Rational Choice Theory and Irrational Behavior (TUGAS NINA)

Rational Choice Theory
and Irrational Behavior

Introduction: What Is Rational Choice Theory?
For public administration scholars, rational choice can be simply thought of
as neoclassical economic theory applied to the public sector. It seeks to build
a bridge between microeconomics and politics by viewing the actions of
citizens, politi- cians, and public servants as analogous to the actions of self-
interested producers and consumers (Buchanan ). This analogy not only
makes it possible to con- ceive of the public sector in market terms but also
makes available to public administration scholars a well-developed set of
theoretical tools from economics. The terminology for these tools varies
(they are sometimes called political econ- omy or welfare economics), but
they are best known and most widely applied as rational or public choice.
The intellectual roots of rational choice date back at least to the work of
Adam Smith, whose The Wealth of Nations (first published in ) is the
intellectual
rock on which neoclassical economic theory is constructed. Smith’s great
insight was that people acting in pursuit of their own self-interest could,
through the mechanism of the “invisible hand,” produce collective benefits
that profited all society. For example, businessmen might be motivated only
by a desire to enrich themselves, but their ability to turn a profit depends
upon producing cheaper, better-quality goods than their competitors. Higher-
quality goods at lower prices benefit everyone. If this is true, it implies that
social order and collective benefits can be produced by market mechanisms
rather than by the strong centralized hand of government. These basic elements
—the self-interested actor, competition among producers, and a relatively
unregulated market—are the hallmarks of neoclassical economic thought
and central to rational choice theory. Although Smith did not construct a
theory of public administration, he was fully cognizant of the
193
Rational Choice Theory and Irrational 194
Behavior
implications of his arguments for the public sector, and often supplied
government with policy advice based on his intellectual labors (Buchholtz
, –).
Though rational choice’s basic intellectual toolkit is centuries old, students
of public administration largely ignored it until relatively recently. Public
administration was intellectually cross-fertilized with business-oriented
disciplines such as management and organization theory as early as the late
nineteenth century, but it was another half century before economists began
transferring the formal
theories of their home discipline to politics. With Anthony Downs’s An
Economic Theory of Democracy (), and James Buchanan and Gordon
Tullock’s The Cal- culus of Consent (), the implications of economic theory
for the public sector
could be ignored no longer. These works presented an immediate challenge to
orthodox thinking in public administration and political science (Buchanan
and Tullock’s work is widely considered to mark the formal founding of
rational choice theory). The key characteristic separating these works from
traditional approaches to political and public administration theory was their
emphasis on the rational, self-interested actor. In these frameworks, the
public-spirited citizen and the neu- trally competent public servant were
replaced with the rational utility maximizer. Following Smith’s lead, citizens
and civil servants in these frameworks were not presumed to engage in
political behavior because of civic ideals or commitment to the common
good; instead, it was assumed they engaged in political behavior for the same
reasons they engaged in economic behavior, namely, they were motivated
by a desire to benefit themselves.
Rational choice theory is thus anchored to the belief that the central
behavioral assumption of the neoclassical economic paradigm is universal: Self-
interest drives our decisions and actions, whether these are purchasing a car,
voting, or formu- lating a public budget. From this starting point, it is a short
step to the notion of markets for public services, a situation where citizen-
consumers shop for the public goods and services they most prefer, and
producers of these services are competitive organizations whose self-
interest is coupled to the need for efficient response to consumer demand.
This, needless to say, contradicts orthodox public administration notions of
who should provide public services and how: bureaucracies in centralized
jurisdictions that are responsive to representative democratic institutions rather
than consumer demand.
This large-scale challenge to traditional thinking in public administration is
fashioned from remarkably simple theoretical tools. As outlined by Buchanan
and Tullock, there are only two key assumptions of rational choice theory. ()
The average individual is a self-interested utility maximizer. This means an
individual knows her preferences or goals, can rank-order them, and when
faced with a set of options to achieve those preferences will choose those
expected
Behavior to maximize individual benefits and minimize individual costs. This
preferred mix of benefits
Behavior
and costs is referred to as an individual’s utility function, and Buchanan and
Tul- lock (, ) argued that individuals will act to maximize that utility by
choos- ing “more rather than less” of their preferences. ( ) Only individuals, not
collectives, make decisions. This is known as methodological individualism,
and it presumes that collective decisions are aggregations of individual
choices, not a unique property of the group. In laying down the foundations
of rational choice theory, Buchanan and Tullock clearly stated the importance
of methodological individualism to their project: “We start from the
presumption that only the individual chooses, and that rational behavior . . .
can only be discussed meaning- fully in terms of individual action” ().
From these simple premises, rational choice scholars have deductively
constructed entire theories of individual and organizational behavior, and
extended the implications deep into the administrative arrangements of
government and the intellectual development of public administration.
Indeed, it is difficult to un- derestimate the impact of rational choice on the
applied and scholarly sides of public administration. This impact has been
felt in three primary areas. () Or- ganizational behavior. Rational choice
theory offers a comprehensive framework to answer the question of why
bureaucracies and bureaucrats do what they do. () Public service delivery.
Rational choice theory offers an explanation of how public goods are
produced and consumed, and from these insights favors a series of public-
sector reforms that turn traditional public administration presumptions and
prescriptions on their heads. () A claim for a new theoretical orthodoxy. Ad-
vocates of rational choice theory have argued that it is the natural successor
to the Wilsonian/Weberian ideas that have dominated a century’s worth of
intellectual
development in rational choice. Rational choice, some suggest, is not just a
pos- itive theory (an explanation of how the world does work), but also a
normative theory (an explanation of how the world should work). As a
normative theory, ra-
tional choice has been argued to be a way to fuse the economic theory
formulated by Smith and the democratic theory formulated by James
Madison and Alexander Hamilton. It thus has staked a claim to meet the
challenges of Dwight Waldo and John Gaus, public administration scholars
who argued the discipline could move forward only when administrative
theory developed into political theory.
Yet despite the grandiose claims of early rational choice scholars, recent
decades have seen a plethora of essays, articles, and books challenging the
basic assumptions of rational choice theory. The basic premise behind this
movement is that the individual acting as a self-interested utility maximizer is
not easily defined in terms of costs and benefits. Rather, there are sharp
deviations from what would be considered utility-maximizing behavior.
Emerging research indicates utility maximization includes some sense of
fairness where literally less may be preferred to more (Smith ). At the very
least, this new group of scholars argues that
Behavior
Behavior
utility is quite malleable and context-dependent. These arguments may have
put a mortal wound in the tenets of rational choice theory, made all the more
dam- aging by the fact that many of these scholars hail from economics (the
discipline directly responsible for rational choice theory), notably behavioral
and experimental economics.
In this chapter we briefly examine the impact of rational choice on the
three areas mentioned earlier in this section. We also provide a discussion of
how recent advances in behavioral economics, experimental economics,
social psychology, and psychology are redefining the ways in which public
administration scholars view the contribution of rational choice to these
areas, and more generally are changing the way scholars theorize about utility.
The Rational, Self-Maximizing Bureaucrat

One of the earliest and most far-reaching impacts of rational choice theory
was in explaining the actions of bureaucrats and bureaucracies. Picking up
the intellectual foundation laid by Buchanan and Tullock, several scholars
extended the rational choice framework into a model of organizational behavior
that challenged traditional scholarly perspectives on bureaucracy. The best
known of these works
are Gordon Tullock’s The Politics of Bureaucracy (), Anthony Downs’s
Inside Bureaucracy (), and William Niskanen’s Bureaucracy and
Representative Gov- ernment ().
Following the core assumptions of rational choice theory, all these works
begin with the presumption that what bureaucracies do can be understood by
viewing bureaucrats as self-interested utility maximizers. They also borrow
heavily from the Weberian picture of a mature bureaucracy, particularly in
the sense that a bureaucracy is an organization that enjoys an information
advantage over its supposed political masters. Given these starting
presumptions, Tullock, Downs, and Niskanen presented a picture of public
administrators far removed from the neu- trally competent agents of
implementation that populate traditional public administration folklore.
