A Critical Comment on Niskanen's Model

Abstract

Niskanen's model has been largely criticized, but it still remains a standard explanation of bureaucracy's behaviour. In this paper we criticize the monopoly power that Niskanen assigns to the bureaucracy. A bilateral monopoly between bureaucrats and politicians might be a much more adequate framework for explaining the bureaucracy's behaviour than Niskanen's original formulation of a perfect discriminating bureaucracy. In a bilateral monopoly model, in no case the type of relationship which holds between the sponsor and the bureau leads to an oversupply of output. Should an excess output occur, it would be a consequence of the political decision-making mechanisms. This result stands in sharp contrast to the Niskanen's model, but, at the same time, it is coherent with the fact that, when the sponsor introduces control and monitoring mechanisms, the sponsor does not pretend to decrease the output but rather to supervise and to reduce the costs of producing the output.