Politico Eco Bureaucracy: Concept & Explanation

Politico Eco Bureaucracy

The performance of any economy depends upon its institutional structure, which comprises public sector units and the type of bureaucracy present in the economy. Bureaucracy is a set of various government officials who help in the running of the government machinery. Thus, we can say that bureaucracy is a way of administratively organizing a large number of people who need to work together. Thus, the bureau is a nonprofit making organization which is mainly financed from a lump sum grant rather they are engaged in the sale of output.

There is severe competition in bureaucracy also, some bureaus are cooperative in nature, and they do not compete with each other, while there are bureaucrats who are opposite in nature. They compete with each other for scarce resources. It is necessary that an analysis of the behaviour of bureaus should be done, and the role of bureaucrats in resource allocation should be paid specific attention and resource allocation should be the prime motive for each bureaucrat.

Such type of analysis was being done by various economists like Weber, Niskanen and Breton, and this analysis came to be known by the name as Politico eco bureaucracy theory.

According to (Weber Palgrave Dictionary 2000), the bureaucrat, i.e. senior decision maker, is an administrator who dispassionately observes the established set of administrative rules and carries them out unquestioningly, but this view has been modified by economists like Niskanen and Breton.

According to Niskanen (Herber Bernard Modern Public Finance 2004 pg 42), bureaucrats act as utility maximisers. He argues that the bureaucrat’s utility function includes his salary, the size of the staff working for the bureaucrat and salaries of the staff, perquisites and power. Most of the items that are included in the bureaucrat’s utility function are also directly related to the size of the budget, and hence, they are also called as budget maximisers.

Therefore, the bureaucrat (budget maximizer) plays a very important role in the decision-making process of the government and not merely acting as a neutral agent of the government.

The bureaucrat will always maximize his utility by finding various ways of maximizing his budget size, but on the other hand, politicians want a large size of the budget because they do not want to upset their voters. Politicians are always interested in increasing the level of quantity by giving quality service, but the bureaucrat always wants to maximize his budget because it will maximize his utility.

Thus, allocation of budget is not only limited to bureaus budget, but it also includes various expenses on furniture and fittings, expenditure accounts and various rents given to public sector employees. But this theory has been criticized on the following grounds:

• In this theory, excessive importance has been given to bureaucracy, which is not necessary.
• This theory is unable to reveal the choice of public goods that are to be supplied by the government in the economy.
• It is an executive mechanism and not a decision-making authority of the bureaucrats.

This theory is not much affected by the criticism because it is the first theory that discusses the importance of bureaucracy in the economic decision-making process.

Read More in: Theory of Public Finance

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2. Role of Government in Economy
3. Role of Government in Mixed Economy: Public & Private Sector
4. Role of Government under Cooperation and Competition
5. Role of Government in Economic Development and Planning
6. Concept of Public Goods, Private Goods, and Merit Goods
7. Concept of Market Failure and Functions of Government
8. Market Failure and Functions of Government: Decreasing Costs
9. Market Failure and Functions of Government: Externalities
10. Market Failure and Functions of Government: Public Goods
11. Future Market: Meaning, Role & Uncertainty
12. Concept of Information Asymmetry
13. Theory of Second Best: Concept & Explanation
14. Problem of Allocation of Resources: Public & Private Mechanisms
15. Preferences: Meaning, Types & Problems of Preference Revelation
16. Preference Aggregation & Its Mechanism
17. Voting Systems, Direct Democracy, Representative Democracy, Leviathan Hypothesis & Arrow’s Impossibility Theorem
18. Economic Theory of Democracy: Concept & Explanation
19. Politico Eco Bureaucracy: Concept & Explanation
20. Rent-Seeking and Directly Unproductive Profit-Seeking Activities
21. Rationale for Public Goods: Concept & Explanation
22. Benefit Theory or Voluntary Exchange Theory
23. Lindahl Model: Concept, Equilibrium & Limitations
24. Bowen Model: Concept, Advantages & Limitations
25. Samuelson’s Model of Public Expenditure
26. Musgrave’s Model of Public Expenditures
27. Demand Revealing Schemes for Public Goods
28. Vickery-Clarke-Groves Mechanism
29. Groves-Ledyard Mechanism
30. Tiebout Model: Concept, Assumptions Equilibrium & Simple Tiebout Model
31. Theory of Club Goods
32. Keynesian Principles of Stabilization Policy
33. Difference Between Keynesian Economic Thought and Others
34. Role of Expectations and Uncertainty in Formulating Stabilization Policy
35. Intertemporal Markets Efficiency & Failure
36. Liquidity Preference Theory
37. Diamond-Dybvig Banking Model
38. Preference Shocks, Adverse Selection & Central Bank
39. Equilibrium Deposit Contract
40. Social Goods and Its Effect on Stabilization Policy
41. Effect of Infrastructural Facilities on Stabilization Policy
42. Effect of Distributional Inequality on Stabilization Policy
43. Effect of Regional Imbalances on Stabilization Policy
44. Wagner’s Law of Increasing State Activities: Explanation, Graph & Criticism
45. Peacock-Wiseman Hypothesis: Explanation, Graph & Criticism
46. Public Expenditure: Concept, Objectives, & Public vs Private Expenditure
47. Pure Theory of Public Expenditure
48. Structure & Growth of Public Expenditure in India
49. Trends, Lessons & Priorities in Public Expenditure in India
50. Social Cost-Benefit Analysis: Project Evaluation, Estimation of Costs & Discount Rate
51. Performance Based Budgeting and Zero Based Budgeting
52. Theories of Tax Incidence: Concentration Theory, Diffusion Theory & Modern Theory
53. Tax System and Its Principles
54. Equity Principle and Efficiency Principle of Taxation: Meaning, Explanation & Examples
55. Ability to Pay and Benefits Received Principle of Taxation
56. Theory of Optimal Taxation: Excess Burden & Distortions of Taxation
57. Deadweight Loss of Taxation: Causes, Measurement & Example
58. Concept of Equity & Efficiency in Economics
59. Trade-Off Between Equity and Efficiency: Meaning & Example
60. Theory of Measurement of Dead Weight Loss
61. Double Taxation: Meaning, Desirability, Forms & Solution
62. Solution to Problem of Double Taxation: Intra-Country & International
63. Double Taxation Avoidance Agreement (DTAA) and Indian Policy
64. Classical View on Public Debt
65. Compensatory Aspect of Public Debt Policy
66. Public Debt or Borrowings: Concept, Need, Sources & Types
67. Concept of Public Debt or Public Borrowings
68. Need for Public Debt or Public Borrowing
69. Sources of Public Debt
70. Classification of Public Debt
71. Burden of Public Debt: Meaning, Types & Explanation
72. Debt Through Created Money or Deficit Financing
73. Public Debt (Public Borrowings) and Inflation (Price Level)
74. Crowding Out of Private Investment and Activity
75. Principle of Public Debt Management and Debt Repayment