Exceptional Proff 612

Introduction

Topics to be covered include:

· Being Accountable to Citizens

· Carl Friedrich’s Views on Accountability

· Herman Finer’s Views on Accountability

· Reaching a Middle Ground

· A Framework for Accountability

· A Question of Ethics

· Privatizing Public Services

· Privatization Debate

· What is Participatory Budgeting?

· Public Works Programs

· Thematic Programs

· Four Perspectives of Participatory Budgeting

· Behavioral Public Finance

· Behavioral Finance Frameworks

· Collaborative Budgeting

· Involving Citizens in the Process

In this final week of the class, we will focus on public administrator accountability to the citizenry and the increased involvement of those citizens in the budget process. Today, public administrators are more than ever beholden to what public goods and services citizens want for their tax money. In the late nineteenth century, Woodrow Wilson identified a dichotomy between elected politicians and public administrators. He believed they both should focus on doing their respective jobs and not interfering with one another. As we will see in this lesson, this dichotomy evolved in the century that followed.

Being Accountable to Citizens

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Accountability

What exactly does it mean to be accountable on a public service level? It means to adhere to a standard of professionalism that incorporates the understanding that the nation’s citizens are supporting the professional activities of administrators through their tax dollars. As such, public employees uphold the missions of their organizations and are held responsible by citizens to do so. Whether an organization is public or private, accountability is an important aspect of its functionality and it reminds public servants that they will be held liable for their actions while they are employed by this

Standards of Accountability

It would seem that accountability in the realm of public service is a simple matter, but in reality, it is definitely not. The public interest, statutory and constitutional law, other agencies and levels of government, and community values are among the standards of accountability to which public servants are held accountable—in addition to the citizens whom they serve, of course. Public servants must respond to an array of norms, values, and preferences related to accountability that may overlap, sometimes contradict each other, and are constantly evolving. The environment that is produced by these demands is an exceedingly complex one organization.

Serving the Public Interest

Accountability is a central matter in democratic governance. Simple measures of efficiency or market-based standards cannot measure or encourage responsible behavior adequately. In the public sector, accountability should be based on the idea that public administrators should serve the public interest in all decisions, regardless of how complicated the situation may be. Dialogue within organizations, citizen empowerment, and broad-based civic engagement should all be utilized when making these judgments in order to produce the most equitable results. Public servants assure that solutions to public problems are consistent with laws, democratic norms, and other constraints, while it is the public administrators who make these constraints and their realities known to citizens. Doing this does more than just create realistic solutions. It also builds administrative accountability and further engages the citizens in the process.

Political Influences

It was once believed that defining the work of public administrators as objective and businesslike, completely separating the realm of public service from politics, would ensure administrative accountability. This belief did not take into account the complexity of governmental functions and their dual administrative/political face. Administrative functions cannot entirely be separated from politics, and administrators typically are not elected to their positions. Thus, holding them responsible for their actions and ensuring that they exercise discretion in a manner consistent with democratic ideals becomes a more difficult task.

Today, some of the most important issues in democratic governance involve how accountable and responsible administration can be secured. The notion of controlled, accountable government forms one of the pillars of our political system, one that lies at the roots of American democracy.

Carl Friedrich’s Views on Accountability

German-American political theorist Carl Friedrich (1901-1984)

Accountability in the public sector first became an issue during World War II, when the German-American political theorist Carl Friedrich argued that public administrators need to rely on technical and professional knowledge in order to be responsible. According to Friedrich (1940), professionalism was pivotal to bureaucratic responsibility. At this point, policymaking and policy execution were becoming largely inseparable, and administrators generally possessed the knowledge and technical expertise that the average person did not possess, which was believed to make them more qualified for these tasks that the citizenry at large. Their responsibilities were based on professional knowledge, thus according to Friedrich, they should only be accountable to their fellow professionals where meeting commonly agreed-to standards were concerned.

