Abstract
The issue of investment processes whereby financial resources are allocated “à fonds perdus”, has not yet received much serious attention in the management or economics literature. Allocating resources “à fonds perdus” implies that no actor is deemed directly responsible for the production activities (and their outputs), which result from investment decisions. In other words, neither the decision makers, nor the economic actors who will benefit from an investment must bear clear responsibilities for the actual outputs generated by the investment. The traditional literature on project evaluation, whether for private or public organizations, implicitly assumes that the results of a private investment analysis or social cost benefit analysis for a number of projects will guide the behaviour of decision makers because these decision makers would benefit themselves from choosing the “best” projects. In reality, of course, this is not the case if resources are allocated “à fonds perdus”. If no one is a) directly rewarded for choosing the projects with, e.g., the highest expected profitability or net social benefits, or b) sanctioned for choosing projects with lower expected profitability or net social benefits, there is no reason to assume a priori that decision makers would actually prefer the best ranked projects according to an investment analysis.
senior research fellow with the Belgian national foundation for scientific research at the university of Antwerp (RUCA) and visiting senior research fellow at the university of Toronto. This paper was written when the author held a visiting appointment at Dalhousie University. The author is indebted to Prof. Dr. J. van den Broeck for critical comments on an earlier version of this paper.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Ackerman, R.W., Influence of Integration and Diversity on the Investment process, in Administrative Science Quarterly, Vol. 15, September 1970.
Aharoni, Y., The Foreign Investment Decision Process, Division of Research, Harvard Business School, Boston, 1966.
Allison, G.T., Essence of Decision: Explaining the Cuban Missile Crisis, Little Brown, Boston, 1971.
Ansoff, H.I., Corporate Strategy, An Analytic Approach to Business Policy for Growth and Expansion, McGraw-Hill, New York, 1965.
Arnold, R.D., Legislators, Bureaucrats and Locational Decisions, in Public Choice, Vol. 37, 1981.
Baliga, B. and Jaeger, A., Multinational Corporations: Control Systems and Delegation Issues, in Journal of International Business Studies, Vol. 15, No. 2, 1984.
Baumol, W.J., Business Behavior, Value and Growth, MacMillan, New York, 1959.
Berg, N., Strategic Planning in Conglomerate Companies, in Harvard Business Review, Vol. 43, No. 3, 1965.
Berle, A.A. and G.C. Means, The Modern Corporation and Private Property, Macmillan, New York, 1932.
Birgegard, L.E., The Project Selection Process in Developing Countries, A Study on the Public Investment Project Selection Process in Kenya, Zambia and Tanzania, Economic Research Institute, Stockholm School of Economics, Stockholm, 1975.
Bower, J., Managing the Resource Allocation Process: A Study of Corporate Planning and Investment, Division of Research, Graduate School of Business Administration, Harvard University, Boston, 1970.
Breton, A., The Economic Theory of Representative Government, Aldine Treatises in Modern Economics, Aldine Publishing Company.
Brown, C.V. and P.M. Jackson, Public Sector Economics, Martin Robertson, Oxford, 1982.
Buchanan, J.M. and G. Tullock, The Calculus of Consent, University of Michigan Press, Ann Arbor, Mich., 1962.
Buchanan, I. and R. Tollison (eds.), The Theory of Public Choice: II, University of Michigan Press, Ann Arbor, 1984.
Burgelman, R.A., Managing Innovation Systems, A Study of the Process of Internal Corporate Venturing, Unpublished doctoral dissertation, Graduate School of Arts and Sciences, Columbia University, 1980.
Carter, E., The Behavioural Theory of the Firm and Top-Level Corporate Decisions, in Administrative Science Quarterly, Vol. 16, No. 4, 1971.
Caves, Richard E., Industrial Organization, Corporate Strategy and Structure, Journal of Economic Literature, Vol. 18, March 1980.
Chandler, Alfred D., Jr., Strategy and Structure: Chapters in the History of Industural Enterprise, M.I.T. Press, Cambridge, 1962.
Child, J., Strategies of Control and Organizational Behaviour, in Administrative Science Quarterly, Vol. 8, March 1973.
Cohen, M., J.G. March and J.P. Olson, A Garbage Can Model of Organizational Choice, in Administrative Science Quarterly, Vol. 17, No. 2, 1972.
