I'm a Madison House Bureacrat

As a Program Director for Madison House, it pains me to say I am part of a bureaucracy. Under the Madison House name there are many different autonomous programs. Each program is given a yearly budget and the program directors essentially have full discretion over how those funds are used. Madison House’s overarching goal is to have as many volunteers completing as many hours of volunteer work as possible. To be perfectly aligned with their mission, I should spend the majority of the money on volunteer recruitment and on supplies for the site. I on the other hand, prefer to spend it on Bodo’s egg sandwiches for my volunteers at the end of each semester. This is a Principle-Agent Problem because Madison House’s goal to efficiently spend money on volunteer resources, contrasts with my goal to make my volunteers (and myself) happy with bagels.

There is no close monitoring for the reasons given by Mueller. First, the output of our programs is nonmarket. While Madison House can measure the number of volunteers and hours, it’s hard to calculate the value and quality of the actual work. Secondly, there is a monopoly supplier, so programs don’t compete for efficiency or have alternative sources of information. Finally, compensation is not tied to performance. The budgets are generally the same each year and are decided by outside factors.

If we don’t use all of our budget, we will get less money the following year. Given that no one else knows the true cost of my program, I spend everything even if it’s wasteful, to maximize our potential budget the following year. However, we may not be as autonomous as we think. Madison House wants to allocate funding efficiently, so they are incentivized to grow programs that attract more donors and are more impactful in the community. This means I have to inadvertently spend at least some of the money to continue growing my program  This aligns with Weingast and Moran’s perspective and suggests that even though we may be inefficient with some funds, we still receive funding because we provide an overall net benefit to Madison House that they approve of.