PERSONAL AND FUNCTIONAL RESPONSIBILITY

Friedrich did not believe that it was unimportant to be responsible to the public. But he did carry a focus on the changing nature of administrative responsibility required that professionalism, or “craftsmanship” should be central to the definition of accountability. According to Friedrich, two types of responsibility should be considered when evaluating accountability. Personal responsibility refers to the administrator’s being able to justify his or her actions according to orders, recommendations, and so forth. Functional responsibility involves the administrator’s looking to his or her function and professional standards for guidance (Denhardt & Denhardt, 2007, pp. 121-122). If personal and functional responsibility were to conflict, as Friedrich believed the potential to occur existed, both technical knowledge and hierarchy would have to be considered.

MEASURING AND ENFORCING ACCOUNTABILITY THROUGH INTERNAL CHECKS

Friedrich suggested several methods that could be used to measure and enforce accountability. Essentially, he believed that administrative problems could be solved effectively through internal checks that were created by professional standards and technical knowledge to ensure accountability. This way, the professional administrators’ responsibility cannot be held to politicians and elected legislators, but instead to peers who are appointed rather than elected and who have the same technical knowledge and standards—and therefore know how the standards should operate. In other words, public administration’s complexity requires professionals to deal with ethical decisions because they are the only ones who have the knowledge required to properly understand the ethical issues at hand and how to handle them. The technical knowledge of professionalism ensures proper standards of ethics, making it the only proper framework for ensuring accountability according to Friedrich.

Herman Finer’s Views on Accountability

The Romanian-British political scientist Herman Finer (1898-1969), at the time a professor at the University of London, strongly disagreed with Friedrich’s views and ignited a debate on the topic of accountability after writing to Friedrich in response. According to Finer, the best means of ensuring accountability were external controls; in fact, in a democracy allowing public administrators to hold themselves accountable was futile and counterproductive. Instead, administrators should be subordinate to elected officials, who represent the people and are directly responsible for them.

Finer defined responsibility in two ways in his argument: as a personal sense of moral obligation, and as “X is accountable for Y to Z.” The first definition emphasizes the conscience of the agent. Whether the agent does wrong or not is determined by his or her own conscience. Thus, Finer saw the second definition as the most relevant for ensuring accountability in public administration.

According to Finer, technical feasibility and knowledge should be secondary to democratic controls based on three doctrines or ideas.

FIRSTThe first is what Finer referred to as the “mastership of the public.” Public servants do not work for the good of the public based on their sense of what the public needs, but rather what the public says it wants (Finer, 1941, p. 337).

SECONDSecondly, an elected body and other institutions must be put in place for the purpose of expressing and exerting public authority.

THIRDThirdly, and most importantly, these elected institutions should not only express public wants but also be able to decide how these wants are to be satisfied and to enact these decisions. If there are no external controls used in the process, it is inevitable that power will be abused and corruption will occur.

Finer did not agree that administrative responsibility was more of a moral than a political issue, as Friedrich had posited. He finally reached the conclusion that moral responsibility operates in direct proportion to the strictness and efficiency of political responsibility. When political responsibility is weakly enforced, a complete lack of accountability and gross corruption result. Finer did not find professional standards, public duty, and technological efficiency to be unimportant to achieving accountability; but he viewed them as factors in sound administrative operations rather than prime movers of sound policy.

Reaching a Middle Ground

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· Friedrich’s Response to Finer’s Approach

Friedrich later argued that Finer’s views would not be feasible without clear agreement and little or no need for administrative discretion. He pointed out that the main concern should be ensuring effective administrative action, which would involve consideration of the relationship between the realms of policymaking and policy execution. He also was critical of Finer’s suggestion that accountability depended upon external controls, insisting that unless administrators hold each other accountable to a set of standards based on professional and technical knowledge, no accountability can be achieved. For a public administrator, accountability means not only following the law and the rules of elected officials but also using your profession’s expertise.

Blending of Internal and External Controls

Today, the ideas of Friedrich and Finer are both highly regarded in the realm of public administration, but most theorists have sought a middle ground on the subject. Most agree that accountability in public administration is best achieved through both internal and external means. Internal controls are those that are established and enforced within an agency, while external controls may involve legislative supervision, budget and audit activities, the use of an ombudsman, criticism from the press, and oversight by consumer groups, interest groups, and other concerned individuals (Denhardt & Denhardt, 2007, p. 125).

