The budget-maximizing model is a stream of

public choice theory Public choice, or public choice theory, is "the use of economic tools to deal with traditional problems of political science".Gordon Tullock, 9872008, "public choice," ''The New Palgrave Dictionary of Economics''. . Its content includes the st ...

and

rational choice Rational choice theory refers to a set of guidelines that help understand economic and social behaviour. The theory originated in the eighteenth century and can be traced back to political economist and philosopher, Adam Smith. The theory postula ...

analysis in

public administration Public Administration (a form of governance) or Public Policy and Administration (an academic discipline) is the implementation of public policy, administration of government establishment (public governance), management of non-profit establ ...

inaugurated by

William Niskanen William Arthur Niskanen (; March 13, 1933 – October 26, 2011) was an American economist. He was one of the architects of President Ronald Reagan's economic program and contributed to public choice theory. He was also a long-time chairman of t ...

. Niskanen first presented the idea in 1968, and later developed it into a book published in 1971.William A. Niskanen,

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1994. ''Bureaucracy and Public Economics'', Elgar. Expanded ed. Description and review
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According to the budget-maximizing model,

rational Rationality is the quality of being guided by or based on reasons. In this regard, a person acts rationally if they have a good reason for what they do or a belief is rational if it is based on strong evidence. This quality can apply to an abili ...

bureaucrat A bureaucrat is a member of a bureaucracy and can compose the administration of any organization of any size, although the term usually connotes someone within an institution of government. The term ''bureaucrat'' derives from "bureaucracy", ...

s will always and everywhere seek to increase their budgets in order to increase their own power, thereby contributing strongly to state growth and potentially reducing social

efficiency Efficiency is the often measurable ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without ...

. The bureau-shaping model has been developed as a response to the budget-maximizing model. Niskanen's inspiration could also have been Parkinson's law sixteen years earlier (1955).

Niskanen's budget maximizing bureaucrat

The model contemplates a bureaucrat who heads a public administration department, and who will try to maximize the department's budget, thus increasing its salary and prestige. There is a demand for the department's services on the part of electors and voters, but, contrary to publicly managed firms, which directly offer their products and services to these electors, the department is responsible for producing the services which will then be supplied by the Legislature to the electors. It will therefore be the legislature, or Government, the agent which defines the department's budget, depending on the quantity which it supplies. The more services the department supplies, the higher will its budget be. Therefore, the bureaucrat's objective will be to maximize the quantity of services supplied, subject to a social welfare break-even constraint. This means that the dead weight loss generated by excessive production of services must never be higher than the elector's consumer surplus (otherwise, the Legislature would notice that something was wrong with the department's activity, which would be causing social losses and not gains). In other words, a typical, private-sector utility maximizing model would anticipate that the department would expand services (and budgets) to the point that the marginal cost and marginal benefits are equated. In Niskanen's model, he would predict that average costs and benefits would be equated instead of the marginals.

Notes

References

*Friedman, Lee (2002), ''The Microeconomics of Public Policy Analysis'', Princeton University Press, pp. 429–432 Maximizing model Public choice theory Rational choice theory {{polisci-stub