Tullock sought to explain what a bureaucracy would look like if
bureaucrats were self-interested utility maximizers. He argued that a rational,
self-interested bureaucrat maximizes utility through career advancement, and
that advancement in the merit-based systems of public bureaucracies often
depends upon the favorable recommendations of superiors. If this is so,
Tullock reasoned, the rational bureaucrat will seek to please superiors and put
himself in as favorable a light as possible. Thus, a rational bureaucrat will
highlight information that reflects favorably upon himself and will repress
(perhaps even suppress) information that does not. Distorting information in
this way will create a host of problems. Lack-
Behavior
ing accurate and/or complete information, agency leaders and external
political actors will form skewed expectations about an agency’s performance
and capabil- ities. The same lack of information will concurrently diminish
their ability to hold the bureaucracy accountable. The net result is an agency
prone to mistakes, difficult to manage, and hard to control.
Traditional managerial responses to these problems in public agencies
emphasize replacing or restructuring the bureaucratic hierarchy. Tullock’s
argument suggests that such reforms will be ineffective because, although
they may alter the institutional environment, they pay little attention to the
individual incentives that are the real source of the problem. Tullock went so
far as to suggest that in extreme situations, the external political control of
bureaucracies will virtually evaporate as bureaucrats engage in “bureaucratic
free enterprise,” that is, pursue their own goals rather than the public
missions associated with their agencies (, ). This picture of
unwieldy, self-interested agencies whose actions in- creasingly became divorced
from public rhetoric seemed to offer intellectual confirmation for negative
and widespread perceptions of public bureaucracies.
Downs’s work is only slightly more optimistic. Building from the
assumption of rational self-interest, Downs argued that a set of behavioral
biases should be common to all bureaucrats: () Like Tullock, Downs (,
) argued that bureaucrats will be motivated to distort information as it
passes upward in the hierarchy to reflect favorably on themselves and their
individual goals. () Bureaucrats will favor policies that fit with their own
interests and goals. () How bureaucrats react to directives from superiors
will depend on how those directives serve the bureaucrats’ self-interest. If the
directives favor individual interests, the degree of compliance will be high; if
not, it will be low. () Individual goals will determine the extent to which
bureaucrats seek out responsibility and also determine their risk tolerance in
pursuit of responsibility and power.
Rather than concentrate on career advancement, Downs sought to
accommo- date a wider variety of individual goals in conceptualizing the
motivations of the self-interested bureaucrat, and systematically ordered
these goals into a typology of bureaucratic personalities. In Downs’s
classification (, ), “climbers” are bureaucrats who want to maximize
their power, income, or prestige. Climbers are likely to pursue responsibility
aggressively, especially in the sense of creating new functions for their
agencies. In contrast, “conservers” are bureaucrats who want to maximize
security and convenience, and they will more likely defend existing
prerogatives and functions rather than try to invent new ones. “Zealots” are
bureaucrats motivated to pursue particular policies, even in the face of
overwhelming obstacles. Downs suggested that because zealots are unlikely to
make good administrators, they are unlikely to hold high organizational
ranks. Other categories included “advocates,” who, like zealots, aggressively
pursue favored policies but
Behavior
are more open to influence from peers and superiors, and “statesmen,”
bureaucrats seeking to promote the public interest through the promotion of
broad policy goals ().
Working from this typology, the basic assumptions of self-interest and the
likely impact from the structural characteristics found in the bureaucratic
form of organization in shaping individual motivations, Downs proposed a
series of general propositions about the behavior of bureaucrats and
bureaucracies. These included the “Law of Increasing Conserverism,” which
posits that in the long run most bureaucrats become conservers; and the
“Law of Imperfect Control,” which posits the larger an organization, the
weaker the control those at the top of the hierarchy have over the actions of
those in the middle and at the bottom. Downs added to the picture portrayed
by Tullock, but did not radically change the overall impres- sion: The rational,
self-maximizing bureaucrat led to public agencies that were unwieldy,
difficult to manage, and, at best, only partially oriented toward the public-
interest concerns embedded in their putative missions.
Although Downs and Tullock presented a radically alternative picture of
bureaucratic behavior than that conveyed by previous research, it was
Niskanen who
really thrust rational choice theory into a central role in explaining
bureaucratic behavior. Niskanen’s great achievement was to create the first
formal economic theory of bureaucratic behavior (i.e., his theory was based
on mathematical derivations
concerning the utility and productivity functions of bureaucrats and
bureaucracies). Niskanen’s starting points were similar to those of Tullock and
Downs in that the central figure in his theory is the individual utility-
maximizing bureaucrat. Niska- nen, however, paid more detailed attention to
what bureaucrats seek to maximize. The rational choice assumptions of
economics argue that in making decisions and taking actions, an individual
seeks to maximize personal utility.
In and of itself, however, this is not a particularly useful insight. What,
after all, constitutes “personal utility”? In economics, utility is typically put
into oper- ation according to Buchanan and Tullock’s “more rather than less”
dictum. Deci- sions that yield more of something (wages, profits,
consumption opportunities) are thus presumed to increase utility. Niskanen
sought to extend this reasoning from the individual economic actor to the
bureaucrat by suggesting several variables that might enter into the latter’s
utility functions: salary, perquisites, power, prestige, patronage, public
reputation, and agency output. Niskanen argued that most of these variables
are tied to the budget of a given agency. If such things as salary, power, and
prestige are tied to the overall budget of an agency, the rational bureaucrat
should therefore strive to make that budget as large as possible. Niska- nen
(, ) thus suggested that budget maximization serves as a good proxy for
the utility of the bureaucrat.
Niskanen recognized that not all bureaucrats are motivated by financial
Behavior
bottom lines or career advancement, and was willing to acknowledge that
some bureau-
Behavior
crats genuinely seek to serve and advance the public interest. These
bureaucrats, however, have a problem: “A bureaucrat . . . is neither
omniscient nor sovereign. He cannot acquire all of the information on
individual preferences and production opportunities that would be necessary
to divine the public interests” (, ). In other words, bureaucrats have
different ideas about what constitutes the public interest, and no individual
has all the information required to make a definitive claim that his or her
conception of the civic good is the correct one. So although Niskanen
recognized that some public servants might be public spirited, he be- lieved
they were unlikely to be particularly effective in advancing the public in-
terest. In fact, argued Niskanen, “it is impossible for any one bureaucrat to
act in the public interest, because of the limits on his information and the
conflicting interests of others, regardless of his personal motivations” ( ). In
contrast, the rational bureaucrat is well positioned to act on behalf of his own
interests. All he needs to know are his own preferences.
Niskanen thus viewed a bureaucracy as a rough equivalent of a business in
which budget maximization substitutes for profit maximization. Niskanen created
a market analogy where bureaucracies are monopoly producers of public
services, and legislators are monopsonist buyers. Bureaucrats seek to
maximize their budgets by “selling” a certain level of public services to
legislators. For any given bureaucracy, a subgroup of legislators will have
powerful incentives to secure high levels of the service produced. These
incentives are largely electoral—bureaucracies provide contracts, jobs, and
services that benefit constituents and for which legislators can claim credit.
A market with monopoly producers and a handful of dominant buyers has
predictable outcomes: inefficiency in production and supply outpacing
demand (, ). To combat this inherent dysfunction in public service
production, Niskanen suggested that the financing of public services be
restricted to the lowest level of government possible, and that budget
decisions be required to muster a two-thirds vote in a legislature (–).
