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Public and Private Bureaucracies: The Transaction Cost Economics Perspective
Oliver E. Williamson, University of California, Berkeley

Public Bureaucracy is large, growing, and consequential.  Our understanding, however, is limited.  Although successive efforts to address the issues have made headway, much remains to be done.  Partly this is explained by the interdisciplinary character of the public bureau – in that the political science, economic, and organization theory literatures are all implicated.  There is also widespread confusion over the role of efficiency and how to define it.  The relevant level of microanalytics with which to engage the issues is also disputed.  Altogether, the sheer complexity is daunting.  This paper does not purport to solve the problem but takes the position that the lens of contract/governance as developed for the study of the private sector (including private bureaucracy) is pertinent.  On the premise that solving a complex problem can often benefit from relating it to a simpler problem that has already been worked up, I begin with an examination of private bureaucracies (as examined through the lens of contract).  I then apply this to public bureaus, where the problems are more complicated – especially because of the political nature of the issues.  I conclude with a speculative discussion of the challenges to entrepreneurship that are posed as among different nation states in the 21st Century.


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