Crew, M.A., M.W. Jones-Lee and C.K. Rowley, X-Theory versus Management Discretion Theory, in Southern Economic Journal, Vol. 38, No. 2, 1971.
Dasgupta, P., S.A. Marglin and S.K. Sen, U.N.I.D.O. Guidelines for Project Evaluation, United Nations, 1972.
Downs, A., Inside Bureaucracy, Boston, Mass., Little Brown, 1967.
Earl, P., The Corporate Imagination, How Big Companies Make Mistakes, M.E. Sharper Armonk, New York, 1984.
Fischhoff, B., P. Slovic, S. Lichtenstein and R. Keeney, Acceptable Risk, Cambridge University Press, New York, 1981.
Galbraith, John Kenneth, The New Industrial State, Houghton Mifflin, Boston, 1967.
Imboden, N., A Management Approach to Project Appraisal and Evaluation with Special Reference to Non-Directly Productive Projects, Development Centre of the Organizaton for Economic Cooperation and Development, Paris, 1978.
Jackson, P.M., The Political Economy of Bureaucracy, Totowa, Barnes and Noble, 1983.
Jones, L.R. and F. Thompson, Risk for Efficiency: Comprehensive Reform of Direct Regulation, Academy of Management Review, Vol. 9, No 4, 1984.
Leibenstein, H., Beyond Economic Man, A New Foundation for Microeconomics, Harvard University Press, Cambridge, Mass. and London, England, 1976.
Leibenstein, H., On Bulls-Eye-Painting Economics, in Journal of Post Keynesian Economics, Vol. 4, No. 3, 1982.
Lindsay, C.M., A Theory of Government Enterprise, in Journal of Political Economy, Vol. 84, No. 5, 1976
Linstone, H.A., Multiple Perspectives for Decision Making, Bridging the Gap between Analysis and Action, North-Holland, New York, Amsterdam, Oxford, 1984.
Little, I.M.D. and J.A. Mirrlees, Manual of Industrial Project Analysis in Developing Countries, Vol. II, Social Cost-Benefit Analysis, O.E.C.D., Paris, 1969.
Loasby, B.J., Choice, Complexity and Ignorance, An Enquiry into Economic Theory and the Practice of Decision Making, Cambridge University Press, Cambridge, Londen, New York, Melbourne, 1976.
Maass, A., Muddy Waters, Harvard Univerrsity Press, Cambridge, Mass., 1951.
Marris, R., The Economic Theory of Managerial Capitalism, Free Press, New York, 1964.
McCain, R.A., Competition, Information, Redundancy, X-Efficiency and the Cybernetics of the Firm, in Kyklos,Vol. 28, Fasc. 2, 1975.
McGuinness, N. and A. Conway, World Product Mandates: The Need for Directed Search Strategies, in H. Etemad and L.S. Dulude (eds.), Managing the Multinational Subsidiary, Croom Helm, London, 1986.
Mintzberg, H., The Structure of Organizations, Prentice-Hall, Englewood Cliffs, 1979.
Mintzberg, H., Power In and Around Organizations, Prentice-Hall, Englewood Cliffs, 1983.
Mintzberg, H. and A. McHugh, Strategy Formation in an Adhocracy, Administrative Science Quarterly, Vol. 30, No. 2, June 1985, p. 160–197.
Mintzberg, H., D. Raisinghani and A. Theoret, The Structure of ‘Unstructured’ Decision Processes, in Administrative Science Quarterly, Vol. 21, No. 2, 1976.
Mueller, D.C., Public Choice, Cambridge Surveys of Economic Literature, Cambridge University Press, Cambridge, London, New York, Melbourne, 1979.
Murelius, O., An Institutional Approach to Project Analysis in Developing Countries, Development Centre Studies, O.C.D.E., Paris, 1981.
Niskanen, W.A., Bureaucrats and Politicians, in Journal of Law and Economics, Vol. 18, 1975.
Olson, M., The Logic of Collective Action, Public Goods and the Theory of Groups, Harvard University Press, Cambridge, Mass., 1965.
Ouchi, W.G., The Relationship Between Organizational Structure and Organizational Control, in Administrative Science Quarterly, Vol. 22, March 1977.
