Chocolate and Gold Coins

Wednesday, November 02, 2005

Bureaucratic Reengineering

A troubling trend in developed nations is that over time the share of the GDP devoted to government spending tends to increase over time. Here is a graph of U.S. Federal Government spending over time, (too bad it ends in 1997 – it would be going way up past 2000).

One reason this might occur is that the technology for government-produced goods is not keeping pace with the technology for private sector goods, and as we wealthier, we spend an ever-increasing portion of our budget on relatively scare public goods. Note the public goods are scarce only because they lack a good technology for producing them efficiently.

So over time, the government sector becomes relatively inefficient and drags down growth in the economy. The way to prevent this growth decline is to improve the efficiency of government-produced goods so that they too grow when the rest of the economy grows.

But reforming bureaucracies is easier said than done. Bureaucracies resist change. The type of employee that tends to migrate to the bureaucratic sector of the economy is the type that really doesn’t want to innovate and rock the boat. These people tend to be comfortable with the status quo. If someone comes in with bright new ideas, the bureaucracy might produce some valid objections, some invalid ones, and a lot of indifference, but little in the way of support.

It isn’t practical to suggest simply eliminating the bureaucracy. Often, the bureaucracy is doing a few important tasks along with some less important tasks. Some organization will need to do those tasks in any case.

Another approach to reforming bureaucracy is to thoroughly understand what essential tasks the bureaucracy performs and find a better way to do those tasks. Outside contractors could help design a new bureaucracy that performs all of the essential tasks that the old bureaucracy did with fewer employees and at a lower cost. Then the government could create this second bureaucracy in parallel to the original bureaucracy. In this way, the transition from one bureaucracy to the other will be smooth.

I can give an analogy with a road. It is very hard to repair a road and let traffic flow at the same time. Perhaps it would be easier just to build a parallel road and then, once the new road is finished, destroy the old road.

I am not claiming that this would eliminate government inefficiency and make the public sector as efficient as the private sector. I am only suggesting that we could improve the efficiency of the government sector enough to prevent it from being a serious drain on the growth rate of the economy.

The first bureaucracy I would reform is the CIA.


  • The first bureaucracy I would reform is the CIA.

    What about FEMA?

    By Blogger Vikrum, at 10:39 AM  

  • Eliminating pork barrel spending is difficult because it comes back to bite politicians in their asses during election times. Look at how Bush and his fellow cretins blasted Kerry over his vote to reduce funding for redundant Cold war weapons systems. Even though Cheney had voted for the same reductions. You say it is necessary to reform the CIA, I say no one's going to want to be the one to push for it because of it's political implications. Until people like Karl Rove employ tactics like this to win elections, no one's going to do anything remotely resembling fiscal level headedness in this country.

    By Blogger gawker, at 10:57 AM  

  • Lobbyists are another species, I would get rid of. A lot of spending happens because these lobbysists force the government to enact legislation or budget finances to suit their clients.

    By Anonymous Anonymous, at 12:48 PM  

  • Hi Vikrum Gawker and Arzan
    Vikram: CIA is worse, believe me.
    Gawker: True: just look at that ridiculous $200 million bridge they are building in Alaska for only 500 people on an island.
    Arzan: I actually met a lobbyist the other day. He looked the part.

    By Blogger Michael Higgins, at 3:09 PM  

  • To be honest , Michael , being a patriotic Indian , I would happily give away my house to you and my entire bank balance (whatever its worth) , if we could exchange the bureaucracies our respective countries....

    I dont understand why Americans crib about their country....Trust me , things are a lot worse in the rest of the world.

    By Anonymous Anonymous, at 2:09 AM  

  • Hi Raj
    I cannot argue with that. It could be that the same process could help improve bureaucracy in India.

    By Blogger Michael Higgins, at 4:18 AM  

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