The idea was to reduce the influence of monopoly buyers and to better
connect the supply of public services to demand by putting producers as close
as possible to consumers. Coming as they did in the late s and early
s, the work of scholars such as Tullock, Downs, and Niskanen struck a
chord not just because their theoretical approach was novel (to public
administration), but also because their conclusions fit with widely held
conceptions of bureaucracy. As the public sector expanded in the decades
after World War II, people began to question the cost and efficiency of public
services. The ineffective, inefficient bureaucracy of popular perception gained
intellectual confirmation in these works. The prescriptive conclusions—less
bureaucracy, less centralization, and more competition in the production of
public services—may have turned administrative orthodoxy on its head, but
they found a ready audience in policy circles. Yet as public administration
scholars from the more orthodox schools were quick to point out, these works
Behavior
were almost purely theoretical, and their prescriptive conclusions rested on
untested assumptions and anecdotal evidence.
The work of Tullock, Downs, and Niskanen generated a good deal of
research seeking to take rational choice beyond calculations of abstract utility
functions. The more data-driven research helped support some of the
theoretical underpinnings of rational choice, but it also made clear that
economic theory had difficul- ties digesting the public sector. Empirical
counters to works such as Niskanen’s center on claims that the underlying
assumptions about individual behavior and the institutional dysfunction
deduced to follow from these premises bear only a passing relationship to the
real world. In a wide-ranging examination of the empirical foundations of
the budget-maximizing bureaucrat, for example, Andre Blais and Stephane
Dion () note that the evidence is mixed. Bureaucrats do seem to request
larger budgets, but it is not clear they profit from them through better
salaries, increased reputations, or any of the other elements Niskanen was
trying to condense into an individual utility function. Though budget
maximizing has become firmly entrenched as public administration folklore,
it is not even
clear that bureaucrats pursue these strategies as a general pattern. Some
studies have found evidence that bureaucrats routinely pursue minimizing
strategies, look- ing not for ever bigger budgets but “for solutions for
problems within their agency
through mandate clarification as well as organizational, planning, and
information changes” (Campbell and Naulls , ).
Niskanen even acknowledged some of these problems, and suggested that
the budget-maximizing model developed in Bureaucracy and Representative
Democracy was incomplete. He added, “In an important sense, it was also
wrong!” (Niskanen
, ). The empirical evidence since the s, Niskanen argued,
suggests that what bureaucrats tend to maximize is their discretionary budgets
rather than their overall budgets. The discretionary budget is defined as “the
difference between the total budget and the minimum cost of producing the
output expected by the political authorities” ( ). This is a subtle but
important difference from the budget-maximization standpoint. It means that
bureaucrats are seeking to maximize control over their budgets rather than
the absolute size of their budgets. In addition to this nuanced shift in the
behavioral assumptions driving his model, Niskanen also suggested that his
original work seriously underestimated the role of the political sponsors in
monitoring bureaucracy, an issue having even more important implications
for the conclusions of Tullock and Downs. These early rational choice
theories of bureaucracy tended to paint pictures of politically powerful
bureaucracies that, at least under certain conditions, could act almost uni-
laterally as bureaucratic self-interest displaced their public missions. To use
Tullock’s words, rather than agents of implementation for democratic
institutions,
Behavior a form of “bureaucratic free enterprise” could develop in which
bureaucrats pursued their own goals. Since then, empirical work has
provided considerable evidence that bureaucracies tend to be highly
responsive both to their political
Behavior
principals and to public opinion generally (Wood and Waterman ; see
Chap- ter  for a more thorough discussion of this topic). This does not
necessarily mean that bureaucracies act altruistically in pursuit of the public
interest. Nonetheless, it does suggests more constraints on the self-interested
bureaucrat than are accounted for by rational choice theory.
Some of these constraints may even be willingly imposed by the
individual. As various researchers have concluded, bureaucrats routinely
espouse a commitment to the public interest. If Niskanen is correct, these
worthy motives will cumulatively account for little because no one
bureaucrat has the necessary information to divine the public interest.
Perhaps so, but when it comes to information, bureaucrats are better
equipped to create a reasonable approximation of the public interest and act
in its pursuit than are most other social actors. Most career administrators at
the Environmental Protection Agency are committed to environmental
protection, and their counterparts in the Defense Department are committed
to national defense. Such bureaucrats often evidence a willingness to shift
policies and programs in pursuit of these goals, even if the benefits to them-
selves or their agency are hard to discern. For example, the senior career
administrators in at least one major federal agency (the Civil Aeronautics
Board) successfully worked to put their organization out of business (Meier
, ). These sorts of findings do not necessarily disconfirm rational
choice theory’s explanation of bureaucratic behavior, but they do raise
questions about the funda- mental assumptions that supply the framework’s
explanatory power.
James L. Perry’s seminal work (Perry, Mesch, and Paarlberg ) on public
service motivation is also instructive here. Most notably for our purposes, the
link between financial incentives and the motivations and behaviors of
public-sector employees is more nuanced than would be predicted by a strict
model of pure rationality. Variables relating to participation in
organizational decisionmaking, the amount and quality of employee
feedback, and the degree to which the job is challenging all affect public-sector
employee motivations (Perry, Mesch, and Paarl- berg ; Perry ). Rather
than fixed preferences as assumed by strict rationality, the institutional
environment can also shape individual preferences. More hierarchical
organizations with less red tape can increase the level of public service
motivation reported by employees (Moynihan and Pandey ). Niskanen’s
self- interested bureaucrat engages in predictable behavioral patterns; she will
maximize salary when possible, shirk work in the absence of monitoring, and
reliably respond in the face of financial incentives. Recent empirical
evidence suggests that, even though bureaucrats are predictable, their
behavior is not rational.
Trust and the Irrational Bureaucrat

Despite
Behavior the ordered logic of rational choice theory as a model for explaining
inefficiency in public organizations, recent work in organizational psychology
suggests
Behavior
the basic assumptions of such a model are flawed. Bureaucrats may seek to
maximize their own self-interest, but managers can improve efficiency.
Tullock and Downs both presented a picture of a self-interested bureaucrat
quite willing to distort information, and subsequently the public, in order to
maximize individual self-interest, that is, career advancement. The solution
that emerges from this framework is primarily institutional—-more rules,
more rigid structure, more hierarchy. More recently, however, evidence
exists suggesting that the solution depends less on the structure of the
institution and more on the interrelationships between actors within the
institution.
A growing body of literature suggests that bureaucrats’ responses to the
task environment often depend on psychological, nonmonetary assessments.
For a leader, whether in an organization or in elected office, to be effective,
he or she must possess a certain set of skills that encourage follower trust,
thereby increasing follower productivity and a willingness to comply with
authoritative requests. Scholars have classified these skills under the umbrella
of “political skill,” and they are characterized most prominently by an ability
to form lasting social networks and the possession of a certain set of social
skills that allow for interpersonal influence (Ammeter et al. ; Ferris et al.
; Hall et al. ). Leaders with high levels of political skill tend to be
viewed as more effective leaders and are positively correlated with work unit
performance (Douglas and Ammeter ). Leader political skill also tends
to positively affect perceptions of organizational support among subordinates,
in turn increasing job satisfaction and organizational commitment (Treadway
et al. ). There is good reason to expect such findings
to apply to both the private and the public sector.
