1 THE STUDY OF BUREAUCRACY

Neil Garston

1. Introduction

Social scientists have long recognized the existence of bureaucrats and

bureaucracies, whether that recognition is traced back to Max Weber or
Karl Marx. Some scholars have tried to analyze these phenomena and
determine their place in social systems. However, most social scientists,
and economists in particular, have ignored or abstracted from both, con-
centrating on what they have considered more important issues.
In recent years bureaucracy has attracted more attention. Not only
have there been new tools and new insights to shed more light on its na-
ture, functioning, and importance, but real problems have forced atten-
tion in its direction. A great deal of time and energy currently is focused
on attempts to reduce, combat, or, at least, control bureaucracy.
It is ironic that this increased interest is coming at a time when the
phenomenon of bureaucracy may have peaked in both public (the col-
lapse of the USSR, Thatcherism, Reaganism) and private sectors (the de-
centralization of IBM, the decline of GM). Whether we have seen the
high-water mark of bureaucratization or whether there are peaks to
1
2 THE STUDY OF BUREAUCRACY

come, we do not yet know.! Institutionalists hope there will be such peaks
(as will be discussed below); most economists do not. Perhaps improved
analysis will make predictions possible. None of the contributors to this
volume accepts the corollary of Parkinson's Law that implies that the
bureaucracy expands at a constant exogenous rate, nor do they accept the
Peter Principle that bureaucracies work the way they do because so many
bureaucrats have "reached their level of incompetence."
Even if the peak has passed, in all nations substantial portions of
the labor force - and larger portions of the educated labor force - are
now employed in bureaucracies or as bureaucrats, and considerable non-
human resources are employed in conjunction with them. 2 Whatever its
future significance, right now bureaucracy is too important to ignore.
In order to do research in any area, it is necessary to establish an agen-
da, to decide which are the central questions that need to be answered.
There are profound differences among scholars as to which are the key
questions. However, surely they include: what are bureaucrats (and
bureaucracies), why do they exist, what do bureaucrats do (what are their
functions in organizations), how is their pay determined, how do they be-
have, how much real power do they have, what impact do they have on
efficiency and production, and how do they affect society?
These are questions that all may consider important, but there is
agreement neither on their relative centrality nor on the proper meth-
odology to be employed in exploring any of them. There is not even agree-
ment on what these questions really mean.
This book contains analyses of all these issues, done by a variety of
economists of differing backgrounds, approaches, and opinions. The
approaches are broadly categorized under the labels neoclassical, institu-
tionalist, and Marxist, though there are overlaps and correspondences
that cross ideological and/or paradigmaP boundaries. In the literature in

lThe fact that from 1980 to 1989 the percentage of the US labor force in government
employ (local, state, and federal) rose slightly (7 to 7.2 percent) gives one pause in discus-
sing the impact of the Reagan administration. Of course, not all these were bureaucrats, and
the proportion of federal employees fell in this period (3 to 2.7 percent). (Percentages taken
from, or calculated from, The Statistical Abstract of the United States, 1991, p. 306 and 330.)
2See , for example, the relevant estimates for the U.S. in Wolff, Growth, Accumulation
and Unproductive Labor and those in Radner [1992], especially pp. 1386-1387, where the
percentage of the labor force working as managers is, depending on the breadth of the de-
finition, as low as 20.9 to better than 40%. By one definition, he has the proportion rising
from 11.6% in 1900 to 43.8% in 1980.
3The use of the term "paradigms" here is based on that of Kuhn, i.e., exemplary anal-
THE STUDY OF BUREAUCRACY 3

this area, it is often difficult to decide whether certain papers are best de-
scribed by single terms or as mixes of two or more paradigms. In this
book, the labels are employed as a guide to the reader with a preference
for one approach over the others, and as an indication of how chapters in
different sections are related in their approaches.
This chapter has several purposes: to define the phenomenon under in-
vestigation, to briefly review the history of bureaucracy and the past liter-
ature on it, to discuss the basic methodologies employed in the three
paradigms mentioned, and to describe the current extent of bureaucracy
in the real world.

2. Defining Bureaucracy

U.S. Supreme Court Justice William J. Brennan, faced by the need to

define obscenity, did so by saying that he knew it when he saw it. Much
the same might be said about bureaucracy. Ask people on the street what
bureaucracy is, and you probably will not get a clear definition. However,
your victims are likely to think that they can recognize it. If you ask what
their opinion of bureaucracy is, they are likely to put it high on the list of
what is wrong with the world, so much is the fault of the "damn bureau-
crats." This might be a reaction to decisions by large government, cor-
porate, or trade-union organizations. It might equally be a reaction to a
set of regulations, to required paperwork, or to a display of inefficiency
(real or apparent). It is generally true, however, that the "damnation"
involves a use of what is considered illegitimate power (or an illegiti-
mate use of power).4 The one thing that is certain is that when a per-
son, rule, or organization is called bureaucratic, it is not a compliment. 5

yses that teach later scholars how to think about a subject, how to state problems, how to
decide which problems are important, and what techniques are useful in solving problems.
4The power of bureaucrats can be considered illegitimate insofar as they seem no longer
to be interpreting policies set by legitimate authorities (corporate or governmental) but
creating policy themselves, regardless of the reasons for their doing so. The distinction be-
tween legitimate and illegitimate power is seldom discussed by Neoclassical economists, who
relegate it to other social sciences, but can be a central concern to Marxists [see, e.g., James
O'Connor, The Fiscal Crisis of the State, especially Chapter 1]. It concerns us for both pri-
vate and public sector bureaucrats since, in essence, if people think they should obey (legiti-
mate authority), it is easier to get them to obey. In other words, having people think your
authority is legitimate reduces costs.
5See, for example, von Mises, Bureaucracy, p. 1: "The terms bureaucrat, bureaucratic
and bureaucracy are clearly invectives . . ."
4 THE STUDY OF BUREAUCRACY

