Political Economy of the Public Sector

Virtually all government policies depend on organizations to execute and evaluate them. Effective public management therefore depends crucially on an understanding of how organizations work. This course provides a comprehensive introduction to the institutional basis of public policy and administration. A major theme throughout is that explaining organizational outcomes requires the understanding of the relevant political actors, and the institutions, or “rules of the game” within which they function. Expanding on this theme will allow us to explain many features of political organizations, including some that may appear (at first glance) to be pathological.

The study of organizations is multi-disciplinary in nature, and as a result the course draws upon a range of literature from economics, political science, and psychology. It will focus particularly on applications of behavioral economics and game theory. The course readings and the student assignments will provide ample opportunities for seeing how theoretical arguments are developed and tested. The objective is to give students not only a working knowledge of how public sector organizations work, but also the ability to utilize it across a broad range of settings.

The course begins by considering different models of individual and collective behavior. With these tools in place, it then proceeds to study the internal structures of organizations and their management implications. Economic principal-agent theory will guide this discussion. Next, it will examine the impact of the external environment on organizations. Finally, it will consider some prospects for reform.