The public management literature has a rich theoretical tradition focusing
on the relationship between leaders and followers. Beginning with Chester
Barnard’s () “acceptance theory,” perceptions of bureaucratic authority
have been critical to the study of public management theory. Barnard argued
that the effective- ness of administrative authority depends on the willingness
of others to accept and comply with such authority. Following Barnard, public
administration scholars have long recognized the influence of individual
personalities on organizational activity and performance (Simon
/; Downs ; McGregor ; more recently, Terry ;
deLeon and Denhardt ). Recent empirical evidence shows that
perceptions of a leader’s characteristics influence whether a follower will
engage in a particular behavior (Dirks and Skarlicki ; Kramer ;
Kramer and Cook ; Kramer and Tyler ). Followers that attribute
com- petence and trustworthiness to leaders are not only more likely to
follow authoritative requests but are also more likely to engage in risky
behavior on behalf of leaders/managers (Elsbach ), and are less likely to
perceive a need to break the rules or “sabotage” the organization (Brehm and
Gates ). Moreover, employees are more likely to identify with their
organization
Behavior and engage in voluntary compliance with organizational norms
when they trust their superiors (Darley
Behavior
; Dirks and Ferrin ; Podsakoff, MacKenzie, and Bommer ). This is
a direct counter to one of Downs’s behavioral biases that bureaucrats will
shirk responsibility. Identity-based trust is important because it reduces the
likelihood of betrayal within organizations and increases the probability that
employees will seek to prevent organizational crises (Darley ). In short,
subordinates respond favorably to leaders who exhibit trustworthiness (see
Carnevale ; Ruscio ). This fits well with other scholarly
research indicating that people are more likely to comply with a leader’s
requests if they perceive the leader to be trustworthy and the leader’s
motivations to be neutral (Tyler , ; Tyler and DeGoey ).
The extension of rational choice into the realm of organizational behavior has
thus created a long-running controversy within public administration over the
motivations and explanations of bureaucratic behavior. In advocates such as
Niska- nen, rational choice developed into one of the most rigorous and
theoretically el- egant models applied to bureaucracy. It offers public
administration a strong deductive basis for building general models of
bureaucratic behavior that, at least internally, are logically consistent and
produce a wide variety of empirically testable hypotheses. The critics of
rational choice argue that its starting assumptions are too narrow and
unreasonably downplay the possibility that bureaucrats might seek to
maximize the public interest, professional or ethical norms, or a variety of
group-based motivations that threaten methodological individualism. From
this perspective, the analogy of monopoly producers and monopsonist buy-
ers propping up the supply of public services shrinks to a metaphor that
caricatures
rather than characterizes public life.
The Niskanen model’s emphasis on individual self-interest is not without
merit; it is just that the definition of utility requires revision. For example, in
instances of information asymmetry, as is often the case with bureaucrats and
clients, the tendency to appear fair and unselfish dominates the tendency to
engage in actual fair behavior (Smith ). This tendency, however, can
actually lead to suboptimal behavior in that decisionmakers are willing to incur
significant costs in order to appear fair. Even though in the early s the
empirical record seemed to declare no clear winner in this debate, the momentum
has clearly shifted to a more diverse view of bureaucratic, and human,
behavior. Nonetheless, it is clear that work in rational choice has stimulated
public administration scholars to think about bureaucracies in different
ways and will continue to do so into the foreseeable future.
The Self-Maximizing Citizen and the Tiebout Hypothesis

Although rational choice has had a considerable impact on the study of
bureaucratic behavior, its greatest theoretical and applied implications arise
from its ap- plication to citizens rather than to bureaucrats. Bureaucrats and
bureaucracies
Behavior represent a challenge to rational choice theory in that the
market analogy sometimes seems forced. In works such as those of Tullock,
Downs, and Niskanen,
Behavior
public servants have no clear, consistent role as “buyer” or “seller,” and what
is being exchanged, with whom, and by what mechanism is simply not as
intuitively or empirically obvious as the market for, say, cars or soft drinks.
The market analogy becomes much sharper when rational choice turns its
attention to citizens and the services produced by local governments through
public agencies. In the rational choice framework, citizens consume public
services; the patterns and motivations of their consumption can become the
rough equivalents of consumption patterns in markets for cars or soft drinks.
This analogy will not be perfect. By definition, a public good is indivisible,
something that cannot be broken up and distributed individually. For example,
an individual consumer can purchase a car or a can of soda based on personal
preferences with relatively little input from or impact on anyone else. This is
hard to do with public goods such as clean air or national defense because
they require binding collective decisions rather than individual ones.
Traditionally, such goods were considered to be sub- ject to market failure, that
is, left to themselves, free-exchange mechanisms would either underproduce
these goods or not produce them at all. For this reason, the production of
public goods traditionally is held to be appropriately concentrated under
government control. From here it is but a short step to prescriptively em-
bracing administration orthodoxy—public goods and services can be most
effec- tively and efficiently provided by functionally organized agencies with
centralized jurisdictions. Thus, one public bureaucracy should provide, say,
law enforcement for a given area. This will ensure that a vital public service
is available to all, avoid duplication of service, simplify command and
control, and, in doing so, promote efficiency and accountability.
One problem with this line of reasoning is that some goods and services
fall into a gray area between public and private. Education and garbage
services, for example, are provided by both the public and the private sectors.
Private contrac- tors, and therefore the free market, play a role in providing
even “pure” public goods such as national defense. The fuzzy line between
public and private goods provides an intellectual leverage point for arguing
that the mechanisms used to provide the latter might be able to handle a
greater role in providing the former. When that lever is pulled, public
administration orthodoxy crashes head-on into basic economic theory. What
James Q. Wilson or Max Weber might call a well- run public bureaucracy,
Adam Smith and Milton Friedman might call a monopoly. Monopolies are
unresponsive and inefficient producers because, according to the axiom of
self-interest, they have no reason to be otherwise. The consumer has no
option but to buy the monopoly good at the monopolist’s price, and the
monopolist has all the advantages in the producer-consumer exchange. If, as
Tullock, Downs and Niskanen argued, bureaucrats are self-interested, and
public agencies are in effect monopoly producers of public goods and services,
the citizen-consumer may be getting a very bad deal from the centralized
bureaucracies advised by tra-
Behavior
ditional public administration orthodoxy. A better arrangement would be a
market for public services, where instead of one centralized agency in one
jurisdiction, citizen-consumers have a broad variety of tax-service packages
and could move to the location that best fit their preferences. Competition
would force these multiple agencies to produce high-quality public services at
low cost, their alternative being to face being abandoned by the public. This
line of reasoning suggests that, rather than centralized bureaucracies
providing public goods and services, they could be better supplied by a
competitive market arrangement.
These arguments were first formally articulated in a seminal  article
by Charles Tiebout. Like Tullock, Downs, and Niskanen, Tiebout’s work also
rested on the twin assumptions of self-interest and methodological
individualism. Tiebout’s work, however, centered not on the internal workings
of bureaucracy but on the relationship between citizens and public agencies as
consumers and producers of public goods. Tiebout argued that a
competitive market for public services could be created if mobile citizens
could shop across local jurisdictions for the package of public services and
attendant tax burden that best suited their preferences. As Tiebout put it,
mobility would provide “the local public goods coun- terpart to the private
market’s shopping trip” (, ). If citizen-consumers shopped around for
preferred tax-service packages, competitive pressures would force producers
—that is, local governments and public agencies—to respond to citizens’
preferences. The result, at least in theory, would be efficiently produced
public services that reflected public demand for those services.
Note that the Tiebout model prescriptively implies the exact opposite of
orthodox approaches to supplying public services. The central hypothesis of
the Tiebout model and its various extensions is that many agencies competing
hori- zontally (across jurisdictions) and vertically (within jurisdictions) will
provide a higher-quality service at a lower price, and be more attuned to
citizens’ preferences, than will large bureaucracies in centralized jurisdictions.
This hypothesis has stimulated an enormous amount of empirical and pre-
scriptive research on the differences between polycentric (centralized, single-
jurisdiction) and monocentric (fragmented, multijurisdiction) government.
Much of this research has sought to assess the validity of the Tiebout model
by examining the impact of fragmentation on spending for public services.
