This is the first book to develop a formal theory of supply by bureaus. Niskanen develops an original and comprehensive theory of the behavior of bureaus with the institutions of representative government. He challenges the traditional view that monopoly bureaus are the best way to organize the public sector, and he suggests ways to use competitive bureaus and private firms to perform operations such as delivering mail, fighting wars, or running schools more efficiently than the present government agencies.
The theory concludes that most bureaus are too large, grow too fast, use too much capital, and exploit their sponsor. His theory explains the relation of the output and budget of a bureau to demand and cost decisions. It compares bureaus with other forms of organization facing like conditions and delineates the production and investment behavior of a bureau, the behavior of nonprofit firms with no sponsor, the behavior of mixed bureaus with financing from a sponsor and from the sale of services, the effects of competition between a bureau and a competitive industry.
The book also develops a simple theory of the market for public services financed through a representative government; the final section suggests a set of changes to improve the performance of our bureaucratic and political institutions, based both on theory and Niskanen's professional experience. It is essential reading for professionals and students in the social sciences and could prove instrumental in reforming some of our government institutions.