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A Primer on Public Management. Center for Democracy, Development, amd the Rule of Law Summer Fellows Program. “It’s not the business plan but the execution”. --attributed to Goldman Sachs. The Scope of State Functions.

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A primer on public management

A Primer on Public Management

Center for Democracy, Development, amd the Rule of Law

Summer Fellows Program

The scope of state functions
The Scope of State Functions

Addressing externalities Education, environmentRegulating MonopolyOvercoming imperfect information Insurance, financial regulationSocial Insurance

Providing pure public goods Defense, Law and order Property rights Macroeconomic management Public healthImproving equity Protecting the poor

Intermediate Functions

Industrial policyWealth redistribution

Minimal Functions

Activist Functions


Two dimensions of stateness
Two Dimensions of Stateness

Strength of State Institutions

Scope of State Functions

Stateness and efficiency
Stateness and Efficiency

Quadrant I

Quadrant II

Strength of State Institutions

Quadrant III

Quadrant IV

Scope of State Functions

The stateness matrix
The Stateness Matrix



United States

Strength of State Institutions




Sierra Leone


Scope of State Functions

Ussr russia

USSR 1980

Strength of State Institutions

Russia 2010

Russia 2000

Scope of State Functions


China 2011

Strength of State Institutions

China 2005

China 1978

Scope of State Functions

New zealand
New Zealand


Strength of State Institutions



Scope of State Functions

Why is public administration so difficult
Why is Public Administration So Difficult?

  • Central issue of all organizational theory is delegated discretion

  • All organizations need to delegate authority

    • To take advantage of local knowledge

    • To respond quickly

  • But delegation means loss of control

Two approaches to organizational theory
Two Approaches to Organizational Theory

  • Economists’ approach

    • Man is homo economicus

    • Incentives matter

    • Principal-agent framework

  • Social capital approach

    • Man as social animal

    • Norms and bonding over incentives

Principal agent theory private sector
Principal-Agent Theory: Private Sector


Board of Directors


Senior Management


Principal agent theory public sector
Principal-Agent Theory: Public Sector

The People




Implementing organizations

How is the public sector different from the private sector
How is the Public Sector different from the Private Sector?

  • Public agencies not allowed to retain earnings

  • Public agencies can’t reallocate factors of production

  • Public agencies must follow goals not of their own choosing

  • Public agencies not subject to market discipline

Making the public sector more like the private sector
Making the public sector more like the private sector

  • New Public Management (NPM)

  • Adding an exit option and competition

    • Vouchers, school choice

  • Wage decompression

  • Separating the policymaker from the implementer

  • Public expenditure tracking surveys

What these innovations have in common
What these innovations have in common

  • All can be subsumed under principal-agent framework

    • Use a monitoring-and-accountability framework

  • All try to affect agents’ incentives

  • All try to mimic market mechanisms

  • But: Do they work?

Limitations of principal agent
Limitations of Principal-Agent

  • If you can’t measure, you can’t hold accountable

  • Multiple principals

  • Principals want contradictory things

  • Public agencies are monopoly suppliers that can’t go out of business

Public sector outputs
Public Sector Outputs

Quadrant I

Quadrant II

Low Specificity High

Quadrant III

Quadrant IV

Low Transaction volume High

Monitorability of public sector outputs
Monitorability of Public Sector Outputs

Aircraft maintenance


Central banking


Highway maintenance

Low Specificity High

Foreign affairs

Court systems

Primary school teaching

University education

Preventative medicine

Guidance counseling

Low Transaction volume High


  • Human beings are not simply homo economicus

  • Are social animals as well

  • Motivated by pride, self-respect, group solidarity, other norms

  • Importance of social capital

A third type of capital
A Third Type of Capital

Physical Capital

Human Capital

Social Capital

And to outsourcing








Final Product

And to Outsourcing

Where does social capital come from
Where does social capital come from?

  • In traditional societies:

    • Kinship, shared culture, repeated interaction

  • In modern societies

    • Education, particularly professional education

    • Shared goals and standards

    • Leadership!

Education reform
Education Reform

  • Economic approaches

    • Vouchers, school choice

    • Testing and individual accountability

  • Social capital approaches

    • Raise salaries; improve professional standards

  • Fundamentally a political issue

    • Teachers’ unions, low incentives to solve issue

Community driven development
Community-Driven Development

  • Program design

    • Designed to foster social capital

    • Bypasses traditional institutions

    • Relies on participation and bottom-up input

  • Problems

    • Expensive and highly labor intensive

    • Encompasses ambitious social engineering goals

Conditional cash transfers
Conditional Cash Transfers

  • Transfers to poor require school attendance

  • Programs designed for sustainability

    • Goal is increased human capital

    • Often built-in evaluations (Progresa/Oportunidades)

  • Problems

    • Programs develop their own constituencies

    • Can be used in clientelistic ways