We have seen that the growth of government after World War II was the outcome of a battle between liberal and conservative philosophies of political economy. Historian Arthur Schlesinger, Jr. (1986, Chapter 2) described this as an alteration between periods when the dominant ideology stresses “public purpose” and periods when the dominant ideology stresses “private interest.” In the long run, according to Schlesinger, government will grow because programs initiated by liberals may be cut, but are unlikely to be eliminated, by the conservatives who follow. The appropriate image is that of government as a spiral that widens during periods of liberal dominance but that never contracts. In Schlesinger’s view, the alteration between liberalism and conservatism is generational. Politically active young people adopt the ideology dominant in their formative years. As time goes by, they reach higher and higher levels of influence in government, the private sector, academia, and the media. Eventually, they take power and attempt to re-impose the liberal or conservative ideology of their youth. The Little New Deal is a good example. John F. Kennedy and Lyndon B. Johnson attempted to realize the liberal vision of the 1930s. Bill Clinton’s presidency also illustrates Schlesinger’s theory: Clinton and many of his close advisers were college students and antiwar activists during the liberal Kennedy-Johnson era.
Economists Milton Friedman and Rose D. Friedman (1983, 41-51) share with Schle-singer the view that new government bureaus and programs tend to survive subsequent administrations, liberal or conservative, but the Friedmans tell a different story about why this is so. In their view, federal programs become permanent because of the “tyranny of the status quo.” An “iron triangle” of bureaucrats (see Economic Insight 26.1), politicians, and private sector beneficiaries of government programs protect programs even when it has been shown that these programs are detrimental to the public interest. Measured across all voters the gain from eliminating a given program may be large; but for each voter separately, the gain may be too small to make fighting to eliminate the program worthwhile.
In his book, Crisis and Leviathan (1987), Robert Higgs agreed that the dominant ideology is the crucial factor determining the growth rate of government but emphasized the role of economic or social crises in making the liberal interventionist ideology acceptable. A mild recession in 1931 might have led to a Democrat replacing Herbert Hoover; but the Great Depression persuaded people to accept a wide range of radical new programs. John F. Kennedy and Lyndon B. Johnson would have pushed for new programs in any case, but the social and political upheavals of the 1960s stemming from the Civil Rights Movement persuaded the public to accept a much broader range of new legislation and programs, particularly those designed to solve the problems of poverty and racial discrimination.
Not all crises lead to more government. There seems to be what might be called a political Phillips Curve (the tradeoff between unemployment and inflation). When unemployment appears to the public to be the number one economic problem, people in the middle of the political spectrum tend to listen to liberal politicians who advocate additional federal spending that creates jobs. But when inflation becomes the major concern, people in the middle of the spectrum tend to listen to conservative politicians who advocate cutting government programs, cutting taxes, and reducing regulation.
WHY DOES BUREAUCRACY HAVE NEGATIVE CONNOTATIONS?
Maximizing the Size of the Bureau
Why do government bureaucracies often seem so big and inefficient? Why, to put it somewhat differently, does the term hureaucracy carry such negative connotations? Economist William Niskanen (1971) provided one still-controversial answer based on the relationship between Congress and the bureaus. The S curve in the figure represents a government bureau’s cost of supplying units of “output”—acres of land irrigated, recommendations made to farmers, grants awarded, loans to low income borrowers, or the like. The D curve shows the marginal valuation of each additional unit of output. The efficient output would be OG at that level of output; every unit would be produced for which the marginal value exceeded the marginal cost. At OG, the cost of producing the last unit, BG, would exactly equal the value placed on it. This is, of course, what would happen if the product were produced by private firms and sold in a competitive market.
Niskanen believes, however, that the budget-making process in Congress works differently. Bureaucrats are not interested in minimizing costs or maximizing profits. Their goal is to preside over as large a budget as possible—from which comes prestige in Washington. Because they are likely to be a monopoly and to have all available information about costs of producing a somewhat difficult-to-measure output, they will make it extremely difficult to judge the shape of the S curve. Instead, they will provide the congressional committee overseeing the bureau a single request for the money
Needed to carry out the bureau’s “mission.” The congressional committee is also likely to be happy with an output larger than OG because committee members will be receiving campaign contributions from the interest groups that benefit from the bureau’s work. If, however, the agency’s total costs were to grow to the point at which they exceeded the total benefits, questions would be raised by other members of Congress on other committees, by the press, and by the executive branch, which takes the heat when total taxes are raised. The result is that the bureau will produce output OF at a total cost of OCF and that these costs will be equal to total benefits of OAEF. The bureau will be too big.
World History
