In this work the authors present a general theory of bureaucracy
and use it to explain behaviour in large organizations and to
explain what determines efficiency in both governments and business
corporations. The theory uses the methods of standard neoclassical
economic theory. It relies on two central principles: that members
of an organization trade with one another and that they compete
with one another. Authority, which is the basis for conventional
theories of bureaucracy, is given a role, despite reliance on the
idea of trade between bureaucracies. It is argued, however, that
bureaucracies cannot operate efficiently on the basis of authority
alone. Exchange between bureaucrats is hampered because promises
are not enforceable. So trust and loyalty between members of
bureaucratic networks play an important part. The authors find that
vertical networks promote efficiency while horizontal ones impede
it.
General
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