theory to model the funding process for a specific agency. This agency seeks ever-increasing budgets and can exploit perfect information about the legislature's preferences. The legislature has a standard demand function for the output of the agency: The lower the price, the higher the quantity desired. However, the legislature does not know the unit cost of the output from the agency. These assumptions allow the agency to submit an "all or nothing" ultimatum to the legislature, where the "all" is the maximum the legislature is willing to pay for an agency selected point along its demand function. Niskanen concluded that this agency always overproduces past the legislature's preferred level and past the socially optimal level. He further generalized that this situation produces a government that is always too large. Although this model serves as foundation for a body of literature, it has serious limitations. Niskanen clearly condensed a complex, iterative, and political process down to a small number of modeling assumptions. In doing so he left out critical aspects, such as the delineation between funding for agencies versus funding for programs, the role of the Office of Management and Budget (OMB), the existence of multiple principles for any agency action, and the role of agenda control within the legislature.
Niskanen's contribution serves primarily as a straw man architecture, which other scholars have used as a starting point. The ensuing work developed on this platform by incremental improvements in specific attributes: the addition of more complex budget options provided by Robert Mackay and Carolyn Weaver ( 1981), the inclusion of agency deception and legislative oversight from Jonathan Bendor , Serge Taylor, and Roland Van Gaalen ( 1985), and the provision of a dynamic, reiterative focus by Jonathan Bendor and Terry Moe ( 1985). There is also a current trend toward greater scope in formal models of bureaucracy beyond simply analyzing the budgetary dimension alone. For example, John Ferejohn and Charles Shipan ( 1990) concentrated on the policy output dimension but added judicial review and presidential veto to the model.
Another rich dimension of formal models of bureaucracy lies in the intersection of public administration and organizational theory. This class of models relies heavily on social choice theory, specifically, the principle of individual rationality: Individuals within a bureaucracy analyze alternatives and make decisions that maximize their own utility. The core idea is that organizational structure affects the aggregate behavior of the bureaucracy because the mechanisms for aggregating preferences are biased by individual preferences that are often expressed through informal, undocumented processes. Graham Allison ( 1971) has called these "action channels." Action channels have particular attributes: differing levels of individual power, definable jurisdictions, and specific historical precedents. Thomas Hammond ( 1986) applied this perspective to bureaucratic restructuring. Hammond asserted that organizational structures within bureaucracies behave like agendasetting structures within legislatures, and he constructed a simple model of hierarchy to demonstrate that agency heads can manipulate the final choice-set of the bureaucracy in order to maximize their individual utility. In the simplified version of the model there are field managers with specified jurisdictions who evaluate two policy alternatives and propose their own individual preferences to a middle manager. The middle manager takes the proposals from each of his or her subordinate field managers and submits a preferred alternative to the director. Hammond showed that the director can get a preferred choice-set simply by rearranging lines of reporting between the field managers and the middle managers. This situation infers that bureaucratic output is not necessarily an aggregation of participant preferences and leads to what Hammond calls the "structure = agenda" metaphor.
Formal models of bureaucracy provide a unique perspective to students of public administration. This approach, borrowing tools from economics, statistics, and formal logic, enables one to look at public institutions in a simplified manner. These models ask the question, What central underlying features exist across a broad range of institutional settings? This approach also contributes to the public administration literature by providing an abstract theoretical framework that is flexible enough to address a wide range of administrative relationships. However, the quality of these models and their conclusions is primarily a function of the quality of the stated assumptions. Critics of formal modeling commonly focus on the oversimplification of some model assumptions. Since this criticism has justly focused on the reliance upon the rational choice assumptions of individual utility maximization and perfect information, recent models have employed progressively more realistic and sophisticated specifications.
Allison, Graham, 1971. Essence of Decision. Boston: Little, Brown.
Bendor, Jonathan, Serge Taylor, and Roland Van Gaalen, 1985. "Bureaucratic Expertise Versus Legislative Authority: A Model of Deception and Monitoring in Budgeting". American Political Science Review 79 (December): 1051-1060
Bendor, Jonathan, and Terry Moe, 1985. "An Adaptive Model of Bureaucratic Politics". American Political Science Review 79 (September): 755-774.
Ferejohn, John A., and Charles R. Shipan , 1990. "Congressional Influence on Bureaucracy". Journal of Law, Economics, and Organization 6 (special issue): 1-44.
Hammond, Thomas, 1986. "Agenda Control, Organizational Structure and Bureaucratic Politics". American Journal of Political Science 30 (May): 379-420.
Mackay, Robert J., and Carolyn L. Weaver, 1981. "Agenda Control by Budget Maximizers in a Multi-Bureau Setting". Public Choice, vol. 36, no. 3: 447-472.
Niskanen, William, 1971. Bureaucracy and Representative Government. Chicago: Aldine-Atherton.