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Quote 641-646

Hierarchical language suggests that those who are making the decisions from “above” have qualities (apart from their position) that are in some way superior to the inferiors “below” who are to do as they are told.
We associate altruistic decision making with the family, efficient decision making with the firm, and crisp, clear lines of authority with the military.
What social order could be finer than one that is at once clear, efficient, and altruistic? The emotional appeal of centralized ordering is so powerful, so visceral, that it provides an underlying centralizing tendency to almost every political philosophy, even those that are not purely socialist.
The very strength of centralized direction in capitalizing on the personal and local knowledge of central directors (parents, managers, military officers) is at once its weakness as a strategy for solving the first-order problem of knowledge.
A persistent bias in favor of centralized decision making results from our apparent ability to second-guess the wisdom of others’ decisions when these decisions go awry. Such a bias falsely assumes that an institutional competence to second-guess the correctness of another’s call on occasion entails an institutional competence to make correct calls for others systematically. The concept of competence does not rest on an ability to make every decision better than anyone else; it rests on being in a better position than anyone else to make knowledgeable decisions.
individuals and groups ought to be accorded a presumption of competence in exercising their discretion.

   --  Randy Barnett

YouTube Video

Decentralised ordering - sounds contradictory
Jurisdiction is a strategy that distinguishes between who makes a decision and what is the correct decision to make. 

To deal with the knowledge problem of power we should decentralising jurisdiction down to those who have local knowledge that central organisations lack.

Bounded individual and social discretions ( freedom has to be limited to the level of knowledge the individual has)

Prof Randy Barnett: All societies have to solve 3 categories of social problems; these are problems of: knowledge, interest, & power

Problems of knowledge

how to put scarce resources to use, including our own bodies (Co-ordination)

Personal knowledge

(own personal perception and preferences) even people in the same room have different perception of same events. Other people do not have access to this knowledge.

Local knowledge

  • More available, but not everyone knows it cant be in two places at one time 
  • Price system is the way we incorporate our plans into everyone else's plans
  • Assumes we all want to get along but determining whats mine and what is yours.
  • Property is a decentralised jurisdictional strategy

Problems of interest

Not everyone wants to do the right thing - we all favour ourselves over others - we are not impartial

Good people will sleep well at night knowing that millions will be in trouble and die overnight, but tell them that they will lose the tip of their finger in the morning they will not sleep well at all.

When you decentralise jurisdictions to individual and association level you departmentalise and limit the scope of partiality

(Prof. Barnett: decentralising jurisdiction reduces the scope that impartiality can adversely affect decisions)

Problems of power

Appeal of central control

Hyacks order of actions 2 ways actions may take place, temporally, and spacially.
This can lead to central ordering or decentralised ordering.

Centralised ordering - appealing here's where it works
  • First type of ordering we grow up with. First form of existence is socialism.
  • Military is centralised ordered
  • Business firms centrally ordered
It is wrong to generalise from the good things central ordering that central ordering is always good.
Central orderers can't gather all the knowledge we have

As central powers go up, local power goes down

Source of bureaucracy
Quote 1075-8

a large motivator for public servants was the size of their own budgets, since that brought with it many other personal benefits

They may well seek to do a good job and to serve the public diligently; but like the rest of us, they also seek income, wealth, ease, tenure, seniority, leisure and comfort; and in their case, perhaps discretionary power and deference too. In the bureaucracy, there is extensive scope for such selfserving action, partly because the output of public officials can be hard to define. Unlike market production, where success is measured in financial profit or loss, the officials’ performance is hard to monitor, being based on objectives that are often vague – such as the ill-defined ‘public interest’. So it should be no surprise if bureaucrats make time to pursue their own objectives too.

In terms of what bureaucrats actually do pursue, Niskanen suggested that budget maximisation provided a fair measure. It is an approximation to the objective of profit in the market context. And it provides a simple proxy for all the other things that go with a large and growing budget – such as job security, promotion prospects, salary increases and so on.

The fact that bureaucrats are far more knowledgeable about their own particular area than the average politician means that politicians cannot effectively control the bureaucracy.

   --  Dr Eamonn Butler

Solutions to bureaucracy
  • Competition against the private sector for provision
  • Competition against regions for comparison,
  • payment by results.

The king and bureaucracies:
  • Direct industry
  • Forbid and subsidise enterprises
  • Grant monopolies to favoured companies (now known as cronyism)
  • Protect local industries from cheaper imported goods
  • Manage trade to benefit ruling powers of the state to raise money for the treasury