Bureaucratic Limits

Don Boudreaux quotes economist Steve Horwitz regarding the problems in bureaucracies. Rather than use the rigorous language of Hayek, Horwitz says it in simple terms. There are two problems with bureaucracies:

  1. Lack of local knowledge
  2. Weak incentives

The more politically oriented can use this as an argument against all kinds of big government programs, but a broader understanding is that this applies to all bureaucracies: public, private, and non-profit. Given that bureaucracies are not going away, it’s worthwhile to concentrate on how bureaucracies can attain better local knowledge and how incentives should be structured.


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