Public and Private Bureaus

Oliver Williamson
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Oliver Williamson: Boalt Hall, UC Berkeley

No 1150, Berkeley Olin Program in Law & Economics, Working Paper Series from Berkeley Olin Program in Law & Economics

Abstract: The public bureau is a puzzle. On the one hand it is widely used. On the other it is believed to be very inefficient in comparison with private bureaus. Many social scientists appeal to politics, which they describe as inherently inefficient, to explain public bureaus. This paper examines public and private bureaus through the lens of transaction cost economics. The emphasis is on what JamesQ. Wilson describes as "sovereign transactions," of which foreign affairs is an example. I ask what it is that distinguishes sovereign transactions, after which I compare the efficacy of public and private bureaus for managing such transactions. I conclude that there is an efficiency place for the public bureau, butlike all modes of governance (markets, hybrids, firms, regulation, public bureaus)the public bureau needs to be kept in its place. Put differently, all modes of governance operate as economizing instrumentsprovided that they are used to manage transactions for which they are (comparatively) well-suited. Contact the Law and Economics Program at Boalt Hall, UC Berkeley, Berkeley, CA 94720 for a copy of this paper.

Date: 1995-04-30
Note: oai:cdlib1:blewp-1150

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