Three Important Questions

Questions about accountability have continued to revolve around three deceptively simple questions that have been debated hotly by those in the field. Different perspectives on administrative accountability have been suggested based on the answers to these questions and the importance assigned to them.

· What are we responsible for?

· To whom are we responsible?

· How is that responsibility best ensured?

Achieving Accountability

If these are the basic circumstances, how should accountability be achieved? The basic principles of administrative responsibility are sometimes incompatible, so no generic response is acceptable. This could involve the use “criteria” of responsibility, some of which may conflict with others, but all of which can be weighted and applied appropriately (Maass & Radaway, 1959, p. 163-164). These questions illustrate exactly how complex accountability truly can be. One answer might be to make sure that accountability is always in balance in a given circumstance, and that all administrators are only held responsible for incidents that occurred under his or her official authority. But even the word “responsibility” has multiple definitions and uses and is used more often than it is defined.

Accountability, Cause, and Obligation

When addressing responsibility, three connotations are used: accountability, cause, and obligation. Explicit accountability involves answering and accounting for an administrator’s performance of official tasks. But implicit accountability can involve outcomes that the administrator did not cause directly and occurs when one or more of four core elements is lacking: resources, knowledge, choice, and purpose (Spiro, 1969, pp.15-16). Democratically, it would be very negative if a person were held accountable for an event that he or she did not contribute to. Thus, figuring out how to ensure responsibility is difficult.

Enforcing Accountability

The more important issue is how to ensure accountability. Most scholars of public administration have determined that administrative accountability is even more difficult to enforce than it is to define, thanks to the complex web of accountability mechanisms and systems that characterize the current American governmental system.

A Framework for Accountability

A useful framework for understanding these multiple perspectives on accountability identifies four primary types of accountability, each of which is either internal or external and the levels of individual autonomy present (Romzek & Dubnick, 1987).

HIERARCHICAL ACCOUNTABILITYThe first type is hierarchical accountability, based on close supervision of public servants who have little work autonomy. Under this approach, public administrators have expectations that are managed through focusing attention on the priorities of those at the top of the hierarchy. At the same time, a wide range of agency activities is tightly controlled and supervised. This type of accountability system involves an organized and legitimate relationship between a superior and a subordinate (in which the need to follow orders is unquestioned, barring illegality) and close supervision or a surrogate system of standard operating procedures or clearly stated rules and regulations.

LEGAL ACCOUNTABILITYThe second is legal accountability, which involves detailed external oversight of performance for compliance with established mandates such as legislative and constitutional structures. Fiscal audits and oversight hearings fall under this category of accountability. In contrast to hierarchical accountability, legal accountability is based on relationships between a controlling party outside the agency and the agency’s members. That outside party is the person or group who is in a position to impose legal sanctions or assert contractual obligations. These people make the laws and other policy mandates that the public administrator enforces or implements. In policymaking terms, the outsider is the “lawmaker” while the public administrator has the role of “executor.”

PROFESSIONAL ACCOUNTABILITYThe third is professional accountability, based on high degrees of autonomy to people who based their decision-making on norms of appropriate practice. Public servants must rely on skilled and expert employees to provide appropriate solutions, and those employees are held fully accountable for their actions. If they fail to meet job performance expectations, they can be reprimanded or terminated. They expect to be given sufficient discretion so that they may complete their jobs. The key to the professional accountability system is deference to expertise within the agency. While outside professional associations may indirectly influence the decision making of the in-house expert, the source of authority is essentially internal to the agency.

POLITICAL ACCOUNTABILITYThe fourth is political accountability, which requires responsiveness to key external stakeholders, such as elected officials, clientele groups, and the general public. If deference characterizes professional accountability, responsiveness characterizes political accountability systems. The key relationship under these systems resembles that between a representative (the public administrator) and his or her constituents (those to whom he or she is accountable). Under political accountability, the primary question is, “Whom does the public administrator represent?” The potential constituencies include the general public, elected officials, agency heads, agency clientele, other special interest groups, as well as future generations. The public administrator is expected to be responsive to the policy priorities and programmatic needs of his or her constituency (Romzek & Dubnick, 1987, pp. 228-230).

