SCALE ECONOMIES AND IRON LAWS: MERGERS AND DEMERGERS IN WHITEHALL 1971–1984

Abstract

Between 1971 and 1984 there were ten cases of merger or demerger in British central government departments, ranging in importance from the massive DTI demerger into four distinct departments (1973) to the absorption by the Lord Chancellor's Department of the Office of the Public Trustee (1982). By analysis of changes in aggregate indices of ‘top staff‘, ‘middle staff’, ratio of administrative grades to total staff, salary costs relative to total budget, budget relative to total Government budget, and staff relative to total Civil Service staff, some common hypotheses about the rationale and effects of such bureau‐shuffling are explored. It is found that, if anything, like attracts unlike (in terms of these indices); that change in scale creates neither economies nor diseconomies; that reorganization does not inevitably produce cost escalation (the ‘Iron Law of Prodigality’); but that the ‘Iron Law of Inertia’ (reorganization in practice has little observable effect on bureaucratic structure and working) is supported by the observed results.