Thursday, November 16, 2023

The Surplus

Many of life's greatest lessons can be learned from The Office (the American version that is). And no Office character exhibits this microcosm of deep knowledge than the one and only Michael Scott. For those of you who haven't watched the show or don't know who Michael is, how do I put this...let's say that he's interesting. In the "The Surplus" episode, Michael is made aware (like a 5 year old) the branch has a $4300 surplus that it "needs to spend", or it will be removed from the budget the following year. Factions form in the office and tensions rise between the copier and chair lobbyists. But wait, there's more! Michael is also made aware that he could receive an individual bonus for returning the surplus to "corporate".

Besides being a humorous situation, this scenario applies some of the concepts about bureaucracy from Weingast and Marshall. Not only is the principal-agent problem very evident ("corporate" and shareholders want costs lowered, but the agents [employees] are looking to maximize their own benefit/utility by buying an expensive chair or copier) but we also see the behavior of Senior Bureaucrat (Michael) affected by the maximization of his power and salary, both related to the size of the budget he oversees. 

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