Efficiency in Government; D. Bechara

Dennis Bechara Efficiency •In Government IT IS always fashionable to criticize governmental waste and ineptitude. People constantly make reference to the fact that most government em ployees are overpaid and under worked, and that administrative agencies frequently waste resources. These criticisms contain a grain of truth, but fail to focus on the fun damental issue. Although it is true that many agencies waste resources or pay salaries higher than are paid in the private sector, such censure strikes merely at the symptoms of governmental bureaucracy. Government functions differently from private enterprise. Industries are organized in a way that maximizes production while -minimizing costs. An enterprise Mr. Bechara Is an attorney in the law offices of Goldman, Antonetti & Davila in San Juan, Puerto Rico. 284 that does otherwise finds itself quickly out of business. Competition among firms stimulates the search for cost-saving measures. Consum ers reap the benefits of this in the form of lower prices. Enterprises de pend for survival upon the patron age of willing customers. Govern ment, on the other hand, does not look to voluntary contracts for its existence. Government does not rest on the need to maximize production or to minimize cost. The essence of government is organized force, which society utilizes to compel its members to act in prescribed ways, or to punish those members who refuse to obey the law.

If government is to compel people to obey the law, the broader the scope of the law, the more powerful must the government be. As the state assumes increasing responsiEFFICIENCY IN GOVERNMENT 285 bility for activities previously left to private citizens, it becomes neces sary for the government to set up additional bureaus or agencies that serve to implement the law. It is futile to censure government bureaucracy on the ground that it does not act in a fashion comparable to that of a business enterprise. The very purpose and nature of these bureaucracies do not allow for such behavior. Even if governmental agencies were managed in a manner similar to a business, it would still be impossible to objectively measure the success or failure of the agency. The Profit and Loss System Business organizations have at their disposal a quick and objective method for judging the success of their venture-the profit and loss system. Administrative agencies, on the other hand, lack any such objec tive measure of efficiency in ad ministering or enforcing a law. And the worst judges of· their perfor mance are the agencies themselves, because they have a vested interest in enhancing their work and por traying it as attractively as possible.

At best, there might be some evi dence of a general trend, but this is not always useful. For example, an agency may have prosecuted more cases in a given year than the pre vi ous year. But this statistic alone does not reveal the nature of the prosecutions. It is possible that one case has greater significance than many others combined. Similarly, the fact that an agency handled its cases according to arbitrarily drawn time targets is not an indication of its efficiency. Quality is often sac rificed for quantity, as the agency attempts to mold each case to a preconceived time target. Highly unreliable are such measures by which administrative agencies sup posedly justify their activities. Business enterprises have a dou ble incentive to reduce costs of oper ation: the profit motive as well as the competition in the marketplace. No shareholder is pleased to dis cover that management has in creased its operating costs. Yet, this is precisely what the administrative agencies are doing when they at tempt to justify their existence by pointing to the extra millions of dol lars spent to operate this year as compared to last year. This is sup posed to be evidence that the agency was truly necessary. After all, the more money spent, so goes the logic, the more important the function.

Instructi ve is the behavior of an agency as it nears the end of its fiscal year. Because they are funded by the legislative branch of the gov ernment, agency heads are always trying to persuade Congress that their work will require more funds than were allocated the previous year. If agency heads were to ap proach the end of the fiscal year 286 THE FREEMAN May with an operating surplus, this would be tantamount to an admis sion that their agency did not really need the money it asked for before; and Congressmen would most cer tainly point this out when the new budget is being discussed. Accord ingly, administrative agencies rush to spend every dollar allocated to them. If a surplus is being gener ated, the agency may take care of it by hiring new employees, or em barking upon additional studies, or by intensifying programs previously neglected. The point, of course, is to persuade Congress that the agency not only is necessary, but that its work is as important as the amount of money needed to pay expenses.