A Question of Ethics

If one were to focus solely on the constitutional and legal framework in answering this question without considering other sources of knowledge and resources, the purpose becomes decidedly negative. With a broader approach, accountability can have the more positive purpose of enhancing responsibility across the public sphere. From this perspective, then, the focus should be on the character and ethics of the individual administrator.

Ethics provide accountability to the public and the administration and ensure that the public receives what it needs from the people who are appointed to serve them. It also gives the administration guidelines for integrity that helps foster the trust of the community. This atmosphere of trust helps the public understand that their public administrators are working with their best interests in mind.

Some have suggested that accountability is essentially a question of ethics. This indicates that the role of administrator should be reconceived as an ethical actor. In this vein, four components of responsible conduct can be identified:

· Individual Attributes

· Organizational Culture

· Organizational Structure

· Societal Expectations

Individual ethical behavior requires individual ethical autonomy and self-awareness as well as limits to the reach and power of organizations (Cooper, 1998, p. 149).

Privatizing Public Services

During the Great Depression many dams, buildings, bridges and other structures were built by men hired as part of government programs such as the:

· Civilian Conservation Corps

· Public Works Administration

Many of the tasks that government agencies are charged with today, such as conducting scientific research and building highways and dams, were once undertaken by private industry. Since the 1980s, a shift has occurred in which more and more of these tasks are returning to the private sector, with prisons, schools, electrical utilities, railroads, and many other institutions leaving the hands of the government agencies that once controlled them.

Whether this is a good idea or not has been hotly debated. Proponents of  privatization believe that it will increase the efficiency and quality of government activities, reduce taxes, and shrink the size of government as the profit-seeking behavior of new, private sector managers will lead to cost-cutting and greater attention to customer satisfaction. But its critics make a different argument, contending that improved efficiency is not necessarily an outcome of privatization. They fear profit-making strategies and corporate practices that will make essential services unavailable to many citizens and ultimately require government intervention at a much larger scale than before.

Privatization Debate

The  Veterans Administration  (VA) gets some  harsh criticisms  due to long wait times for veterans who need care, resulting in a program called Veteran’s Choice that would allow veterans to seek care from private doctors and private facilities (Lawrence, Whitney, & Tomsic, 2016).

The debate over privatization relates directly to public administrative accountability to the public interest, moving the debate from the issue of private versus public to that of administrative behavior. When the pros and cons of privatization can be measured against the standards of good management, three conclusions emerge.

· Neither public nor private managers will always act in the best interests of their shareholders.  Privatization  will be effective only if private managers have incentives to act in the public interest, including but not limited to efficiency.

· Profits and the public interest overlap best when the privatized service or asset is in a competitive market. Competition from other companies is required to discipline managerial behavior.

· When these conditions are not met, the continued governmental intervention will be necessary. The simple transfer of ownership from public to private hands will not necessarily reduce the cost or enhance the quality of services (Goodman & Loveman, 1991).

For privatization to be an effective means of reducing the size of government and creating fiscal efficiency, accountability must be in the forefront. Organizational mechanisms and competition must ensure that public administrators carry out the public’s wishes and best interest in all circumstances.

What Is Participatory Budgeting?

Town councils are a widespread means of giving voice to citizens’ concerns.

CITIZEN PARTICIPATION Participatory budgeting  allows citizens to deliberate and negotiates resource distribution in their areas, promoting transparency, accountability, and decentralization while discouraging corruption and inefficiency, with the goal of improving government performance overall. 

UNIQUE FEATURESThere are a number of unique features to this process that has drawn attention, the most significant of which are as follows (Participatory Budgeting Project, 2017):

· Ordinary people have a say in their government’s actions, communicated in the fact that they actually are allowed to make decisions directly. Participatory budgeting tends to engage the support of people who may be cynical or distrusting of their governments. As ordinary citizens become more involved, they build closer relationships with the politicians who represent them and they have a better reason to place trust in their governments.

· It has been well established that without transparency and accountability, budgeting is rife with opportunities for corruption, waste, and backlash. These opportunities are reduced when community members decide to spend through a public process.