To denigrate bureaucracy is not to define it, and definitions are needed

in any discussion. "I know it when 1 see it" is a possible mode of defining
a term, in the sense that a list of things that do, or do not, fit within a
given term can be used to define that term. That method is used in dic-
tionaries and elsewhere, but it seldom satisfies those who want to develop
analyses. A good starting point is the definition of "the categories of
rational legal authority" by Max Weber.
According to Weber,6 such an "authority" (equivalent to proper
bureaucracy) involves:

1. A continuous organization of official functions bound by rules.

2. A specified sphere of competence. This involves (a) a sphere of
obligations to perform functions which has been marked off as part
of a division of labor. (b) The provision of the incumbent with the
necessary authority to carry out these functions. (c) ... the neces-
sary means of compulsion are clearly defined and their use subject
to definite conditions . . .
3. The organization of offices follows the principle of hierarchy
. . . each lower office is under the control and supervision of a
higher one.
4. The rules which regulate the conduct of an office may be technical
rules or norms ... (so) specialized training is necessary.
5. . .. members ... should be completely separated from ownership.
6. ... complete absence of appropriation of his official position by
the incumbent.
7. Administrative acts, decisions, and rules are formulated and re-
corded in writing. . . .

Weber goes on to describe the "purely bureaucratic organization" as

being "from the purely technical point of view, capable of attaining the
highest degree of efficiency and is in this sense formally the most rational
known means of carrying out imperative control over human beings."
[po 337]
As a definition, however, this has the defect of its virtues. It assumes
much about the phenomenon it tries to define, much that the analyses in
the modern literature question or deny in terms of its relevance to real

6In his The Theory of Social and Economic Organization, pp. 3300. Ellipses in the
quotes are for clarity and brevity only.
THE STUDY OF BUREAUCRACY 5

world phenomena. People who, by general admission, are bureaucrats, in

organizational structures that by that same standard are bureaucracies,
may not act as mere efficient instrumentalities, mechanically carrying
out well-defined orders and policies. The neoclassical emphasis on "agent-
principal" issues focuses on that aspect, as does the Marxist class analysis
of the possible "relative autonomy"7 of state bureaucrats and corporate
managers. Indeed, a definition of bureaucracy is likely to contain, impli-
citly at least, some of the analysis and more than a little bit of the conclu-
sions. For example, Weber's provides more than a hint of approval.
A somewhat more neutral definition is P. M. Jackson's 1982 definition:
"A bureaucracy is a particular form of organization comprised of bureaus
or agencies, such that the overall bureaucracy is a system of consciously
coordinated activities which has been explicitly created to achieve specific
ends."8 Even this definition excludes the possibility that a bureaucracy
might "just grow," without a conscious design or a clear end in view, a
concept that institutionalists might feel comfortable with.
From the foregoing, it is obvious that it is not easy to write a short
definition that is equally acceptable to all analysts and from the perspec-
tive of all paradigms. The following is an attempt:

I) A bureaucracy is an organizational structure characterized by a hier-

archy whose occupants are appointed, whose lines of authority and re-
sponsibility are set by known rules (including precedents), and in which
justification for any decision requires reference to known policies whose
legitimacy is determined by authorities outside the organizational struc-
ture itself.
II) A bureaucrat is a person whose income, authority, and status is
largely or wholly determined by the position to which he/she is ap-
pointed in such an organizational structure and who does not directly
produce any good or service for society. 9

7See, for example, the discussion in Poulantzas [po 29] of this concept as found in Marx's
Capital and Grundrisse.
8 The Political Economy of Bureaucracy, p. 121.
9The last, italicized portion of the definition is specifically designed to exclude as
bureaucrats those members of organizations who would otherwise fit this definition (and
Weber's), but who are not usually thought of as bureaucrats, i.e., classroom teachers, police
on the street, soldiers in the field, production line workers in a factory, service personnel at
their counters.
6 THE STUDY OF BUREAUCRACY

This definition of bureaucracy does not imply that those within the
structure never determine policy, but only that the legitimization of policy
requires approval (even if proforma) from outside the bureaucracy. In
a corporation, "outside" can mean the board of directors, or a stock-
holders' meeting. In government, it can mean approval by elected rep-
resentatives of the people, by referendum, by a monarch, by "the Party,"
or by "the Leader."
Neither definition negates the possibility of "back doors," i.e., infor-
mal lines of communication and influence that allow people who seem to
be of little importance to be of very great importance indeed. However, if
most of what goes on happens via such "back doors," one is either not
looking at a bureaucracy, or, at least, one is examining a badly function-
ing one. Of course, it is possible to redefine the structure to include those
back doors, but only at the risk of losing the "well-known" aspects of
hierarchies and rules.

