Budget-maximizing model

The U.S. economist William A. Niskanen developed and published in 1968 as a representative of the economic theory of bureaucracy, the so-called budget maximization theory (also budget maximization model).

To the theory

Central argument of this theory is that the interest of a bureaucracy is to maximize their budget, because all the other dimensions of benefit depend therefrom.

To this end, Niskanen defines these benefit dimensions:

• Opportunities for advancement
• Merit and extra earnings
• Prestige
• Power
• Survival of the organization
• Competition with other authorities
• Simplification of changes within the authority

Niskanen sees the bureaucracy as a monolithic actor who negotiated with the policy to its budget. Between bureaucracy and politics prevails information asymmetry.

Example Authority: An authority is usually monopolist, as the only provider, and can even force consumers to consume (eg compulsory education ). Only the authority knows actual costs and the actual benefits of their services.