Source: David Friedman’s Substack
by David Friedman
“William Niskanen, in a book published many years ago, proposed a simple model of government bureaucracy. The more money a bureaucrat controls the more important he is, so bureaucrats want to maximize their budgets. The legislature knows how much any level of output from a bureau is worth to it. The bureaucracy knows — and the legislature does not — what a government bureau can do at what cost. So the rational bureau finds the largest level of output that it can produce at a cost below the value of that level of output to the legislature and exaggerates the cost of any lower level of output by enough to make it higher than its value, thus tricking the legislature into giving it the largest possible budget. When I first read the argument it struck me as implausible.” (05/22/26)