Ethics and the Evolving Public Funds Investment Decision Effectiveness

Abstract

A question of professional and scholarly interest to public administration is: What should state and local governments do with public funds received to produce public goods and services between the point of revenue collection and the time of their spending? Historically, the ethical answer has varied from (a) keep the money in safes and drawers until they are needed; (b) retain the funds in liquid accounts, such as checking accounts or other instruments, where they are on call; (c) invest in securities that provide investment incomes to governments, thereby adding value to public money. This article focuses on U.S. governments, and it examines what ethical considerations have influenced public managers’ investment decision effectiveness over the last six decades. It identifies periods since the 1960s in ethical investment decision-making, and it notes that ethical considerations often influence public managers’ decisions. The article concludes with a discussion on how contemporary public organizations can increase the value of taxpayers’ money by investing in processes, understanding their policy environment, and developing the human capital of public managers in ethical decision-making.