· People who are allowed the freedom of deciding where their money goes become more active and informed citizens. In turn, they become better servants of their own communities by developing a deeper understanding of their communities’ needs through the political issues that affect them. This increased knowledge also leads to money being spent more wisely, in ways that are more likely to benefit the community.

· Funds are also spent more fairly since everyone in the community is able to make decisions about how the money is spent. Projects that address the greatest community needs are prioritized when people work together to discuss where the funds should be used.

· Meetings and assemblies are held in the communities to discuss matters of budgeting, and through these meetings, people get to know their neighbors and feel more connected to their city. Community groups are connected, new members are recruited from within the community, and local organizations spend less time lobbying and more time deciding policies.

TOO MANY COOKSSome people may argue that involving this many people in the process will result in a huge mess—the proverbial “too many cooks spoiling the broth”—and that this concern states exactly why citizens elect politicians to represent them instead of engaging the entire community in creating a budget. Proponents of participatory budgeting, however, argue that if elected officials share the responsibility of budgeting with the people whom they represent, local needs and desires can better be addressed than they can on the macroeconomic level. By putting elected representatives in closer touch with the people they serve, participatory budgeting helps them do their job more effectively.

Public Works Programs

Many cities build gyms and playing fields and organize teams and tournaments. For example, you can read about the sports available for adults in Minneapolis at:

· Adult Sports Leagues

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Public Work Projects

There are two main types of participatory budget programs. Public works programs focus on specific public works projects, such as building child care centers or paving streets that have fallen into disrepair. These programs involve distributing resources to specific projects, and there are several reasons why governments begin the participatory budgeting process by allocating their time and energy to specific projects.

Connection between Citizens and Government

By focusing on specific public works, a direct connection is established between citizen participation and budgetary outcomes. When the government successfully implements a project that the people have chosen to fund through the public budget, the notion that citizen participation is a valuable tool for promoting change is reinforced. Participants know that when they make decisions, the government will act upon them.

Community-defined Development

This focus also represents an effort to allow communities to define their own development. Citizens understand the problems affecting their communities far better than government officials who may or may not reside within their communities. By giving citizens the power to select public works, the decision-making process is decentralized. Many neighborhood groups first propose small projects whose range and size is expanded over time.

Infrastructure Projects

Local governments often take the responsibility for small infrastructure projects. In countries where state or provincial governments provide these services, participatory budgeting at higher levels of government is often the most effective approach. Public works have long been a key source of patronage between governments and community leaders, and breaking the cycle of patronage involves public discussions on how public works will be managed otherwise. Governments and community leaders can generate a new type of politics by allowing the people to make these decisions.

Citizen Understanding and Responsibility

Finally, this focus allows citizens to understand the level of authority and responsibility that the municipal level of government actually has. Understanding the division of authority helps the citizens to direct their demands to the appropriate level of government. The results are an educated population, as community leaders gain a better understanding of the government’s limited powers and an increase in transparency within the government.

Thematic Programs

Thematic programs focus on general spending policies and more general trends. Participatory budgeting meetings held to discuss thematic programs tend to draw activists within the community, who are well informed and often associated with groups within the community. By letting citizens establish general government priorities, the process is further democratized. Participants are encouraged to analyze and understand the city as a whole rather than focusing on their own neighborhood’s problems and to further envision and work for broader social change.

Participatory budgeting meetings are held to discuss thematic projects in a manner that allows all participants to set broad priorities for public policies. The first stage of this process requires the government to provide detailed information on current policies and what their spending priorities for these are. Then, a series of discussions are held to evaluate these priorities. Finally, the participants place the priorities in order.

New policies are not proposed or debated by the citizens. Instead, the government’s pre-existing policies and their merits are discussed, and citizens work with government officials to determine how resources should be used. If government officials strongly support an existing policy program, they will try hard to convince the participants to support it. If complicity exists between government officials and citizens, participants may agree to the government’s policy positions without proper evaluation—one of the risks of participatory budgeting.

Some participants at a thematic program meeting may be longtime advocates of particular policy issues, while their knowledge of others may be limited. Generally speaking, citizen participants are not highly informed about most policy arenas. Most participants will follow the lead of the more experienced policy advocates present, even without fully understanding the issues. This represents another drawback of participatory budgeting, especially when well-informed (and agenda-minded) political activists try to lead or dominate political discussions. The average participant’s political knowledge should expand as the participatory budgeting process matures over time.