Pattanaik, P.K. and M. Salles (ed.), Social Choice and Welfare, Contributions to Economic Analysis, North-Holland, Amsterdam, New York, Oxford, 1983.
Pearce, D.W. and C.A. Nash, The Social Appraisal of Projects, A Text in Cost-Benefit Analysis, Macmillan Press, London, Basingstoke, 1981.
Peltzman, S., Towards a more general Theory of Regulation, Journal of Law and Economics, Vol. 19, 1976.
Pennings, J.M., D.J. Hickson, C.A. Hinings, C.D. Lee and R.E. Schneck, Uncertainty and Power in Organizations: A Strategic Contingency Model of Sub-Unit Functioning, Paper prepared for a Conference on Problems of Research on Organizational Sub-Unit Functioning, at the University of Alberta, Canada, March 1969.
Perrow, C, The Analysis of Goals in Complex Organizations, in American Sociological Review, Volume 26, 1961.
Schenker, E. and M. Bunamo, A Study of the Corps of Engineers’ Regional Pattern of Investments, in Southern Economic Journal, Vol. 39, No. 4, April 1973.
Schwenk, C.R., Cognitive Simplification Processes in Strategic Decision-making, in Strategic Management Journal, Vol. 5, No. 2, 1984.
Simon, H.A., Models of Man; Social and Rational, New York, Wiley, 1957.
Simon, H.A., Applying Information Technology to Organization Design, Public Administration Review, Vol. 33, May-June 1973.
Staw, B.M., The Escalation of Commitment to a Course of Action, in Academy of Management Review, Vol. 6, No. 4, 1981.
Stewart, F., Social Cost-Benefit Analysis in Practice: Some Reflections in the Light of Case Studies Using Little Mirrlees Techniques, in World Development, Vol. 6, No. 2, 1987.
Sugden, R., The Political Economy of Public Choice, Martin Robertson, Oxford, 1981.
Thomas, H., Strategic Decision Analysis: Applied Decision Analysis and its Role in the Strategic Management Process, in Strategic Management Journal, Vol. 5, No. 2, 1981.
Thompson, J.D., Organizations in Action, McGraw-Hill, New York, 1967.
Tullock, G., The Politics of Bureaucracy, Public Affairs Press, Washington, D.C., 1965.
Van Cauwenbergh, A. and K. Cool, Strategic Management in a New Framework, in Strategic Management Journal, Vol. 3, No. 3, 1982.
Vancil, R.F. and C.H. Green, How C.E.O.’s Use Top Management Committees, in Harvard Business Review, Vol. 62, No. 1, 1984.
Vancil, R.F. and P. Lorange, Strategic Planning in Diversified Companies, in Harvard Business Review, Vol. 53, No. 1, 1975.
Verbeke, A., Rationele Objectieven, Structurele Ineffectiviteit en Commitment in het Belgisch Zeehavenbeleid, een Multipele Perspectieven Benadering voor het Strategisch Investeringsbeleid in Complexe Organisaties, Antwerpse Lloyd, Antwerpen, 1986.
Weick, C.E., The Social Psychology of Organizing, Addison Wesley, Reading, Mass., 1979.
Williams, A., Cost Benefit Analysis: Bastard Science and or Insidious Poison in the Body Politic?, in Journal of Public Economics, No. 1, 1972.
Williamson, O.E., The Economics of Discretionary Behavior, Managerial Objectives in a Theory of the Firm, Prentice Hall, Englewood Cliffs, 1964.
Williamson, O.E., Markets and Hierarchies: Analysis and Antitrust Implications: A Study in the Economics of Internal Organization, Free Press, New York, 1975.
Williamson, O.E., The Economic Institutions of Capitalism, Free Press, New York, 1985.
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1988 Springer Science+Business Media Dordrecht
About this chapter
Cite this chapter
Verbeke, A. (1988). The Managerial Analysis of Public Infrastructure Investment Policies. In: Van Den Broeck, J. (eds) Public Choice. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-7784-7_6
Download citation
DOI: https://doi.org/10.1007/978-94-015-7784-7_6
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-015-7786-1
Online ISBN: 978-94-015-7784-7
eBook Packages: Springer Book Archive