3. The History of Bureaucracy

The analysis of bureaucracy by social scientists may be relatively new,

but, by any reasonable definition, bureaucracy itself is as old as large-
scale human endeavors. Anyone examining the workings of the Roman
Empire, at least after Constantine, must use the concept of bureaucracy
to make sense of its operations. Whether such activities as building the
Pyramids and irrigation systems of Ancient Egypt called for a system
properly defined as bureaucratic is a little more problematic, but certainly
the system of governance in China made use of bureaucracy for at least
the last few thousand years. to
It seems that bureaucracy has been independently invented many
times, in response to problems that arise as the scale of administration
grows too large to permit less formal systems to function at acceptable
levels of efficiency. To be sure, what constitutes acceptable efficiency can

10 Any nation whose most prominent philosopher, Kung Fu Tse (Confucius), was a
career bureaucrat, and whose philosophy emphasizes the virtues most conformable with
bureaucracy (respect for authority and for precedent, for example) must at least be men-
tioned in a volume like this. For a description of the all-encompassing nature of the Chinese
bureaucracy from about 200 B.C. and its relationship with Confucianism, see, e.g., Balazs,
Chapter 2.
THE STUDY OF BUREAUCRACY 7

hardly be considered a constant. Regardless of one's paradigm, the cost

of failures of administration would have to be considered as an essential
element in determining that level. Collection of taxes might involve one
level of acceptable efficiency, while military organization might have quite
another.
This is not to say that various parts of societies become bureaucratized
to degrees that are totally independent of one another. Once developed,
systems invented for one part may be adopted in another, because famil-
iarity lowers the cost of adoption or because the process of bureaucra-
tization itself begins to demand conformity of different organizations in
the same system to a common set of rules and procedures.
The manner of development of the Roman bureaucracy may serve as
an illustration of the process. When Rome was a small city-state like
many others, rules were made either by the monarch (in the pre-Republic
period) or later by the Senate, led by the Consuls. Policy was im-
plemented by magistrates (in terms of law and civil administration) or
generals who were themselves often members of the Senate and who
were assisted by small personal staffs (including slaves and freedmen).
When the Roman Republic began a successful career of conquest, it
began to govern larger territories and larger populations. To some extent
it did so by replicating institutions that already worked on the smaller
scale, i.e., by keeping or instituting local councils that, under general and
specific policies of the Senate of Rome, made local policy and ran the
civil administration, staffing many posts with council members. At the
same time, these institutions had to work with, or under the supervision
of, new position holders and institutions, such as provincial governors.
When the empire grew really large, some areas had administrators
appointed as subordinate to higher level governors.
Where administration was needed, top administrators were generally
Senators, each of whom set up his own staff, in his own way, with people
likely to be personally loyal to him. This method, especially as applied to
people with military subordinates, can be seen as a route towards civil
war. Whatever the significance of this point, repeated civil wars led to a
restructuring of the policy levels of government, with the effective, if not
nominal, replacement of the Senate by the Emperor.
As one historian notes, until the period of the Principate (after the fall
of the Republic), power was in the hands of the Senate, or those mem-
bers currently holding major offices (e.g., Consul). However, Senators
(and the Senate itself) had no staff, and there was no independent civil
service, no foreign service, and no permanent embassies. When ambassa-
8 THE STUDY OF BUREAUCRACY

dors were sent out, there was no one to report to but the Senate. l l In
short, there was no organization in any formal sense, and certainly no
bureaucracy, even though the immense territory controlled by Roman
power seemed to require it.
Initially, the structure of administration under the Republic was main-
tained under the Empire. In fact" ... their approach to administration
remained amateurish ... " even in the time of the early Emperors.12
High level governors were still usually members of the Senate (the aris-
tocratic class) now appointed by the Emperor, and they still took with
them their own small personal staffs. However, as the Imperial system of
administration continued to develop (and provinces were divided into
smaller units,13) with increasing frequency, governors sat at the top of a
structure of officers and office holders who were there before them and
would be there after their departure. In addition, there developed a more
complete separation between the civil and military administrations, with
each available to watch the other.
A similar pattern of development can be seen in the growth of the
bureaucracy in the Islamic empire (Caliphate) that arose out of the con-
quests of the seventh and eighth centuries. Some of the structures and
forms were adapted from previously dominant states (the Byzantine and
Sasanian empires).14 However, it was the difficulties of administering
large areas with varied problems that induced the new rulers to look for
solutions and to adapt them to their needs. In this case, failure to find
good adaptations led to the transfer of power from the monarchs to fac-
tions in the bureaucracy.1 5
In each case as the structure of administration grew more elaborate, so
did the set of official rules and accumulated precedents. Similar stories
could be told about the rise of bureaucracies in many nations. The same
process can be seen in the development of corporate bureaucracy in firms
as they move from new entrepreneurial endeavors to older, usually
larger, and more "professionally administered" ones.
H. Ross Perot has been heard to say (in assorted TV interviews) that
such a process took over GM and caused its decline, indicating that the
private sector could not be called immune. Is it inevitable? There

