Bureaucracy and Incentives

Loved this passage from Glen Reynolds on the VA:

There's a naive tendency to believe that whatever a government agency's mission is supposed to be, is really the mission that its people pursue. That's seldom the case for long.

Science fiction writer Jerry Pournelle, observing such things, has formulated what he calls the Iron Law of Bureaucracy: In every organization there are two kinds of people: those committed to the mission of the organization, and those committed to the organization itself. While the mission-committed people pursue the mission, the organization-committed people take over the organization. Then the mission-committed people tend to become discouraged and leave.

As a result, the strongest priority of most bureaucracies is the welfare of the bureaucracy and the bureaucrats it employs, not whatever the bureaucracy is actually supposed to be doing. That's worth remembering, whenever someone says they've found something else that we should "choose to do together."

This is not unique to government, but a rule for all organizations.  However, in a private-sector, organizations that devolve in this way get slaughtered (except of course for crony favors and bailouts, but that is another topic).  Accountability never ever comes to government organizations.

Update:  One other observation -- in criticizing Obamacare in advance of its implementation, I never mentioned computer systems problems.  And I always assumed that if you threw enough money and mandates at the problem, the number of uninsured (not to be confused with the number of people with access to quality care) would be reduced.  So all the current triumphalism around Obamacare are about issues that were in fact never raised in advance as criticisms.

One issue that was raised time and again was the information and incentives issues that make it almost impossible to government health care to deliver quality care at a reasonable price.  And the heart of the VA disaster is all an incentives issue.  And it will not get solved.  In part because the incentives issues are endemic to monopoly government services (see: public high schools).  But the government is not even trying to solve the incentives issue.


  1. Matthew Slyfield:

    "But the government is not even trying to solve the incentives issue."

    The government doesn't want to solve the incentives issue, they want to put a band aid on the perceived problem and hope people will either not notice or forget the real problem.

  2. Eumaeus:

    I recommend Mises short book "Bureaucracy" to you and your readers. It a clear and logical comparison of the necessary differences between profit seeking enterprise and bureaucratic enterprise. It has helped turn my efforts away from a struggle against the form of bureaucracy and toward its source - the socialist state.

    From the conclusion: "Public administration, the handling of the government apparatus of coercion and compulsion, must necessarily be formalistic and bureaucratic. No reform can remove the bureaucratic features of the government's bureaus. It is useless to blame them for their slowness and slackness. ... In the absence of an unquestionable yardstick of success and failure it is almost impossible for the vast majority of men to find that incentive to utmost exertion that the money calculus of of profit-seeking business easily provides."


  3. Georg Thomas:

    While it is simply not true that there is no accountability for bureaucracies, the proposed argument is by itself pertinent. But it suffers from the public choice syndrom, as I call it: It is not good enough to write a book about the zoology of the elephant that lists nothing but elephant diseases. A vital deficiency in the standard arguments on this issue of my fellow libertarians consists in pointing out problems of state bureaucracies without offering explanations how and why they have evolved (as a pretty stable features of the state for thousands of years) and how to replace them with something better. Libertarians will remain a fringe for ever unless they begin to realise that our social order depends on innumerable institutions (the state, bureaucracies, democracy etc.) that are naturally ambivalent (containing the good and the bad), are prepared to deal with this ambivalence rather than wishing it away. Libertarians like to talk about spontaneous order when it fits their preconceptions, but do not see spontaneous order where it evolves practices and institutiions that do not fit a neat account of liberty. That's why the USA looks to (many of) them like a concentration camp.

  4. Craig Loehle:

    It has been my experience with large organizations that they protect the managers (part of the bureaucracy) but not the line workers. So at the Dept Energy labs where I worked, managers were never fired, just moved around, whereas line scientists and technicians and secretaries were at will employees. Likewise at universities, the profs until they get tenure are expendable and lots of classroom hours are taught by contract staff.
    To answer Georg: spontaneous order DOES develop in a government agency, but because the incentives are poor the outcome is order that benefits the employees not the public necessarily. For example, agencies fight for funding every year and in essence lobby Congress, even when it would be in the public interest for their agency to shrink or go away. The bloat of agencies is evident in the fact that many (most) universities (Michigan for a case study by Mark Perry) have gone from 2 profs /administrator 30 yrs ago to a 1/2 ratio now. In many states (also Mark Perry data) the highest paid state employee is either a college pres or football coach. There is not competition to keep these things in line.

  5. Onlooker from Troy:

    If only this could be pounded into leftists' heads.
    And as to Obamacare: I'm sure they were happy to have all the attention pointed at the website buffoonery, as it was just noise that would eventually be worked out (for the most part; throw enough money at it...) and distracted from the real fundamental issues.

  6. Rick Caird:

    This is also true of government in general. No matter how honorable a legislator starts out to be, he eventually tiurns into a sociopath and is out only for himself. He does, however, become adept at hiding that.