According to public administration orthodoxy, highly fragmented institutional
arrangements for public services results in inefficient duplication and thus
should result in higher levels of spending. According to the Tiebout
hypothesis, fragmentation stimulates competition, creates incentives for
efficiency and responsiveness, and should therefore lower spending. In thirty
years of research, no clear winner has emerged from these competing
propositions. George Boyne (, –) reviews fourteen studies examining
the effects of fragmentation on spending by various forms of local
government. Of the approximately twenty-five variables used to measure
Behavior
fragmentation in these studies, about half were associated with lower
spending by local units of government, two-fifths were associated with higher
levels of spending, and the remainder were statistically insignificant. These
numbers give a slight edge to the Tiebout hypothesis, but not by much. In a
similar review of fifteen studies seeking to assess the impact of vertical and
horizontal fragmentation, Boyne (–) finds six of twenty-three measures
of fragmentation clearly associated with lower spending, four with higher
spending, with the rest reporting insignificant or unstable results based on
level of analysis and form of measurement. At the macrolevel, Tiebout’s work
stimulated a good deal of empirical research that cumulatively neither
confirmed nor rejected its key hypothesis.
Given the ambiguity of the empirical research at the macrolevel, advocates
and critics of the Tiebout hypothesis in the s began to pay serious
attention to the foundations of the theory at the microlevel. To make his model
work, Tiebout was required to make several assumptions about individual
actors that went above rational utility maximization. First, Tiebout assumed
that citizens are perfectly mobile, meaning they can easily move from
community to community. Second, the model requires citizens to be highly
informed about tax-service packages across several jurisdictions. Tiebout did
not seriously propose that these conditions ex- isted in reality, but he adopted
them as necessary simplifying assumptions to make the model tractable. The
more realistic microlevel expectations implied by the Tiebout model are that
citizens in fragmented government settings will be more informed about
public services than those in centralized government settings; will be more
likely to exit if they are dissatisfied with those services; and, given that they
can make choices about tax-service packages, will be more satisfied with the
services they do receive.
These propositions were given their most thorough empirical examination
in a study by David Lowery, William Lyons, and Ruth Hoogland DeHoog
(), who used a survey based on matched samples of residents in polycentric
and monocentric metropolitan settings. For the most part, their findings flatly
con- tradicted the assumptions inherent in the Tiebout model. People in
polycentric settings were not particularly well informed; in fact, most people
in fragmented regions seemed to have only a vague idea of what government
provided what service to them. Instead, “the residents in our consolidated-
government sites were far better informed about their local government
services than their fragmented-government counterparts” (). There was no
discernible difference in levels of satisfaction with public services between
residents in consolidated and residents in fragmented government settings.
There was some limited evidence that residents in fragmented settings were
more likely to be mobile than those in consolidated settings. In all settings,
however, the probability of moving was very low—an average of
. percent in fragmented areas, and . percent in areas served by consolidated
Behavior
government. Lowery, Lyons, and DeHoog (–) were skeptical that such
limited mobility was enough to create the competitive pressures envisioned
by the Tiebout model.
In an effort to resurrect the microfoundations of the Tiebout model, Paul
Teske et al. () posited that a market for public services could be created
by a few mobile, well-informed citizens. The markets for private goods such
as automobiles and soda, after all, do not require that all consumers of these
products be fully informed rational utility maximizers. All that’s needed is a
critical mass to make informed decisions and introduce the competitive
pressures that deliver the market’s benefits. Teske and his colleagues ()
mentioned Senator Paul Douglas’s oft- quoted remark that a competitive
market could exist if only  percent of consumers made rational, informed
decisions. If this were so, where could that  percent be found in a local
market for public services? Teske et al. recognized that for most citizens it is
rational to be ignorant about public services simply because, at any given
time, the average citizen is not making decisions based on issues re- lated to
local services and taxes. The exception might be actual movers. Teske and his
colleagues accepted that most people do not move because of dissatisfaction
with local tax-service packages but because of job or family considerations.
Nonetheless, movers would still have a high incentive to gather information
as they shopped for a house. If there were enough of these people, and if they
gath- ered enough information to make reasonable choices about tax-service
packages, these “marginal consumers” might be enough to create the
competitive market conditions suggested in the Tiebout model.
Teske et al. tested this proposition through surveys of people who had
recently purchased homes in Suffolk County, New York, and matched them
with longtime residents of that area. To test levels of knowledge, the
researchers asked citizens to rank their school district expenditures and taxes
relative to other school districts in the county. The results indicated that
overall levels of knowledge were very low, even though the study set a
generous threshold for being considered informed. Respondents were asked
whether school taxes and expenditures were above average, below average,
or about average compared to other districts in the county. Those who
responded “average” were judged to be informed if they were in one of the
 percent of districts surrounding the mean. Using this criterion,  per-
cent of residents were able to rank their schools accurately. Movers actually
had less accurate information than nonmovers— percent of nonmovers
accurately ranked school taxes and expenditures versus  percent of movers.
When movers were separated into categories according to income, however,
information levels in the high-income category jumped ahead of those of
nonmovers. High-income movers were accurate  percent of the time (Teske et
al. , ). Teske and his colleagues reasoned that this subgroup—
wealthy movers with higher levels of
Behavior
information—might be enough to drive a market for public services, create
the pressures for efficiency, and provide an empirical basis for the
microfoundations of Tiebout’s theory.
In a response to Teske et al.’s refinement of the theory underpinning the
Tiebout model, Lowery, Lyons, and DeHoog () argued that it provided
marginal, and quite possibly contradictory, evidence for the potential of
public service markets. They argued that the threshold used to judge a
respondent informed was very low, the subset of “marginal consumers” small,
and these results dealt with education—the local government service with the
highest community profile. In the region used for the Teske et al. study,
education was even higher profile than is typical. Lowery et al. noted that
school districts on Long Island hold annual referendums on school spending,
an unusual budgetary process that provides citizens with a cue to education
taxing and spending issues that is not present in most districts. If more than
 percent of the high-income movers were unin- formed on a minimal
measure of such a high-profile local service, the levels of information about,
say, police services and sanitation were likely to be minuscule. Although
stopping short of arguing that the Teske model was wrong, Lowery and his
colleagues argue that the empirical evidence supporting it is very weak.
Although it is difficult to take anything definitive from the empirical
research on market mechanisms on public services, these studies do bring
into sharp relief the central disagreements over the Tiebout model. Advocates
of rational choice argue that, if constructed with care, something approaching
a competitive market for public services can be created that will produce
benefits for all. The competitive pressures of the market can provide public
agencies with the incentives to be responsive to consumer-citizen
preferences and to become efficient producers of public goods. Opponents of
rational choice argue that faith in markets is naïve and ignores the reality that
competition produces losers as well as winners. Such losses are acceptable in
the private sector, but when, say, a school goes out of business, the losers are
not just the producers but the consumers, and what is lost is not just a
consumption opportunity but a part of the common weal. Regardless of the
theoretical payoffs to deregulating the public sector, critics of rational choice
argue that in reality there are too few informed consumers to drive a
competitive market for public services. The likely result of trying to create
such a market is not more efficiency but less equality. The socioeconomically
advantaged are simply better positioned in such markets to defend their
dominant social position, an outcome at odds with the egalitarian values of
democratic government.
While academics debate the pros and cons of the Tiebout model, its core
arguments have entered mainstream political debates and helped drive
numerous reforms in public agencies. The s movement to “reinvent”
government through decentralizing authority and encouraging competition, for
example, popularized the key arguments underlying Tiebout’s model and
sparked
Behavior a raft of or-
Behavior
ganizational reform in the public sector (see Osborne and Gaebler ).
School vouchers, Total Quality Management, privatization, and contracting out
—many of the most controversial reforms attempted in the public sector
since the early
s—spring from the arguments first formally articulated by Tiebout.
Whether these reforms will expose the weakness or the wisdom of orthodox
perspectives in public administration scholarship is still an open question.