11 Eckstein, Senate and General: Roman Foreign Relations 264 B. C. -194 B. c., Introduc-
tion.
12Braund, The Administration o/the Roman Empire, p. 7.
13 Arnold, Roman Provincial Administration, p. 187.
14 Lapidus, A History 0/ Islamic Societies, especially Chapter 4.
IS Lapidus, op. cit., Chapter 8.
THE STUDY OF BUREAUCRACY 9

are counterexamples in the private sector, such as 3M, and, despite re-
cent reversals, perhaps even IBM.16 Are such processes "irrational?"
That would get different answers from neoclassical and institutionalist
scholars.
Do these stories show the results of duration alone, or size, or the na-
ture of the tasks to be performed, or the nature of the technology em-
ployed? Why do bureaucracies form? What role do they play? Are they
necessities? Do the answers depend on the type of organization of the
society in which they exist? As with the (related) questions posed in sec-
tion 1, these questions must be examined from particular perspectives,
particular ways of understanding the (social) universe. This volume will
not answer all of these questions from any perspective. It would be a
much larger book if it did-even insofar as answers are available.
Whether any of the theories currently in vogue are fully satisfactory
and whether full satisfaction is offered in any of the later chapters in this
volume is for the reader to judge, although the point will be raised again
in the last chapter. To help in this judgment, this chapter offers descrip-
tions of the three paradigms employed in later chapters. Those fully im-
mersed in a particular paradigm may not care for my description of their
favorite. Those unfamiliar with one or more, may find the descriptions
useful.

4. MethodologieS/Paradigms

4.1. Neoclassical: (Chapters 2, 6, and 7)

Neoclassical economists seldom look back to Weber for inspiration (and

never to Marx). They trace their analysis of bureaucracy to Coase.17
Naturally, he began with the theory of the organization of the profit-
maximizing firm, such firms being a central concern of this mode of analy-
sis. Subsequently, some of the work inspired by Coase has proven fruitful
in the analysis of other forms of organization, including bureaucracy in
governments.
The core of the neoclassical approach is individual decision making,

16For a collection of counterexamples, see Peters and Waterman. However, some of the
examples of excellence they cite have not held up in the years since their research.
17The Nature of the Firm" in Economica [1937]. Of course, Radner [1992] points out
some of these ideas in Adam Smith's Wealth of Nations.
10 THE STUDY OF BUREAUCRACY

that is, individuals making maximizing decisions subject to whatever con-

straints are relevant. In Chapter 2, Pecchinino describes the development
of a set of theories, based on this foundation, of the structure and internal
operations of profit-maximizing firms. Also in that vein Beckmann (Chap-
ter 6) analyzes a specific model of the formation of a firm which provides
a maximizing solution for its operators (workers), for its managers, and
for its owner-president. The extension of this approach to public sector
organizations is described by Jackson in Chapter 7.
The current models of bureaucracy within the neoclassical tradition
flow out of the fundamental concepts of that tradition, but there was an
extended period in which neoclassical economists tried to completely ab-
stract from issues of organization, including bureaucracy, regarding firms
as "black boxes" into which went inputs and out of which came products.
This abstraction is still employed in virtually all microeconomic textbook
descriptions of firms and firm behavior.
The literature assumed (and assumes) maximization by individuals (of
utility) and by firms (of profit) but made no rigorous attempt to explore
the reasons why firms have boundaries, that is, why a firm should pur-
chase some inputs through market relationships while producing other (in-
termediate) inputs itself? Why does GM buy some auto parts from other
firms through bid and contract systems, and produce others in production
facilities it owns? Why does it not produce all the parts internally, or,
contrariwise, buy them all? The fact that the analysis was conducted while
abstracting from transactions costs (the costs of making and enforcing
agreements) turned out to be critical in this regard, and much of the
neoclassical analysis of organization has arisen out the realization that
these costs often do matter.
Even when transaction costs were noted, it took time for neoclassical
economists to realize that they could discuss organizations in the context
of optimal decision making by individuals within set organizational con-
straints and the optimization of organizational attributes by those in
whose interests the organization is designed to function. In other words,
these problems were not investigated until their place within the para-
digm was discovered. Once that happened, there was an explosion of
work which has (among other things) invaded the traditional territories of
political scientists and sociologists.
In the process, exploring the problems of organization turned out to
involve explaining the making and enforcing of contracts between
individuals, and the roles of asymmetric and imperfect and/or costly
information. Problems of contracts and information form the core of the
THE STUDY OF BUREAUCRACY 11

neoclassical rationale for the existence of organizations in general, and

private ones in particular .18
The neoclassical literature on organizations, using models embodying
these concepts, explains the use of organizations instead of market rela-
tionships, the structure and extent of organizations, and the pay rela-
tionships among organizational members. Such models also explore the
impact of organizational structure on costs and the determination of
optimal structures and sizes of firms, given particular assumptions regard-
ing key relationships. These are the sorts of issues that neoclassical econ-
omists are likely to consider vital.
Of course, specific models have limitations. For example, the Beck-
mann model (Chapter 6) assumes an owner-president. As a result, it is
unable to address issues involving lack of owner control in terms of set-
ting or enforcing organizational goals. It can address loss of control in the
sense of the ability of supervisors to get productivity out of workers
(operators) or lower level supervisors. This model cannot be used to
analyze the issue of "exorbitant" pay for top executives, insofar as it may
be a consequence of a lack of ability by owners to set organizational goals
or impose effective constraints on managerial decision making.
On the other hand, it does offer other possible explanations for phe-
nomena like the disparity of pay between US and Japanese executives,
explanations that do not depend on loss of control. 19 In particular, differ-
ences in span of control, perhaps due to differences in worker motivation
and discipline, could explain all or part of the differential, and so could
differences in the opportunity costs of executives. 20 Both of these are fea-
tured in Beckmann's model.

