The Law and Economics of Government Efficiency

During a time when there is debate about governmental efficiency, this article offers a speculative economic analysis of the potential benefits and challenges of the idea to improve efficiency in governmental affairs. Obvious benefits include cost savings and efficiency improving public service speed and quality perception. Creating fiscal space via efficiency savings is a novel elegant way to fund multiplier actions that can trickle down the economy and improve citizens’ quality of life and wellbeing. Setting incentives to perform and inspiring public endeavors with entrepreneurial business acumen but also the scrutiny of being held accountable for performance promise to innovatively ignite endogenous growth drivers into public service. Savings directed to enhance public causes ranging from education, healthcare, investments, security and culture in a more efficient way will build public support of the government and breed trust in society and bestow social capital in the economy. Challenges may include the legal nature of the advisory commission and its legal and executive capabilities to enact change. If efficiency and cost-cutting measures lead to layoffs of public officials, the consequence may be that the private sector gets an influx of the less-efficiently perceived public servants, which may cause the private sector to be facing less entrepreneurial but regulatory-minded workers. Transfer of social security savings from the public into private sector employment may cause frictions and/or additional administrative hurdles. If bold projects of enacting efficiency are successful in leading countries of the world, this may set an example to be replicated around the world. While nations that follow the trend early and successfully may be enabled to advance themselves as public efficiency leaders, less efficient governments have a larger margin of improvement potential and hence comparative gain advantages when learning from governmental efficiency proponent countries.