1. A Primer on Public Management Center for Democracy, Development, amd the Rule of Law Summer Fellows Program

2. --attributed to Goldman Sachs “It’s not the business plan but the execution”

3. The Scope of State Functions Minimal Functions Intermediate Functions Activist Functions Providing pure public goods Defense, Law and order Property rights Macroeconomic management Public health Improving equity Protecting the poor X-axis Addressing externalities Education, environment Regulating Monopoly Overcoming imperfect information Insurance, financial regulation Social Insurance Industrial policy Wealth redistribution

4. Two Dimensions of Stateness Scope of State Functions Strength of State Institutions

5. Stateness and Efficiency Scope of State Functions Strength of State Institutions Quadrant IQuadrant II Quadrant IIIQuadrant IV

6. The Stateness Matrix Scope of State Functions Strength of State Institutions USSR Japan Brazil Sierra Leone United States France Turkey Afghanistan

7. USSR/Russia Scope of State Functions Strength of State Institutions USSR 1980 Russia 2000 Russia 2010

8. China Scope of State Functions Strength of State Institutions China 1978 China 2005 China 2011

9. New Zealand Scope of State Functions Strength of State Institutions 1981 2000 1990

10. Why is Public Administration So Difficult? Central issue of all organizational theory is delegated discretion All organizations need to delegate authority –To take advantage of local knowledge –To respond quickly But delegation means loss of control

11. Two Approaches to Organizational Theory Economists’ approach –Man is homo economicus –Incentives matter –Principal-agent framework Social capital approach –Man as social animal –Norms and bonding over incentives

12. Principal-Agent Theory: Private Sector Shareholders Board of Directors CEO Senior Management Workers

13. Principal-Agent Theory: Public Sector The People Legislature President Bureaucracy Implementing organizations

14. How is the Public Sector different from the Private Sector? Public agencies not allowed to retain earnings Public agencies can’t reallocate factors of production Public agencies must follow goals not of their own choosing Public agencies not subject to market discipline

15. Making the public sector more like the private sector New Public Management (NPM) Adding an exit option and competition –Vouchers, school choice Wage decompression Separating the policymaker from the implementer Public expenditure tracking surveys

16. What these innovations have in common All can be subsumed under principal-agent framework –Use a monitoring-and-accountability framework All try to affect agents’ incentives All try to mimic market mechanisms But: Do they work?

17. Limitations of Principal-Agent If you can’t measure, you can’t hold accountable Multiple principals Principals want contradictory things Public agencies are monopoly suppliers that can’t go out of business

18. Public Sector Outputs Low Transaction volume High Low Specificity High Quadrant IQuadrant II Quadrant IIIQuadrant IV

19. Monitorability of Public Sector Outputs Low Transaction volume High Low Specificity High Central banking Aircraft maintenance Primary school teaching Highway maintenance Preventative medicine Telecoms Guidance counseling Foreign affairs Railroads University education Court systems

20. Finally, Human beings are not simply homo economicus Are social animals as well Motivated by pride, self-respect, group solidarity, other norms Importance of social capital

21. 10/2/201521 A Third Type of Capital Physical Capital Human Capital Social Capital

22. 10/2/201522 Networks of Trust

23. 10/2/201523 A Corporate Culture

24. 10/2/201524 Trust networks critical to flat organization...

25. 10/2/201525 And to Outsourcing Final Product Design Manufacturing CEO Manufacturing Personnel Marketing Design

26. Where does social capital come from? In traditional societies: –Kinship, shared culture, repeated interaction In modern societies –Education, particularly professional education –Shared goals and standards –Leadership!

27. Education Reform Economic approaches –Vouchers, school choice –Testing and individual accountability Social capital approaches –Raise salaries; improve professional standards Fundamentally a political issue –Teachers’ unions, low incentives to solve issue

28. Community-Driven Development Program design –Designed to foster social capital –Bypasses traditional institutions –Relies on participation and bottom-up input Problems –Expensive and highly labor intensive –Encompasses ambitious social engineering goals

29. Conditional Cash Transfers Transfers to poor require school attendance Programs designed for sustainability –Goal is increased human capital –Often built-in evaluations (Progresa/Oportunidades) Problems –Programs develop their own constituencies –Can be used in clientelistic ways