18Due to deadlines, only the editor of this volume had the chance to read the JEL sur-
vey by Radner (1992), in which he offers insights into aspects of the neoclassical approach to
the study of organization. Among other things, his suggestion that the term "assymetric in-
formation" is misleading and should be replaced by "heterogeneous information" is well
taken. The latter does not necessarily imply that someone has superior information. It is
probably too late, however.
19Differences in owners' loss of control is a possible explanation, since Japanese firms
are owned in patterns that differ from those in the US.
2OBeckmann's model sets compensation for executives in terms of their supply prices,
which means that they must be paid at least their opportunity costs. If in the U.S. it is re-
latively easy for persons with the skills and capabilities required in top executive positions to
turn entrepreneur and to obtain high incomes, and if it is less easy and renumerative in
Japan, then executive pay will be lower in Japan. This would be true even if the Japanese
executives caused higher profits for owners than did U.S. executives.
12 THE STUDY OF BUREAUCRACY

The analysis of the public organization naturally differs from that of

the private organization. In the latter, for example, vertically integrated
organizations may form because of asset specificity. That is, one organiza-
tion may have the choice of investing in resources itself or contracting for
their output with another firm. If it does not invest, and the resources
(and their product) have no other use, a bilateral monopoly has been
created, with potential problems of forced renegotiations (as one party
or the other tries for additional advantages). The problem of investment
in specific assets does not cause vertical integration in governments, but
it does influence public-sector operations.
In the chapter by Jackson, the basic model (adapted from Niskanen) is
based on just that fact. The specific assets in question are those possessed
by the bureaucrats in the form of specialized knowledge. [This is a matter
that was discussed earlier by Weber.] The principals, presumably political
authorities (or in the purest sense-in democratic regimes-the people
at large) cannot do without that knowledge and can get it nowhere else.
At the same time, of course, the bureaucrats have no other market for
most of their expertise.
The major difference between public and private sector analyses lies in
the relative absence of the market in the former. In private-sector mod-
els, the sources of revenue arise from market sales, and markets constrain
the possibilities for bureaucratic expansion. In the public sector there are
constraints, but they are harder for neoclassical economics to encom-
pass, and their analysis lies in the area of political science and political
economy.
However, one of the current themes of neoclassical research on the
public sector, one with considerable application to current policies in a
number of countries, is precisely the introduction of more market choice
into government operations. By this I mean the "contracting out" of gov-
ernment services. The use of contracting out to improve the cost effec-
tiveness of the public sector is also discussed by Jackson. 21
One final comment regarding the literature within the neoclassical par-
adigm follows. In the course of developing models capable of explaining
or predicting behavior, optimal decision rules are derived. The activity of

21 Another currently popular measure, privatization, removes operations from the public

sector entirely and makes public-sector bureaucrats into private-sector ones. However, since
"contracting out" also moves activities from public to private sector, presumably with a
movement in employment of bureaucrats, there are some similarities. The difference lies in
the matter of control, since privatized activities are not under supervision of the state
bureaucracy (with some utility-type exceptions), but "contracted out" activities are.
THE STUDY OF BUREAUCRACY 13

deriving such rules is an essential part of the paradigm, but insofar as

such rules are obtained, they may be applied to real situations in order to
improve actual decision making. The fact that neither Marxist nor institu-
tionalist paradigms derive such rules is one reason why they have
achieved less influence than neoclassicism. (Institutionalists have recom-
mendations, but their nature does not make them seem desirable to those
looking for ways to make small adjustments to a given structure.) Actual
and potential policy makers and bureaucrats have more reason to patro-
nize an approach that offers to help them in their endeavors than those
which do not. (A version of Marxist theory was "useful" to those in
power in certain countries, because their regimes were legitimized by
the ideological framework employed. That is-or was-a different type
of usefulness. )

4.2. Marxist: (Chapters 3, 4, and 9)

Marxist analysis has as its most fundamental characteristic an emphasis on

the role of social classes; therefore, a proper definition of the term "social
class" is fundamental to any such analysis (see Chattopadhyay in Chapter
3 and Dumenil and Levy in Chapter 4). For the purposes of this introduc-
tion, I define a class as any group with a special relationship to the process
of production in a given society. This is not the Weberian class based on
income and "life style" differences, though the two definitions may often
create similar divisions in the population.
Marxist analysis is historically specific, so that the organization of a
society and the way that organization changes both reflect the class con-
flict( s) inherent in that specific society. 22 In feudal society, landlords were
in fundamental conflict with peasants. (The Marxist term "contradiction"
would apply here.) This conflict arose from the production of (use) value
by the peasants (goods and services) and the "extraction" of some of that
value by the landlord class, which owned the means of production (espe-
cially land, and in some senses the peasants, too) and which had a
monopoly of force. In a capitalist society, in addition to any other con-