Perhaps the most comprehensive and useful revision to the Tiebout model,
and rational choice more generally, comes from the work of Nobel Laureate
Elinor Ostrom. Ostrom and her colleagues have advanced a theoretical
paradigm in which cooperation can be achieved in the absence of an external
authority or explicitly stated rules and sanctions. The Hobbesian solution to
a social dilemma is not supported by empirical reality. In a public goods
setting, Ostrom has shown that, given the opportunity to communicate,
people are quite capable of solving social dilemmas through cooperation
(Ostrom, Gardner, and Walker ). In short, people are able to govern
themselves. Reviewing the work on social dilemmas and public goods
games since, Ostrom (, ) argues there are distinct behavioral patterns
that severely limit the applicability of rational choice as a predictable
theory. In particular, the first move in a public good setting is cooperation, not
defection, as would be suggested by rational choice theorists. Research from
behavioral economics has demonstrated a strong tendency to abide by norms
of fairness, even in the absence of an external authority or in cases of
anonymity (Camerer, Lowenstein, and Rabin ). Also of note,
communication increases the likelihood of cooperation, and individuals tend
to voluntarily punish those who fail to cooperate (Fehr and Gachter ).
Rational choice theory and the logic of appropriateness discussed in
Chapter
 both depend heavily on the principal-agent model—that an external actor
wield- ing sanctions or incentives is necessary to achieve optimal outcomes.
Ostrom’s work demonstrates this to be incorrect. Mutually beneficial
relationships can develop so long as there is a medium to facilitate and
improve trust between individuals. For Ostrom (, ), the key factors
are trust, reciprocity, and reputation. Trust and trustworthy reputations create
opportunities for cooperation between individuals, cooperation that in turn
tends to be reciprocated. A reputation as someone who is untrustworthy
causes the breakdown of cooperation and ultimately suboptimal outcomes.
A clear implication of Ostrom’s work is that institutions able to facilitate
trust, either through more open communication or more transparency, are
likely to lead to improvements in the organizational culture of the institution,
and potentially more beneficial relationships. Communication, particularly face-
to-face communication, provides a signal of trustworthiness. Although
Ostrom’s early work tended to come to a similar conclusion as Tiebout,
emphasizing “polycentricity” (Toonen , ), her more recent work on
common
Behavior pool resources (CPRs)
Behavior
provides a fresh alternative for public service delivery. For small-scale
jurisdictions, competition between providers is not necessary. The notion that
most individuals lack perfect mobility is well accepted. However, this is not a
limit to the establishment of efficient policymaking institutions. As Vincent
Ostrom would later comment, Elinor’s work was unique in that it placed an
emphasis on “human (as over and against) bureaucratic management”
(Toonen , ).
Rational Choice as the New Orthodoxy

Rational choice mounts a challenge to the prescriptive arguments taken from
traditional public administration scholarship, some of its advocates argue,
and it should be adopted as the core paradigm of the discipline. These
advocates present rational choice not simply as an economic framework that
can be adopted to help understand bureaucratic behavior and the production
of public services but also as a normative, democratic theory of
administration in its own right.
The most forceful and best-known articulation of this argument comes
from Vincent Ostrom in his book The Intellectual Crisis in American Public
Adminis- tration (). Ostrom’s central thesis was that public administration
scholarship
was centered on a theoretical construct that was in the process of breaking
down. Ostrom (–) argued that the intellectual foundations of public
administration were built upon a set of seven theoretical propositions formulated
by Woodrow
Wilson. First, there is, and always will be, a dominant center of power in any
system of government. Second, the more power is divided, the more
irresponsible and difficult to control it becomes. Third, the structure of a
constitution deter- mines the composition of central power. Fourth, the
process of government can
be separated into two parts: determining the will of the state (politics) and
exe- cuting the will of the state (administration). Fifth, although the
institutions and processes of politics vary widely from government to
government, all governments share strong structural similarities in
administration. Sixth, “good” administration is achieved by the proper
hierarchical ordering of a professional public service. Seventh, perfection of
“good” administration is a necessary condition for advancement of human
welfare.
These basic propositions, Ostrom () argued, were used to construct
the paradigm that constituted orthodox public administration theory; that is,
administration could be considered separately from politics, and good
administration was tied to the organizational form of Weberian bureaucracy.
Ostrom noted, however, that this orthodox thinking ignored some of the
lessons conveyed by Weber’s conception of bureaucracy, even as it embraced
others. Weber considered bureaucracy a technically superior form of
organization
Behavior in the sense that it favored merit, professional expertise, rational
division of labor, and standardized decisionmaking processes. These seemed
a worthy alternative to patronage, partisan fealty, and
Behavior
political expediency as a basis for carrying out the will of the state. Yet, as
Ostrom (–) pointed out, Weber’s theory also suggested that mature
bureaucracies would become central political institutions, not just technically
superior agents of implementation. The fully developed bureaucracy would
enjoy a huge infor- mational advantage over their political masters, and there
was no reason to expect that advantage would be deployed to advance the
public interest over the bureaucracy’s interest.
Ostrom argued that public administration scholars had concentrated on the
technical superiority of the bureaucratic organization—its purported abilities
to produce public goods efficiently—while ignoring the potential implications
for the democratic process. Weber, Ostrom noted, also described a
democratic alternative to the hierarchical and authoritarian basis for
administration inherent in bureaucracy. Weber said that a democratic
administration would have four characteristics. () Everyone is assumed to
be qualified to participate in the conduct of public affairs. All citizens, not just
technocrats, are assumed to have the necessary expertise to become
involved in deciding what policies to pursue and how to pursue them. ()
Important decisions are opened up to all members of a community and their
elected representatives. () Power is broadly diffused, not concentrated in a
dominant center. () Administrative functionaries are public servants, not a
technocratic elite of “public masters.” Under these conditions, a democratic
administration will be concentrated by polycentric government—one with
multiple power centers in multiple layers (Ostrom , –).
Following Weber, public administration as a discipline rejected the
concept of a democratic administration as theoretically and empirically
untenable. Demo- cratic administration placed unrealistically high knowledge
and participation de- mands on citizens, and in diffusing power also
weakened accountability over public agencies. Accordingly, public
administration cast its intellectual lot with Wilson’s assumption that power
needs to be concentrated if it is to be controlled, and that efficient
administration is more likely to come from technical experts functionally
organized into bureaucracies than from multiple, contradictory, and poorly
informed signals from the masses. Ostrom responded to this reasoning by
arguing that its intellectual props had already crashed down. Scholars such as
Dwight Waldo () and Herbert Simon (/) had bored so
thoroughly into the Wilsonian assumptions (especially the public-administration
dichotomy) that they were simply incapable of supporting the orthodox
perspective. Thus, Ostrom argued, public administration was left in a volatile
and dangerous position: Its intellectual rudder ripped away, it was drifting
and in danger of being consumed by other disciplines.
Ostrom argued that rational choice could not only provide an intellectual
lifeboat but also provide the discipline with its theoretical ship of state.
Ostrom suggested that a democratic theory of administration along the lines
considered
Behavior
and dismissed by Weber is, in fact, possible, and that rational choice provides
the obvious means to achieve it. If markets can efficiently match supply and
demand for private goods and services with little in the way of centralized
power centers or jurisdictional consolidation, why can they not do the same
for public goods and services? After all, we have little difficulty in presuming
that those who buy cars and soft drinks are informed enough to match their
purchases to their preferences. Similarly, we expect consumers to know
enough to abandon producers who fail to satisfy those preferences, thus
allowing the market to weed out those who are inefficient or fail to respond to
consumer demand. Why are these minimal assumptions about information
and individual behavior not transferable to public services? Although not
using the terms common to microeconomists, the writings
of James Madison and Alexander Hamilton in the Federalist embraced the
notion
of individual determinism, and their conception of divided power fit with the
polycentric nature of democratic administration. As Buchanan and Tullock
put it, “Madisonian theory, either that which is explicitly contained in
Madison’s writings or that which is embodied in the American constitutional
system, may be compared with the normative theory that emerges from the
economic approach” (, ). Given such a theoretical connection,
Ostrom argued that rebuilding the intellectual enterprise of public administration
on rational choice foundations was compatible with the democratic principles
articulated in the Constitution.
