I've got the power: granting bureaucrats discretion

About this event

Hume (1785) decreed that government should be designed as if all men were self-interested; we show this assumption leads to misguided management choices if bureaucrats value social gains but are not averse to spending public money. We compare the traditional system of bureaucratic oversight by complaints and investigations with a system of bureaucratic discretion in which bureaucrats are accorded the freedom to manage a budget or quota without external interference. We find that more pro-social agents -- ie, those most likely to overspend -- should be granted discretion to manage their own budgets. The mechanism we propose can be used to screen between bureaucrats of different levels of pro-social orientation. We show that bureaucratic discretion restores the alignment between agents who self-select into the public sector and the bureaucrats that the social planner desires. However, with competition for consumers and funding following consumers, more restrictive funding or quotas are necessary. We illustrate with examples of budgets and quotas used in health and social care systems in the UK and Germany.