22 Part of the basic methodology of Marxism is the "dialectic." In this context, that
means an assumption that all known human societies are characterized by a dynamic of con-
flicts among classes, conflicts unresolvable within the given society. Such conflicts are the
primary source of change within a given society, and of transformations of societies from
one sort to another. "The history of all hitherto existing societies is the history of class strug-
gles." [Marx and Engels in the Manifesto of the Communist Party).
14 THE STUDY OF BUREAUCRACY

flicts that may occur between or within these and other classes, workers
and capitalists are in a fundamental conflict. This conflict is based on pro-
duction by some (workers) and their exploitation by others (capitalists).
The focus of attention is on who produces, who gets what is produced,
and how the latter get it away from the former.
Like neoclassicists, Marxists spent a good deal of time abstracting from
or ignoring bureaucracy. Without prejudging the issue of the class role (if
any) of bureaucrats-an issue explored in Chapters 3 and 4-this was
partly due to the fact that (especially in its most oversimplified form)
Marxists tried to keep everything in a two-class, labor-versus-capitalist
framework. 23 This led to the dismissal of bureaucracy as a mere tool,
used in the process of taking from the workers to give to the capitalists,
with no interests of its own. As such, bureaucracy was, at most, of secon-
dary interest and importance; its internal structure and functioning could
be disregarded.
A great deal of the Marxist literature that tried to address issues of
bureaucracy involved a related problem - namely, the controversy over
the nature of "Socialist" regimes (especially the USSR). Some famous
contributors, e.g., Trotsky, regarded the USSR as a "distorted workers
state," temporarily controlled by a bureaucratic faction (not a class).
Others viewed such regimes as being under the control of a "new class"
(Djilas, in his book with that title) and, therefore, neither capitalist nor
socialist. Still others saw bureaucrats as a social class, but the system as a
new (State) form of capitalism. 24 The conclusions, predictions, and atti-
tudes of the analysts were closely related to how they defined the class na-
ture of bureaucrats.
While many Marxists wrote on bureaucracy and "socialism," few ex-
amined the role of bureaucracies in systems that were clearly dominated
by private capitalism. Those who did found it easier to regard such
bureaucracies as lacking independence as a class, but recently some began
to discuss the "relative autonomy" of the state. That is, they began to
look for indications of expressions of class interests on the part of those
who, in the classic language of Marxist analysis, would merely serve "the
executive committee of the ruling class." Some of these might be properly
described as bureaucrats.

23 Our epoch, the epoch of the bourgeoisie possesses, however, this distinctive feature: it

has simplified the class antagonisms. Society as a whole is splitting up more and more into
two great classes directly facing each other: Bourgeoisie and Proletariat." [Communist Man-
ifesto, p. 1).
24R. Dunayevskaya, Marxism and Freedom.
THE STUDY OF BUREAUCRACY 15

To the extent that they used such expressions, Marxists could discuss a
class in actual or potential conflict with capitalists over the control of the
machinery of the state. Even so, it is hard to find Marxists who have tried
to apply the same distinctions to private sector bureaucracies. The name
most closely associated with such an attempt (without the use of class
concepts) is that of a non-Marxist, J. K. Galbraith. 25
One of the difficulties with Marxist analyses of this subject is the prob-
lem of distinguishing between "capitalism" as a system run by a group of
people living off stock, bond, and rental income, and "capitalism" as a
system devoted to the accumulation of capital. 26 Those using the former
definition cannot see bureaucrats either in state-run systems, in the state
machinery of privately-run systems, or in the corporate structures of the
latter, as capitalists. They must either serve capitalists in the given sense,
or they must be a new ruling class (or a contender for that position).
Those choosing the latter concept have no trouble identifying all those
whose endeavors operate the system for capital accumulation as "capital-
ists," in a sense; that is, as members of a group who carry out the "active"
aspect of being capitalists, with the stockholders and bondholders playing
the passive, financial role. In any event, most of these analysts find no
need for a discussion of a new class.
The underlying difference between the two is not a mere verbal distinc-
tion without a difference. In the former case, the absence of owners run-
ning things leads to the question of what the new ruling class is trying to
do. That is, if a new class is in charge, what is the fundamental dynamic
basis of the system? What do the new rulers have to do to survive as rul-
ers? Capitalists need to accumulate to survive (both individually and as a
class). This is part of the basis for the entire Marxist analysis of capital-
ism. If bureaucrats are a ruling class, what takes the place of accumula-
tion in the analysis? If accumulation is still the central dynamic, then the
bureaucrats are, in essence, capitalists.
In Chapters 3, 4, and 9 in this volume, the position that bureaucrats,

25 The New Industrial State.

26Capital in this context does not mean just the produced material means of production,
machinery and buildings. It implies that these means of production are not controlled by the
people who use them in the act of production. It also implies that, unlike systems like
feudalism (in which direct producers also do not own all the means of production), the sys-
tem requires whoever is in control to try to increase the amount of capital. This is what is
implied by a common phrase in Marxist analysis: "self valorizing capital." The "relations of
production" of capitalism require a continual effort to accumulate capital. The effect of this
concept on Marxist theories of bureaucracy is discussed in Chattopadhyay's chapter.
16 THE STUDY OF BUREAUCRACY

per se, are not a class is accepted. In all three, the role of accumulation is
still considered central. The relationships among accumulation, techno-
logical change, and the growth of public and private bureaucracy in the
U.S. are addressed in Chapter 9 by Dumenil and Levy. They explore the
reciprocal interactions between changes in technology, in an essentially
capitalist system, and the development of both private and governmental
management structures. In the process, they provide a theory of how the
development of bureaucratic organizations affects the micro- and macro-
stability properties of modern economies.