Uninformed citizens may select policies that do not conform to the constraints and may vote to spend more resources that are available. Demanding a level of spending far beyond the capacity of the government may have the effect of derailing a program. But most participants understand the overall impact that revenue and authority constraints have on the participatory budgeting process and remain within these constraints.

In their 2016 paper “Ethnic Diversity and Public Goods Provision: Evidence from U.S. Municipalities and School Districts,” Soomi Lee, Dongwon Lee, and Borcherding (2016) revisit the claim that ethnic heterogeneity—the degree to which different ethnic groups make up the population—reduces local government spending on various public goods. Their analysis suggests that heterogeneity does not necessarily reduce local public spending due to two factors: the low price elasticity of demand for local public goods and the substitution between public goods. Using data from American cities and school districts from 2000 to 2010, they found that ethnic heterogeneity has offsetting positive and negative effects on various types of local government spending. These findings imply that local governments respond to an increase in ethnic heterogeneity by rebalancing local public spending (Lee, Lee, & Borcherding, 2016, pp. 685-713).

 

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Four Perspectives of Participatory Budgeting

The  National Park Service  (NPS) invited public comments on a plan to reduce the size of the bison herd at  Grand Canyon National Park in Arizona . While inviting public comments is laudable, no information about the budget was included. The NPS website has a 199-page document describing the plan, alternatives, and environmental impact, but there is no information about costs or budgets:

· Initial Bison Herd Reduction

 

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· Four Perspectives

 

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Scholars have supported participatory budgeting from four perspectives:

· Postmodern Discourse Theory

· Disillusionment with Bureaucracy

· The Search for a Democratic Ideal

· The Need for Participation in Developing Countries

Citizen participation is a logical outcome of the movement from insulation and bureaucracy to openness and transparency. Current societal conditions and relations between individuals and their governments that are characteristic of liberal democracies make it likely that citizens will seek to involve themselves in public decisions through discourse (Moynihan, 2007, pp. 56-57).

Conflict between Bureaucratic Expertise and Citizen Participation

Disillusionment with traditional governance models, insulated public service and the belief that administrative power is checked by citizen participation have spurred interest in participatory processes. Bureaucratic organizations have had difficulty building inclusive relationships with the people they serve. However, it is expertise that gives bureaucracy its value; the members of a bureaucracy combine many different modes of expertise in order to create the most adept and inclusive skill set for public policymaking. Thus, the democratic or representative values that underpin the idea of participation are in conflict with the very idea of bureaucracy (Moynihan, 2007, pp. 57-58).

Appeal of Participatory Budgeting

Much of the appeal of participatory budgeting lies in its idealistic nature. Participation prevents popular alienation from the government while maintaining the stability of the political system. A more active approach shows greater concern for participation that produces benefits to citizens and offers them the chance to exert real influence on the governing process—one of the chief aims of democracy (Moynihan, 2007, pp. 58).

Developing Country Perspective

In developing countries, the need for participation is vital. Participation fosters good governance, promotes transparency, increases social justice by involving the poor and excluded, and helps individuals become better citizens. Poorer countries desperately need accountability and competent performance, and participation is one way to achieve these goals. Related to the good governance argument is the view that participation provides additional sources of information not available through traditional political institutions. Many arguments in favor of participation rest on the claim that citizens have a right to their own voice in all decisions affecting their future in any democratic system. People who have had limited chances for involvement in civic life can be broadly benefited more through the provision of “citizenship schools” (Moynihan, 2007, pp. 58-60).

Behavioral Public Finance

Most market models have rationality and self-interest at their core. Those who create these models attempt to maximize their satisfaction in the private sector as workers, consumers, and investors and in the public sector as citizen-voters.  Behavioral public finance  challenges the classical model of government fiscal decision-making, particularly where decision-makers are characterized as self-interested and seeking to maximize their satisfaction. Instead, behavioralists believe that individual citizens are more altruistic than self-centered.

