Bureaucratic Incentives, Social Efficiency, and the Conflict in Federal Land Policy

Economic analyses of bureaucracy have charged that public pro- duction tends to be more costly than optimal;’ the extra cost may be due to either technological or allocational ineuficiency.2 Conversely, the standard theory of regulation asserts that regulated industries produce too little and, behind barriers to entry, obtain monopoly rents on their suboptimal output levels;3 Stigler and Posner have also argued that regulated industries tend to capture their regula- tory agencies so that policies are made on behalf of the industries rather than to promote the commonweal.~Both of these hypotheses are based on the premise that decision makers, whether in private firms or in public agencies, are wealth maximizers and that non- optimal decisions made by the public officials are a result of inappropriate incentives. In particular, while private wealth maxi- mization efficiently allocates resources in the private sector through profit seeking, in the public sector it leads to inefficient overproduction through budget seeking.5 However, if these hy- potheses are implied by a consistent theory of bureaucratic behav- ior, why is it that public production may be too large and yet publicly regulated private production too small?...