Critics of the Ostrom perspective not only reject rational choice as the
basis for a normative democratic theory of administration but also argue that
its underlying principles lead to fundamentally undemocratic processes and
outcomes. Indeed, some argue that rational choice has created rather than
solved an intellectual crisis, one considerably more severe than the lack of a
central disciplinary paradigm alluded to by Ostrom. M. Shamsul Haque
() argues that the pro- market values unavoidably embedded in rational
choice theory threaten the cred- ibility and the very existence of public
administration as an independent scholarly discipline.
Haque further argues that the movement to introduce market mechanisms
into the public administration has advanced by denigrating the performance
of the public sector and extolling the excellence of private enterprise. The
negative image of the public service threatens its legitimacy in the popular
mind and creates the incentive to think of public administration as a slightly
modified branch of business administration. The problem with this, Haque
suggests, is that the public and private sectors are different and, at least in
democratic systems, operate on different principles. What gets lost when
viewing the public sector through the lens of rational choice is that market
values and democratic values are not just different but probably
incompatible. For example, markets may efficiently distribute goods and
services, but they do not distribute them equitably, and markets
Behavior
may strive to connect supply to demand, even if the good or service is
patently offensive to democratic ideals.
Consider education, a public service about which rational choice
arguments have spread from academic matters to policy debates in the forms
of proposals for vouchers, charters, and other marketlike mechanisms. One
of the earliest calls for a system of school choice, that is, to create a
competitive market within public
education, was by southern whites in the wake of the Brown v. Board of
Education
desegregation orders. Going unmet was the demand for racial segregation,
and the creation of a market for public education was seen as a way to
persuade schools to pay less attention to external political institutions and
more to local consumers. Most accept that a market for public education
services could produce pockets of excellence and higher levels of consumer
satisfaction among “marginal consumers,” but widespread disagreement
remains about whether markets will equitably distribute those benefits to
everyone or concentrate them in the hands of a socioeconomically
advantaged few (Henig ). Such outcomes may representthe technical
advantages of the market in efficiency, but contradict the egalitarian values
of democracy. In Madisonian terms, markets may unleash rather than con-
strain the corrosive power of factions.
Haque () argues that the contradictions between markets and democracy
have important implications for the practice as well as the study of public
administration. The basic ethics of public service as established by the
American Society of Public Administrators emphasize norms such as legality,
responsibility, accountability, commitment, responsiveness, equality, and
public disclosure (Mertins and Hennigan ). As rational choice becomes
the epistemological standard in public administration courses, Haque (,
) suggests, it has to redefine “public” in market terms if it is to preserve its
internal theoretical consistency. As the concept of “public” atrophies under
the paradigmatic insistence of rational choice, students, teachers, and
scholars of public administration are left with an identity crisis. The likely
result is that public administration morphs into business administration,
where efficiency and productivity are prized and equity and representa-
tiveness are relegated to secondary concerns. This, Haque suggests, is not a
concept of administration that is compatible with the democratic theorizing
of Madison or Hamilton.
Other critics also argue that rational choice’s focus on methodological
individualism has blinded it to the core purpose of public administration.
Ronald Moe and Robert Gilmore () argue that from the standpoint of
representative democracy, the mission of any public bureaucracy has to be top-
down, not bottom-up. A public agency is ultimately responsible to the
representative legislature and the law that authorizes its existence, its
purpose, and its mission. The job of a public agency is not to divine the
preferences
Behavior of its clientele and then satisfy
Behavior
them. A public agency, in other words, is just that: public. It is not the
equivalent of a private-sector producer serving a market niche by satisfying
the preferences of a certain set of customers. A public agency’s job is to serve
the collective institutions of the democratic system and, ultimately, the
Constitution. An agency’s clientele might not like some of the actions when
they are responsive to such top- down considerations, but public
administration is supposed to serve the will of the state, not the selfish wants
of the individual. There are any number of con- ceivable instances in which
an agency might serve its clientele well, but, in doing so, harm the common
good. A school in a competitive education market, for example, may offer
religious indoctrination as part of the curriculum. Parents who find this
attractive can take their children, along with their tax dollars, to such a school
and be highly satisfied. From an individual and market perspective, all is well
—supply is efficiently matched with demand through the mechanisms of
competition among producers and choice among consumers. From a group-
level democratic perspective, the result is less pleasing. The central legal
justification for public schooling—to teach the imperatives of democratic
citizenship—is sub- ordinated to market demand, if not lost altogether
(Rebell ).
Democracy is ultimately a set of guarantees about process—a person’s
rights to participate in collective decisions—not about outcomes. The market
delivers what the individual wants; democracy delivers what we can all agree
upon and live with. The two, as critics of rational choice take some pains to
point out, are not the same thing in practice or in theory (Callan ). For
such reasons, critics argue that rational choice is a poor choice for the central
paradigm of public administration. Market values and democratic values are
not interchangeable equivalents, and rational choice favors the latter over
the former. The decades since the seminal contributions of Waldo () and
Simon (/) may havebeen marked by an intellectual crisis in the
study of public administration, and the discipline’s difficulty in intellectually
accommodating its scholarly underpinnings with democratic values is by now
well known.
Conclusions
Rational choice theory has provoked some of the most contentious and
controversial debates in public administration scholarship, but it has also
provided the discipline with a little-rivaled intellectual stimulant. Regardless
of whether the purpose has been to advocate the theory or to expose its
faults, some of the most original and valuable contributions to public
administration knowledge come from those working from a rational choice
foundation.
The attractions of rational choice theory (especially its formal
applications) are not only its internal consistency but also its ability to
generate
Behavior logically deduced, empirically testable propositions. As long as its
founding premises hold, it is ca-
Behavior
pable of parsimoniously and comprehensively explaining a broad range of
phenomena of interest to public administration scholars. In addition to
presenting a formidable challenge to public administration orthodoxy, the
central ideas of rational choice theory have become popularized and were
foundational to the attempts by many Western democracies to “reinvent”
their administrative apparatus in the s and s.
The problem with rational choice is that significant questions remain about
the validity of its starting premises. If these are incorrect, or valid only under
limited circumstances, the broad claims of rational choice—and its widely
adopted prescriptive implications—immediately become suspect. As a deductive
theoretical framework, rational choice stands and falls on the twin pillars of
rational self- interest and methodological individualism. As Buchanan and
Tullock argue, “The ultimate defense of the economic-individualist
behavioral assumption must be empirical” (, ). Thus far, the empirical
record has not definitively rejected these assumptions, but neither has it done
much to confirm them. One of the persistent criticisms of rational choice
theory is that its conception of human nature is too narrow to be of much
use. Consider the firefighters who died while trying to fight their way into the
World Trade Center towers during the terrorist attacks of . Undoubtedly,
these men were doing a job they were being com- pensated for, and job
performance undoubtedly plays a role in the career prospects of any civil
servant. Yet to describe their actions as “self-interested” requires a very broad
interpretation of that concept. Countless more mundane examples of public-
sector behavior support the contention that whatever comprises the average civil
servant or citizen utility function, it is not adequately accounted for by the
traditional portrait of a rational utility maximizer.
Some of these criticisms are built from the same intellectual tools that
rational choice proponents use to expose the weaknesses of orthodox public
administration theory. For example, rational choice advocates are quick to cite
Simon’s work as a mortal blow to the orthodox intellectual tradition, but
Simon also explicitly rejected the economic concept of the rational utility
maximizer. Simon’s administrator was a satisficer, not a maximizer; that is, a
decisionmaker equipped with limited information, driven by habit and values,
who settled for decisions that were “good enough” to deal with the situation at
hand, not those that maximized individual utility (Simon /). Simon
drew his concept of bounded rationality out of psychology rather than
economics, and his portrait of administrators was more psychologically
complex than the cost-benefit calculator that shows up in Niskanen’s formal
models. Simon argued that the economic concept of human rationality at the
heart of rational choice theory fails the empirical acid test set by Buchanan
and Tullock (Simon ). Simon may well have helped un- dermine the
Wilsonian/Weberian theoretical tradition, but his arguments are no less
corrosive to the core assumptions of rational choice.
