Political Economy Approach to Public Administration
We have read about the famous Wilsonian dichotomy of politics and administration
and after the Second World War the diminishing relevance of this dichotomy. The above
reference is vital to be kept in mind to understand this topic which brings together the
science of politics and economic together to gain a detailed understanding of the
administration of the state and its resources.
After the New Public Administration theory of 1968, there was a new approach
proposed in the 1970s which talked about economic approaches to analyze public
administration called the Public Choice Theory. We shall take a step back to understand a
few concepts and developments of that time to better analyze the Public Choice Theory.
By the middle of the last century, the Pigouvian social welfare system was adopted by
many economies. British economist Arthur C Pigou wrote a book called The Economic of
Welfare in 1920 and also tried defining what welfare is in economic terms. According to
him economic welfare can be measured like monetary welfare by means of using money
as a yardstick.
Thus economic welfare, in the Pigouvian sense is the utility satisfaction that a person
derives from the use of goods and services which can be exchanged amongst each other.
The important aspect of this theory was that to maximize the welfare through the means of
distribution of national income. Now, we also need to understand a term called externality.
It comes into action when an individual X affects Y in a reckless manner without taking Y’s
gains or losses into account. This leads to a situation called externality. Therefore, in an
economy, the Government intervention becomes important to address these externalities.
Consider this example given by Pigou himself: If a person is running the business of
manufacturing alcohol, there is a specific and substantial social impact of this product. This
can be, increase in crimes, increased cost of police staff and prisons, the long time and
resources investment of the judiciary etc, which exceeds the net private product, the
alcohol. To counter this, the alcohol production will have to be increased by the
manufacturer. To deal with this overproduction the Government would have to impose a
tax on the manufacturers. This tax would be to equate the private cost (of the
manufacturer) and the social cost.
The above explanation was necessary to understand the Public Choice theory in a
rather detailed manner. Before this theory was proposed, economists and other subject
matter experts considered State or the Government to be an agent beyond the realms of
economic theories. The state functioned on different drivers than economy and it was an
accepted fact. However, the Public Choice theory challenged this very fact and proposed
the use of economic yardstick to evaluate the resource allocation in the public sector and
economic analysis to identify the inefficiencies in the Government policy and decision
making processes. It also makes a premise that the bureaucrats and politicians work on a
model to increase their own power and influence and end up formulating policies which
may be against the larger public interest. Not, that we needed a theory to prove that
however, it got a thumbs up from many authors and subject matter experts. This theory
also brought in a more consumer centric approach in the formulation of policies and the
manner in which the government machinery should function. There was a clear inclination
towards democratic administration from bureaucracy and an important aspect was
emphasized that the government action needs to be in sync with the values, needs and
wants of the citizens.
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1) this topic: Hace referencia sobre la famosa dicotomía wilsoniana de política y
administración.
2) Its: Recursos del Estado.
3) Which: Se refiere al enfoque económico para analizar la administración pública.
4) We: Se refiere a los lectores
5) that time: Se refiere a la época o el tiempo para analizar la Teoría de la Elección
Pública.
6) Him: Arthur C Pigou
7) Thus: Bienestar Economico
8) Which: Bienes y servicios
9) That: Conectivo que hace referencia a la Teoria
10) It:se refiere a la situacion de “Entra en acción cuando un individuo X afecta a Y de
manera imprudente sin tener en cuenta las ganancias o pérdidas de Y
11) This: Se refiere al termino de extenalidad
12) Himself: Arthur C Pigou
13) this product: Alcohol
14) This: Se refiere al producto, en este caso el alcohol
15) This: Alcohol
16) This tax: Impuesto de manufactura del alcohol
17) It: Se refiere al hecho de que las teorías de la economia funcionaban con
impulsores diferentes a la economía
18) It: Se refiere a la premisa de que los políticos trabajen en un modelo para
aumentar el poder adquisitivo.
19) Their: Burocratas y Politicos
20) Which: Se refiere a la formulacion de politicas
