Bureaucratic Provision: Influencing vs. Lying

Abstract

In this paper a public bureau can extract surplus value from the services it provides not only by misrepresenting its production costs to its oversight committee but also by influencing the perceptions of the legislative body such as the parliament or the congress and the public at large by costly argumentation. By juxtaposing the bureau's ability to "influence" with its ability to misreport or "lie", I examine the impact influencing might have on the bureau's incentives to lie and on the efficiency of bureaucratic provision. I find that a truth-telling equilibrium could exist where the bureau's ability to influence would deter it from lying and the level of bureaucratic provision would be efficient. However, there could also be an equilibrium where the bureau would lie in which case there would be either over-production or under-production. This suggests that even when the bureau only cares about extracting the surplus value of its production, there could still be over-production simply due to the bureau's ability to distort cost informationBureaucracy, Influence, Truth-Telling