Behavior
This mixed empirical and theoretical record is discomforting because
there is another side to Smith’s insight that the pursuit of individual self-
interest can produce collective benefits. Scholars have also long known that
individuals who pursue self-interest can impose collective costs. This is
known as the “tragedy of the commons” problem, and was most famously
articulated in a  essay by biol- ogist Garrett Hardin. Imagine a public
pasture, open to any cattle owner who wants to put his herd out to graze. A
rational herdsman will seek to maximize his gain from this public resource by
putting as many cattle out to graze as he can. The problem is that if every
herdsman does this, the grazing of the cattle will quickly exceed the carrying
capacity of the pasture. When the common resource has been exhausted, all
the herdsmen will face ruin because they rationally sought to maximize self-
interest.
Hardin took some pains to point out that the tragedy of the commons was
more than a cautionary parable; indeed, numerous real-world examples range
from the exhaustion of certain fishing stocks to the overuse of national parks.
The tragedy of the commons is, in fact, a problem as old as man, and all
societies are forced to create mechanisms to preserve the common good from
the corrosive effects of individual self-interest. Adam Smith recognized that
self-interest could be harnessed for the collective good, but even he made no
claims that this was a universal possibility. If market mechanisms driven by
self-interested actors cannot protect the common interest, what can? As
Hardin pointed out, modern indus- trialized democracies tend to converge on
a single answer to this question: administrative agencies with the power to
“legislate temperance.” As Hardin put it, “Since it is practically impossible to
spell out all the conditions under which it is safe to burn trash in the back
yard or to run an automobile without smog-control, by law we delegate the
details to bureaus” (, ).
This solution may fit easily with the Wilson/Weberian perspective, but
does little to solve its inherent problems, especially its difficulty in reconciling
the hierarchical, authoritarian nature of bureaucracy with democratic values
and the in- evitable political role Weber assigned to mature bureaucracies.
Rational choice has played an important role in determining the limits of this
orthodox perspective, but has thus far met only limited success in
establishing itself as its intellectual successor. If there are unbridgeable
differences between markets for cars or soft drinks and markets for public
goods such as library, education, and law enforcement services, economic
theory may have limited use for scholars of the public sector. To become the
central paradigm of public administration, rational choice requires markets to
be somehow made synonymous with democracy. Ostrom showed that this is
not necessarily impossible, though subsequent work raises doubts about
whether it is probable.
There are signs of an emerging synthesis between the orthodox perspective
and the challenge from rational choice. Rational choice scholars have
expanded
Behavior and
Behavior
refined the concept of utility maximization since the s in ways that allow
the committed public servant a place in formal models of bureaucracy
(Ostrom ). Relaxing the assumptions that define rational utility
maximization to allow a greater role for altruistic or group-oriented goals—
for example, the desire to help others or serve the public interest—
considerably tempers the portraits of bureaucracy created in early rational
choice works such as those of Downs and Tullock. Teske and his colleagues
show that, at least in theory, competitive markets can exist under
considerably less-than-optimal market conditions, though these markets
may require a strong regulatory role for public bureaucracies to mitigate the
social-democratic downside of market excess. Perhaps rational choice’s lasting
contribution will be to redefine intellectually rather than to replace the role
of bureaucracy in public administration theory.
Cleary, as indicated in this and the previous chapter, research being
conducted in other disciplines is changing the theoretical framework
surrounding decision
theory and rational choice. David Brooks (), political columnist for the
New York Times, has labeled the need for a broader look at human nature as
the “new
humanism.” In order to fully understand the political process, how people
respond to incentives, and the human decisionmaking process, a more
interdisciplinary approach is needed. Others have also called for combining
the natural and social sciences through a process of “consilience” (Wilson
). A brief review of the
number of journal articles, and even journals (e.g. Organizational Psychology
founded in ), attests to the strength of this movement. Some of the disci-
pline’s most well-respected figures, Simon and Ostrom, were strong advocates
of the need to draw on theory and evidence from other disciplines, primarily
psychology and economics. To date, however, the field at large has been
reluctant to more directly situate itself as interdisciplinary (Wright ). Some,
such as Elinor Ostrom, have even explored and utilized theoretical insights from
beyond the social sciences, to include biology and environmental science.
The notion that communication within CPRs can facilitate trust and prevent
hoarding illustrates an important distinction between maximizing short-term
and long-term self-interest. People are willing and able to avoid maximizing
short-term self-interest (e.g., over- grazing) in order to maximize long-term
self-interest (e.g., the longevity of the pasture). Although still a form of
utility maximization, rational choice theory, as currently conceptualized
within public administration, does not distinguish between the two, or when
one or the other will be pursued.
Despite such shortcomings, there is hope for public administration and the
potential for the development of a dominant paradigm as advocated by
Vincent Ostrom. As discussed earlier in this and the previous chapter, early
attempts to apply rational choice theory to the behavior of bureaucrats and
citizens
Behavior break down in light of recent evidence on human decisionmaking. A
brief web search on Amazon or Barnes and Noble using the keyword
“irrational” will reveal that
Behavior
since the mid-s there has been a tremendous increase in the attention devoted to patterns of
decisionmaking that depart from the rational actor model described in the first part of this chapter.
Common to most of these texts is the notion that rationality is rarely defined in terms of maximizing
economic utility. Rather, hu- mans tend to engage in behavior that, although less than financially
maximizing,
is in large part predictable. The title of Dan Ariely’s book Predictably Irrational
() is an appropriate moniker for this emerging line of research.
Beyond Vincent Ostrom and Simon, perhaps few have shaped decision theory and rational choice
theory more than Elinor Ostrom. To rein in self-interested bureaucrats, orthodox public administration
advised a top-down, centralized management structure. Revisions from Tullock, Downs, Niskanen, and
Tiebout suggested that competition and market forces were a more practical alternative to achieving
efficiency. Ostrom’s work on common pool resources suggests that the solution may in fact be
endogenous—within-group communication allows for the establishment of self-regulating institutions.
Coordination, and thus efficiency, can be achieved without competition and without centralized control.
Even though Ostrom’s work on CPR dilemmas is consistent and robust, the implications for large-scale
bureaucracies are less clear. Nonetheless, institutions able to facilitate open communication and
participatory decisionmaking processes are most likely to engender trust and the accompanying
organizational benefits that it provides.
Whatever its weaknesses, rational choice has few equals in public administration theory for internal
rigor and the ability to explain complex phenomena with clarity and parsimony. There are, however,
clear alternatives emerging within the social sciences. Indeed, as discussed earlier in the chapter, when
applying insights from organizational psychology, the theoretical and practical utility of Tullock and
Downs is questionable at best. A new behavioral theory is emerging, one that is by necessity
interdisciplinary. Yet the insular nature of public administration raises concern as to whether the field
will be able to efficiently incorporate insights from other disciplines in this regard (Wright ). Thus,
it is likely that for years to come, rational choice will continue to be employed (both gainfully and per-
ilously) as a way of organizing and studying public bureaucracies and public service provision.
Notes
. Although Adam Smith is best known as a founding father of economics, his ties to public administration are
considerable. Smith never held a position as a professional economist, but he undoubtedly was a public
administrator—he enjoyed something of a second career as a government tax collector.

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Rational Choice Theory and Irrational Behavior (TUGAS NINA)

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Rational Choice Theory

and Irrational Behavior

The Rational, Self-Maximizing Bureaucrat

Trust and the Irrational Bureaucrat

The Self-Maximizing Citizen and the Tiebout Hypothesis

Rational Choice as the New Orthodoxy

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