The "Power of the Purse" and Its Implications for Bureaucratic Policy-Making

Michael M Ting

Public Choice, 2001, vol. 106, issue 3-4, 243-74

Abstract: A dilemma of the "Power of the Purse" is that cutting an agency's budget may make a desired policy infeasible. I examine the implications of this dilemma with a repeated game in which a bureau chooses unobservable policies after a legislature sets its budget. The bureau is work-averse and has its own policy preferences and therefore may cheat, but the legislature may perform an audit to recover "slack" funds. A main result is that if the legislature desires a higher policy level than the agency, then it faces a trade-off between "good" but wasteful policies and "bad" but efficient ones. Copyright 2001 by Kluwer Academic Publishers

Date: 2001
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