A Critical Comment on Niskanen's Model
Niskanen's model has been largely criticized, but it still remains a standard explanation of bureaucracy's behaviour. In this paper we criticize the monopoly power that Niskanen assigns to the bureaucracy. A bilateral monopoly between bureaucrats and politicians might be a much more adequate framework for explaining the bureaucracy's behaviour than Niskanen's original formulation of a perfect discriminating bureaucracy. In a bilateral monopoly model, in no case the type of relationship which holds between the sponsor and the bureau leads to an oversupply of output. Should an excess output occur, it would be a consequence of the political decision-making mechanisms. This result stands in sharp contrast to the Niskanen's model, but, at the same time, it is coherent with the fact that, when the sponsor introduces control and monitoring mechanisms, the sponsor does not pretend to decrease the output but rather to supervise and to reduce the costs of producing the output. Copyright Kluwer Academic Publishers 2001
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- Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
- Breton, Albert & Wintrobe, Ronald, 1975. "The Equilibrium Size of a Budget-maximizing Bureau: A Note on Niskanen's Theory of Bureaucracy," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 195-207, February.
- Niskanen, William A, 1975. "Bureaucrats and Politicians," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 617-43, December.
- I. N. Fisher & G. R. Hall, 1969. "Risk and Corporate Rates of Return," The Quarterly Journal of Economics, Oxford University Press, vol. 83(1), pages 79-92.
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