Notes on X-Efficiency and Bureaucracy

Abstract

As I write I am very much aware of some of the basic difficulties one faces in attempting to analyse some aspects of the bureaucratic phenomenon. Perusal of the sociological and political science literature does not diminish the difficulties. The general problem, or set of problems, appears to be too amorphous and too large to be handled by traditional economic tools. There is no generally accepted way of abstracting some elements and ignoring others. It seems clear that almost any analysis will leave out aspects that some readers may feel are vitally important. A major handicap is the lack of a central problem focus. There are just too many questions to be asked in any attempt to understand bureaucracy. In this paper we shall limit our attention to the determinants of the internal efficiency of a bureaucratic unit where the services of the unit are given to some degree. More specifically we shall be concerned with what determines the cost per unit of service almost to the exclusion of a great many other equally interesting questions. Also we shall focus our attention on the incentives within the bureaucratic unit, and on how these incentives are generated from the outside.