Public finance begins by identifying conditions under which unregulated markets can lead to undesirable outcomes, and it develops guidelines for designing policies that address those conditions. Its power lies in its ability to identify a core set of economic forces and use them both to ascertain the need for policy responses on unemployment, environmental policy, and other topics and to generate those responses. In the standard case, public finance does all of that under the assumption that individuals are perfect optimizers, have unbounded self-control, and, usually, have standard preferences. Behavioral economics finds that those assumptions are rarely rooted in reality (Congdon, Kling, & Mullainathan, 2011, p. 40).

Behavioral economics has a strong basis in psychology and sociology in how it investigates fiscal decision-making, paying specific attention to motivation and cognition.

· MOTIVATION

Motivation concerns why individuals make certain fiscal decisions and are more broadly defined by investigating the well-being of others as well as how to maximize one’s self-interest. Individuals are frequently less self-interested and more altruistic.

· COGNITION

Cognition concerns how individuals obtain and process relevant information. People cannot perceive policies optimally, especially when options are especially complex—the basis of bounded rationality (Ryu, 2014, pp. 265-66).

Practitioners have used behavioral economics to tackle wide-ranging issues such as improving an individual’s financial well-being, designing more effective packaging, enhancing users’ experiences of online services. Not only do they aim to steer consumer behavior, but also enhance productivity in the workplace and improve decision-making and negotiations on an organizational level. Behavioral public finance does have its disadvantages, however. Imperfect optimization (where individual choices are constrained) and non-standard preferences block rational choices (where preferences are reference-dependent) are among the shortfalls of this alternative.

Behavioral Finance Frameworks

THREE ASSUMPTIONSHYPERLINK THE ABOVE TITLE TO PDF L8_CONGDONBehavioral finance provides frameworks more comprehensive than bounded rationality. A classification scheme for results has been borrowed from the disciplines of psychology and behavioral economics. It organizes findings around three basic deviations based on standard assumptions:

· Imperfect organization

· Bounded self-control

· Nonstandard preferences (Congdon, Kling, & Mullainathan, 2011, p. 19-20).

IMPERFECT OPTIMIZATION Imperfect optimization means that individual choices are constrained by limited attention, limited computation capacity, and biased reasoning. The classical model assumes that individuals can capably maximize own utility, and that they know what they want and that their choices and preferences will be consistent. But behavioral economics finds that individuals are imperfect in their ability to maximize their own welfare and that they often make inconsistent choices. In other words, knowing what one wants is not as easy as it may seem.

Psychologists have observed that individuals have a limited capacity to attend to multiple features of choice simultaneously, which is unfortunate indeed for human decision-makers. Taken together, limited attention, limited computational capacity, and biased reasoning all allow for the possibility that people may make systematic errors when they try to maximize their own utility. Rather than the kind of deliberate choice that the standard model envisions, individuals more often use shortcuts that can be incorrect, showing how hard it is to make good decisions and manifesting imperfect optimization.

BOUNDED SELF-CONTROL Bounded self-control denotes that even when individuals can maximize their utilities, there are likely to be gaps between choices and their implementation. Individuals may accurately perceive their own interests, but they can still have difficulty realizing their intentions. The classical model allows for no such difficulty and assumes consistency in preferences. Behavioral economics recognizes that forces such as temptation and procrastination are real and meaningful and that individuals have more difficulty doing what they want to do than the standard model assumes.

Failures of self-control can be thought of as a result of conflict between the mental processes by which individuals plan and those by which they act. Alternatively, they might be thought of as a result of a decision-making process in which self-control demands willpower. They also can be thought of as a result of individuals construing the time dimension of choice in some nonstandard way. In part as a result of the variety of processes that might, in fact, generate such behaviors, not all of these behaviors can be labeled as features of bounded self-control. That said, the approach to considering these behavioral tendencies does make the assumption that both imperfect optimization and bounded self-control derive from an underlying psychology of judgment and decision-making that leads individuals to behave inconsistently.

NONSTANDARD PREFERENCES Nonstandard preferences, such as reference-dependent preferences and other-regarding preferences, further block rational choices of individuals. The standard model makes a few weak assumptions about the shape of individual preferences. According to behavioral economics, preferences appear to be set over changes in status rather than over end states and the assumption of pure self-interest is often very negative in that individuals may hold preferences that regard others. In other words, what people want might be different from what we usually assume.