4.3. Institutionalist: (Chapters 5, 8, and 10)

This is probably the smallest approach used in economics, in terms of the

number of scholars who clearly identify themselves as institutionalist. 27 In
a sense, it is also the one for which an exploration of bureaucracy is most
natural, because it stresses the importance of economic institutions and
their structure in determining outcomes. The fact that many in this group
look back to Max Weber (as well as Thorstein Veblen and Clarence
Ayres) has encouraged them to examine bureaucracy as a phenomenon,
given Weber's paradigmatic studies of this subject.
A major feature of this approach is emphasis on the normative aspect
of economics, as opposed to the positivist emphasis of the neoclassical
school. One might say that the institutionalist starts by looking at the
question: "What will serve the public good?" By contrast, if the neo-
classicist looks at that question, it will be at the end of the analysis, gener-
ally in a carefully quarantined section. This "failure in objectivity" is
shared (after a fashion) by the Marxists to be sure, as they have received
the paradigmal injunction that, "The philosophers have only interpreted
the world, in various ways; the point, however, is to change it. "28 Actual-
ly, Marxists and institutionalists share a skepticism concerning objective
truth, though for slightly different reasons. The former find that class
viewpoint is always obscuring reality (which is not that accessible in any
case, since in a dialectic fashion, that which is, is always in the process of

27In terms of the centrality of the organization and its behavioral patterns as explana-
tions for corporate bureaucratic activity, there is a considerable resemblance between the
Institutionalists and a group that might be termed Evolutionists. [See, e.g., Chandler, 1992.)
However, the latter are nearer the neoclassicists in their assumptions with respect to
rationality.
28Marx, Theses on Feuerbach, in R. C. Tucker, The Marx-Engels Reader, p. 109.
THE STUDY OF BUREAUCRACY 17

becoming something else.) The latter look to an array of perspectives to

get an all-round view and obtain an appreciation of reality, if not the
objective truth of it. (This is part of the reason for their concern with par-
ticipatory democracy, which provides more viewpoints.) They search for
wisdom, which may not be the same thing as truth or even reality.
A major difference between institutionalism and the other approaches
is that, in a sense, institutions are perceived as having a life and a logic of
their own. This can be seen in Chapter 5, where DeGregori and Thomp-
son discuss the "ceremonial" (ritual) and functional aspects of organiza-
tions. It is most particularly the "ritual" aspect that distinguishes the insti-
tutionalist approach, since that is the aspect the others do not consider.
The interplay between the two aspects of organizations is seen as highly
related to changes in the technology employed, since what is functional
once may become ceremonial when methods of production change.
In the neoclassical analysis, the behavior and structure of an organiza-
tion reflect the rational self-interests of those involved in it. In the Marx-
ist analysis, organizations reflect rational interests, although class interests
are involved, as well as individual interests. In both, an organization may
be imperfect in serving those interests, for example, due to unforseen
changes in conditions. However, the divergence between interests and in-
stitutional behavior will persist only until changes can be made - and
those changes will be made as fast as is cost effective.
In the analysis presented by proponents of this third paradigm, institu-
tions may persist in behavior, and structures may be maintained, when
neither serves the current interests of participants. This persistence may
be prolonged, even when it is detrimental to those interests. Individuals
adhere to the modes of behavior set by institutions out of loyalty, not
merely to the institution per se, but to a set of social values which it
embodies (Pecchinino notes some aspects of this in the conclusion of her
neoclassical chapter, Chapter 2). The social values themselves are not
arbitrary, but have arisen out of technical and social relationships.
However, at a particular moment in time they mayor may not optimally
serve those interests.
Indeed, in the institutionalist approach, one finds a great deal less faith
in the predominance of rational thought overall. In Chapter 5 one finds
an emphasis on the problem faced by all rational thinkers - their inability to
determine, in a complex world, which actions or structures truly contrib-
ute to success (however defined) in their endeavors, and which do not.
This is also important in the dynamic process by which institutions adapt
and change. Since that process requires determination of the reasons for
success or failure, such adjustment may also be imperfect.
18 THE STUDY OF BUREAUCRACY

The themes of irrationality and of the separation between the ceremo-

nial (ritual) aspects of behavior and the instrumental aspects are also
taken up by Munkirs in Chapter 8. He discusses how situations (such as
market concentrations), brought about by the interactions of technology
with existing institutions, can lead to behavior on the part of managers
that is, from a normative social perspective, irrational.
It is interesting to note how institutionalists find it easy to accept the
notion of corporate or government institutions falling under the control of
their organizational hierarchies and therefore failing to meet the "ration-
al" objectives set for them by outsiders, even those nominally in authority
over them. This is precisely the notion rejected by the Marxist authors in
this volume. Further, to neoclassicists, behavior generated within orga-
nizations is the epitome of rationality, the rational response of individuals
faced with particular constraints. If one does not like the response, that is
a matter of rational design of incentives so as to get a rational design of
incentives to get the behavior desired. The entire notion of irrationality is
foreign to the neoclassicist, who, if faced by apparent examples, will find
ways to show that the apparently irrational is actually rational.
It is no wonder that communications break down among supposed
members of the same discipline, when one group attempts to define out
of existence what to another is a central issue. The same applies to the
class issue, which does not exist for institutionalists or neoclassicists, but
which is at the core of the marxist analysis.