No Measure of Efficiency The efficiency of an agency cannot be measured by the fact that it leaves either a surplus or a deficit. A surplus may indeed evidence the fact that many areas that could have been covered by the agency were not, so that the implementation of the law in question has suffered ac cordingly. Similarly, a deficit may signify irresponsible waste on the part of the agency, as it made little, if any, effort to cut costs. The efficiency of the work of the employees of the agency cannot be effectively measured either. Since there is no profit motive nor a mar ket price for the services that are provided by a governmental agency, efficiency is translated into subjec tive terminology. This may be one of the reasons why public employee unions are growing. Public employ ees find that the merit system is based on many subjective factors, opening the door to favoritism and inequities.

In the private sector, employers are limited by consumers as to the wages that ought to be paid. In addi tion, employers have the incentive of paying more to the more produc tive workers to retain and attract good employees and to improve pro ductivity. It is possible, of course, for a private employer to favor the least productive and to award solely on the basis of favoritism. The profit and loss system, however, will limit any such arbitrary behavior. The public employer, on the other hand, is not constrained by these considerations. Rather, the work of an agency employee is evaluated in clearly subjective ways. If an em ployee caused an agency to spend more money in a case when he could have, let us say, settled the matter before its having had to go to court, this factor is not taken into consid eration. Allegedly objective criteria are utilized to evaluate some of the work of the government employee.

However, in the final analysis, it is the personal preference of the agency head that carries the most weight. Favoritism exists. No matter how 1979 EFFICIENCY IN GOVERNMENT 287 cleverly the agencies may try to suppress it, it will not be effectively eliminated because there are no ob jective criteria by which efficiency may be measured. How can we mea sure, for instance, the effectiveness of a policeman? Can it it be said that one who caught five burglars is any more efficient than the policeman who happened to be on his beat during an uneventful day? If money is set aside to be awarded to the most efficient employees, it easily lends itself to favoritism and pa tronage. When agencies are established to protect the rights of the people, it is not uncommon to find that the law grants the respective agencies a monopoly in the investigation and prosecution of cases that arise under the law. Individuals thus lose the freedom to institute legal proceed ings in their own defense. According to these laws, the agency chooses whether or not to assert the claim.

Administrative. agencies frequently cite the rate of success of their legal actions as evidence of efficiency. However, those statistics are incom plete. Of the actions that were ad ministratively dismissed, no one knows how many would have been litigated successfully had the gov ernment allowed the parties to liti gate at· their own choice. Administrative agencies fre quently under-utilize their re sources precisely because cost is not a significant consideration. Many talented agency employees are obliged to perform time-consuming tasks that others might have done more efficiently. Professional em ployees in these government agen cies often are kept busy at clerical chores. Furthermore, as the gov ernment becomes more conscious of its Uduty" to hire people of diverse backgrounds so that its workforce adequately reflects a sample of the popula tion, exceptions begin to be made; the rules of efficiency that were promulgated previously cannot be enforced according to the letter of the law.

What is the solution to this prob lem? It is certainly not the abolition of all forms of governmental agen cies. Government is essential to a civilized society, regardless of the fact that in performing its functions it maybe inefficient. Rather, the solution lies in limiting the duties of government as much as possible in order to avoid this incalculable waste of resources. Limiting gov ernment to its appropriate functions would reduce the need for bureau cracies, with consequent saving to the taxpayer and society in general. i THINKING ABOUT ECONOMICS MAN is not simply a spiritual being; he is a spiritual being who feels hunger, needs protection from the cold, and seeks shelter from the elements. In order to feed, house and clothe himself, a person must work. Augmenting his labor with tools and machinery, he converts the raw materials of his natural environ ment into consumable goods. He learns to cooperate with nature and use her forces to serve his ends. He also learns to cooperate with his fellows, his natural sociability rein forced by the discovery that the divi sion of labor benefits all. «(Trade is the great civilizer." There's an un broken thread that runs from these primitive beginnings to the complex The Reverend Mr. Opitz is a member of the staff of The Foundation for Economic Education, a seminar lecturer, and author of the book Religion and Capi talism: Allies, Not Enemies.