These are the examples of how bureaucracy functions. This phenomenon is not restricted to govt. alone. In large corporations there is a bureaucracy. This leads to problem of achieving the actual state objectives. •The ‘predatory’ or ‘autonomous’ state, driven by the logic of power rather than the pre-existing interests of particular groups. The state as a monopolistic firm producing public goods and maximizing the profits of its rulers, subject to the constraints of potential external and internal competition. There is an internal competition that govt. faces from rival parties which might seize power. Possibility of govt. being too oppressive then outside forces from other countries might find it easy to just walk in with the support of the citizens. There is a threat of invasion which oppressive govt. has to face. These are the constraints which the govt. faces which limits what they can extract from their citizens. Therefore, state is a monopoly in a contestable market i.e. even if there is a single firm in an industry there is always fear of competition from outside- rival firms may steal the market and reduce profits. What is the main factor guiding the functions of the state ? Start with a particular group which turns from roving bandit to stationary bandit to set up a state. It plans to settle in the state for a long period of time and use the society as tax base without destroying the productive capacity of the citizens. Importance depends on the time horizon of the rule.
Sometimes the ruler might not be interested in his successor. For examples Louis xii was taxing country and using it for his personal projects. He did not worry about the country and rulers after him. If a govt. has a very low possibility of coming to power or it knows that they are short lived, then it will be the most corrupt govt. In India, Chandra Shekhar Singh govt. was the most corrupt govt. it lasted for 9 months. Limitation of the model: State is not a unified model but a monolithic dependent on bureaucracy subjected to principal-agent problem. There is no dd curve for public good but everyone has a function that depicts how much she is willing to pay. If bureaucrats can perfectly discriminate, they can extract entire amount that people are willing to pay. Area under the MC curve is the actual cost. Bureaucrats extract a surplus above MC. This process of extracting entire surplus is called Lindahl tax. They will produce optimal amount only if this tax is extracted. The problem is bucreaucrats are not a solid homogenous monopoly- they compete among themselves. Politicians use this. Thus perfectly discriminating monopoly is an inappropriate model for bureaucracy. Infact it is a situation of bilateral monopoly. The outcome depends on the relative strength of bargaining between bureaucrats and politicians Consequences of the State’s Intervention in the EconomyTWO VIEWS: •State reflects a bargain between different political forces, interest groups etc. Bargaining theory tells us that equilibrium target that will ultimately
You've reached the end of your free preview.
Want to read all 50 pages?