal Policy Making : Yehezkal Dror puts an optimistic view on the practical lessons to be learnt by policy analysis. To him: 'Contemporary literature in the field of

systems analysis, economics, decision-making theory, management sciences, and

political science, as well as in other disciplines, already includes much material relevant

to constructing an optimal model of policymaking'. Dror’s components of optimal

policy-making are:

(1) using qualitative knowledge;

(2) rational and extra-rationalcomponents;

(3) economic rationality;

(4) metapolicy-making involvement;

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(5) feedback mechanisms.

By analyzing these elements Policy-making should be three kinds:

metapolicy-making -how to conduct policy-making,

(2) making policy on substantive issues, and

(3) re-policy-making or making policy based on the feedback information.

Some have argued that policy analysis is distinct as a discipline and not in terms of

organizational paraphernalia.

The Tools of Policy Analysis : Edward S. Quade stated in ‘Analysis for Public Decisions’ that, “science is concerned primarily with the pursuit of truth, ...” But still

policy analysis cannot be evaluated properly by means of a truth condition because for

appropriate policy analysis it requires perfect policy tools. In this point Quade added

some policy tools that are:

operations research,

systems analysis, cost-effectiveness analysis,

cost-benefit analysis.

Art and Craft in Policy Making : Wildavsky claimed that Policy analysis is both an

art and a craft. Policy analysis is an art where the creativity that is necessary for arriving at a deep understanding cannot be produced by the mechanical application of

information systems like planning, programming, budgeting systems, zero-based

budgeting and management by objectives program, evaluation, review technique and

social indicators.

Finally, author mentioned that like 'politics', 'public administration' and 'public management'

the word ‘Public policy', has a double meaning standing for both the science of something and

the object studied. New concepts, models and approaches are focusing on the place of

motivation or interests and institutions or rules within the public sector. The common focus on

the public sector, in the era of big government, used to be bureaucracy. The truth is that

concepts of bureaucracy tie in with crucial notion – the state, but the early public policy

approach in the 1960s and 1970s was unable to explain fully how bureaux in the public sector

operate. So it was assumed that there are drawbacks in the bureaucracy perspective. Thus the

public administration approach, public policy models failed to clarify how interests and

institutions interact within the public sector. The key concept in the management perspective is that of the objective, in the public choice approach it is the conception of self -interest,

whereas in neo-institutionalism it is the rule, or, as it is also called, 'institution'. Public Policy

is perhaps still the approach that is closest to the concerns of political science and public

administration, as its concept of the policy or the public program targets what decisions or

non-decisions politicians take in government and Parliament.

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