5. Current Problems and the Current Extent of

Bureaucracy

Bureaucracy may have existed for millennia, but some things have been
happening to force attention on it as a current phenomenon. Some
issues-from the rise of managers in corporations who sometimes, at
least, seem quite independent of stockholders/owners, to the evident domi-
nance of other managers in the former Soviet block - call into question
the dividing lines set by all definitions of bureaucrats and bureaucracy.
in the definition set forth earlier in this chapter, a bureaucrat was iden-
tified as someone who referred any decision either to an interpretation
of a rule (policy determination) or to a precedent-a past decision/
interpretation accepted by policy makers, and, therefore, carrying their
authority.
This aspect is one of the things that helps distinguish between a
bureaucrat and one who may function within an organization, but who
THE STUDY OF BUREAUCRACY 19

should not be classified in that fashion. One who does not rely exclusive-
ly, or almost exclusively, on rule and precedent is either a poor bureau-
crat (likely to be ousted in short order) or is in fact, at least within
limits, a policy maker.
By this distinction, some corporate managers are bureaucrats, and
some, at least in the higher ranks, are not. Some observers consider that
in major publicly held corporations (and not just in the U.S.), high-level
managers are in complete charge of policy making, within the constraints
of the law and of the market requirement that negative profits cannot be
too negative for too long. In other words, what looks like the upper ranks
of a bureaucratic structure has taken over from the owners' representa-
tives, the board of directors-or has taken over the board itself.29
The 1991 case of Salomon Brothers, in which the major stockholder
(Warren Buffet) took over when previous management got into too much
trouble, would be a counterexample. However, it is worth noting that just
prior to that change, the same management had put through a substantial
management pay raise over the opposition of that same stockholder. In
other words, only when management got into so much difficulty with the
government that the existence of the firm was in doubt could it be re-
placed, because the board of directors-in principle the representatives
of the owners, charged with hiring and watching management-was
dominated (even selected) by that management.
Another reason why there might be more attention paid to bureaucra-
cy is that the amount of it may have risen. 30 With that rise would come
more contact between average persons and scholars31 and bureaucratic
annoyances. In the private sector the determination of who, in our terms,
is a bureaucrat has its complexities. In industry (in Marxian terms
"productive" industries - manufacturing, direct services) according to

29It is relevant that the u.s. Securities and Exchange Commission has found it necessary
to introduce new regulations that require that companies "display executive compensation in
a clear concise manner" so stockholders can tell what what they are paying their "agents"
and to allow stockholders to communicate with each other, even if executives do not like
what they are saying. [Los Angeles Times, Friday, Oct. 16, 1992, pp. 1,34, and 35].
3OFor example, The Economist [August 8-14, p. 16] reports that in the U.S. in 1992 for
the first time more people worked for the government than for manufacturing. Not all those
in government are bureaucrats, and some in manufacturing are. But the comparison sounds
ominous.
31 My own inspiration for beginning to study bureaucracy was the experience of moving
from a small liberal arts college to a large university, which is a part of an even larger state
university system which, in tum, is part of a large state government. The impact of
bureaucratic hierarchy on academia is another ill-studied area.
20 THE STUDY OF BUREAUCRACY

Moseley [1991], the proportion of supervisory workers almost doubled

from 1950 to 1990. 32 That understates the extent of "bureaucratization,"
since all supervisory workers would fall under that category, but so would
many non-supervisory persons. Moseley also provides estimates of "non-
productive" workers overall, and that proportion also grew enormously.
However, many of those (like Dumenil and Levy's "managerial and cler-
ical personnel" in the last section of this volume) are not bureaucrats.
Consequently, while we know there is more bureaucracy in this sector, it
is hard to say how much more.
In the government sector, the simplest number would be the propor-
tion of government employees in the population. However, some are not
bureaucrats-for example, a police officer walking a beat, or a soldier
carrying a rifle. They are in a hierarchical organization, but they are
directly producing a service. Many of their superiors, and some of their
comrades (with desk jobs), might be considered bureaucrats, however.
In a sense, the situation in the Soviet block was similar. There were
those who were supposed to be the "owners," i.e., the workers and
peasants, and there was the State and Party apparatus that was supposed
to manage their property for them. However, getting that management
out is turning out to be a long, difficult job, even though it was not per-
ceived as either efficient (in producing goods) or fair (in allocating them).
In all the countries in question, bureaucracies have not been fully tamed
yet; so far they have merely been taken down a peg or two. Further,
some of the public bureaucracy may simply have been turned into private
bureaucracy-with a few top bureaucrats turned into capitalists. (This is
discussed in more detail in Chapter 11 by Pilarski.)
In advanced capitalist democracies, the cry also goes up-often from
chiefs of state or government-that supposed policy makers find that no
matter what they say or do, what actually happens depends on how the
entrenched bureaucracy feels about it. Changes which do not suit the
bureaucrats can get lost in the translation from policy decision to imple-
mentation. All these issues concern control of the bureaucracy.
Of course, control is easier if we understand the workings of organiza-
tions. This volume is an attempt to bring together the various perspec-
tives and to open up lines of communication among those who have been

32Moseley in The Falling Rate of Profit in the Postwar US Economy, [e.g., p. 139) has
collected and reworked data from Census, IRS, and other conventional sources to provide
estimates of variables which more closely resemble Marxist categories.
THE STUDY OF BUREAUCRACY 21

holding different parts of the same elephant. Eventually perhaps the tree,
the snake, and the fan can be put together into a proper picture of the
beast. 33

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33For those who have forgotten the tale, three blind sages once tried to determine the
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22 THE STUDY OF BUREAUCRACY

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