Friday, October 29, 2010

Two questions from elsewhere

Anyone who has ever stumbled across public choice theory will be familiar with the Parkinson's Law type arguments - that public services tend to be captured by budget-maximising bureaucrats.

These faceless thieves allegedly cause the services concerned to decline into a mire of inefficiency that defeats the purpose for their existence.

Now here's a question: Are corporations dominated by bureau maximising bureaucrats to a greater extend than public services? Reading this, you could conclude that they are.

Next question: Are banks worth anything? Chris follows up his question with arguments for a 'state bank' - after all, if they socialise their risks.....?

1 comment:

CharlieMcMenamin said...

On your first point I think there are patterns in the behaviour of higher management in the private sector which defy most explanation. Certainly, as Will Davies points out, the whole theory of agency behaviour and alignment of incentives in stock options etc doesn't seem to have made CEOs act even in the interests of the shareholders, never mind the firm as an institution.

We perhaps need a new James Burnham to explain how (formal) ownership and control have first separated and now, it seems to me, utterly changed their meaning.

If de facto 'ownership' means you can exploit a resource without (many) restrictions then there is a case for seeing the managers as the real owners of any commercial institution and the de jure owners - the shareholders - as merely people who have lent them money. Finance and 'control' have trumped law and 'ownership'. I struggle to describe this accurately, I know, and I would welcome others improvements in my hesitant formulations.

I do think there are the germs of many a PHD thesis in this line of thinking. (Not to mention a lot of reworking of any kind of leftwing strategy.....)