Utility Maximizing Behavior in Organized Anarchies

Abstract

Public choice theorists generally assume that bureaucrats seek to maximize their own utility functions, subject to externally imposed constraints. Changes in constraint values may, therefore, be expected to result in predictable changes in the behavior of most organizations, not just businesses. The usefulness of this perspective is, however, frequently denied. Because decision making in public and nonprofit bureaucracies, schools, etc. often reflects (1) multiple, ill-defined, inconsistent preferences; (2) technological ignorance (ignorance of how their production functions work); and (3) fluid participation in decision-making, it follows that these organizations lack the capability to maximize (or even satisfice). The implication is that if these collectivities can't optimize, they won't. Nevertheless, the findings reported here tend to confirm the utility of assuming that not-for-profit organizations behave as if they maximized something - revenue, prestige, whatever - despite the processes of collective decision making in these organizations. Indeed, empirically speaking, the method of partial equilibrium seems to make as much sense of the behavior of the organizations examined here as it does the behavior of for-profit, hierarchically organized businesses. .

Keywords: collective decision making, inconsistent preferences, technological uncertainty, fluid participation, bureaucracy

JEL Classification: D73, D80, D23, H56, H61, L22, L33, L13