After class today, I remembered hearing something a couple years ago that the military would have aircraft fly in circles for hours just to burn fuel and keep costs high. Under the pretense of training, pilots acted in the best interests of the "Senior Bureaucrat". After googling for a little while trying to find evidence about what I remembered, I came across an article that said during Reagan's Presidency, the Pentagon bought $640 toilet seats and $7,600 coffee makers. After the news broke, some members of Congress spoke out about the ridiculous purchases, yet nothing was done.
This is a clear example of the 5th assumption of Niskanen's model - where bureaucrats will exhaust their budget to ensure they receive as much benefit as they can in the future. Additionally, this example is indicative of how bureaucrats will overproduce beyond an ideal Q*. The marginal benefit for these purchases is extremely small - a few hundred dollars combined for the two would certainly suffice. With thousands of dollars spent, it is clear that the marginal cost exceeded the marginal benefit for these purchases, reinforcing the idea that bureaucrats are not efficiently allocating their budgets.
1 comment:
Hey Charlie, this is a great example of how budget maximization in bureaucracies leads to deadweight loss. It is disturbing to know that while there are people literally homeless and/or starving in this country, government bureaucrats are sitting on $640 toilet seats and sipping coffee from $7,600 coffee makers. This makes me think, what are the implications of this practice of not efficiently allocating budgets? And what can be done to fix this through collective action to minimize the monitoring problem (as described by Niskanen) and realign incentives for these bureaucrats?
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