Utility maximizing bureaucrats: The bureaucrat's point of view

In this paper we develop a model to examine the extent to which bureaucrats are maximizing their own utility. In the spirit of Williamson (1964) and Simon (1957), we assume that bureaucrats are utility maximizers but not necessarily cost minimizers and we investigate how well the bureaucrat is doing in relation to his own goals. First, we hypothesize a utility function for the bureaucrat — we assume that the bureaucrat gains utility from producing municipal services as well as from hiring additional labor and capital. Then, using the concept of money metric utility, we determine the minimum expenditure necessary to achieve the same level of utility actually observed. Secondly, we determine the bureaucrat's distance from the utility maximizing choice of resources for a given level of expenditure. Finally, using a sample of public sector bureaucrats we attempt to explain the variation in wasted expenditure across municipalities and why bureaucrats might be underutilizers of each input relative to their own utility maximizing point.