Pure selfishness and reference-independent preferences are not central features of the standard model of decision-making but instead are only convenient assumptions. The issue is whether self-interest or altruism is the more appropriate operating assumption for how economic agents interact with the world. Are expressions of altruism important for understanding behavior? Questions such as these are an empirical matter.

Collaborative Budgeting

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· Collaborative Budgeting

 

Collaborative budgeting  involves cross-sector collaboration sharing networks to achieve collectively what cannot be achieved alone. These networks are supposed to increase efficiency, innovativeness, and flexibility, and enhance community ties. The effectiveness of any network depends on the level of trust established; a number of network participants; goal consensus; and, network-level competencies. There are three types of networks: self-governance (or participant-governed), lead-organization governed, and network administrative organization (NAO)-governed (Provan & Kenis, 2005, pp. 11-14).

Self-governance

Self-governance is the simplest form of network governance. In a self-governed network, groups of organizations work collectively as a network but have no separate governance structure. Governance of activities resides completely with the network members themselves and is accomplished formally (through regular meetings of designated organizational representatives) or more informally (through the ongoing but typically uncoordinated efforts of those who have a stake in network success).

Self-governed networks depend exclusively on the involvement and commitment of the organizations that comprise the network. Participants in the network are responsible for managing relationships within the network and external relations with funders, government, and customers. Only by having all network members participate equally can such a network be wholly successful. In business, self-governance is typically used in dyadic strategic alliances and partnerships designed to develop new prodLead-organization Governance

Lead-organization governance is a model that often occurs where there may be a core provider agency that assumes the role of network leader because of its central position in the flow of clients and key resources. In this structure, network members all share at least some common purpose and also maintain individual goals. They often interact and work with one another, but all activities and key decisions are coordinated through and by one of the members who act as a lead organization, providing administration for the network and facilitating the activities of member organizations in their efforts to achieve goals. The lead organization may underwrite the cost of network administration on its own, receive contributions from network members, or seek external funding, and it is responsible for both the maintenance of internal relationships and the development of external relationships.

ucts or to attract new business in ways that could not be otherwise accomplished Network Administrative Organization (NAO)

Network administrative organization (NAO) governance operates under the basic idea that a separate administrative entity is set up specifically to manage the network and its activities. Like the lead organization model, the NAO plays a key role in coordinating and sustaining the network. But the NAO is not another firm or agency manufacturing its own goods or providing its own services. It is established exclusively to govern the network.

A NAO may consist of a single individual (network facilitator or broker) or a more complex organizational form (an executive director, staff, and board). The more complex form may deal with unique and complex network-level problems and issues. These NAOs have board structures that include all network members or just a subset. With this structure, participant organizations and groups may interact and work with one another but activities and key decisions are coordinated through and by a separate, independent entity.

through the independent efforts of network members.

Implications of Collaborative Budgeting

FOUR PRINCIPAL REASONS COLLABORATIVE BUDGETING IS UNIQUE

1. There are multiple competing interests within a collaborative network.

2. The accountability issue with a bureaucracy is altered when external service providers deliver public services.

3. Activity-based costing is not just an internal management tool but determines levels of resource sharing in the network.

4. The lack of institutional norms develops unique budgetary opportunities for network participants (Mitchell & Thurmaier, 2011, pp. 5-8).

COMPETING INTERESTS

Within a public collaborative network, individuals and participant organizations bring a number of competing and complementary interests to the table. Three levels of evaluation exist within such a network: community, network, and agency (participant). If a network can be evaluated at these three levels, there must be distinct interests at each level. In addition, the individuals participating in the network may have personal interests in collaboration, such as skill development, career advancement, and networking. But agency participants may view participation in terms of a principal-agent or contractual perspective. If the participant and network goals are not aligned in terms of desired services and cost, there may be conflict. The implication is that the collaborative function of budgeting must be viewed through at least two lenses. One lens involves the factors that determine the participant’s decision to participate or not participate. The other involves the network process to obtain resources from participants and expend them in a manner consistent with goals and expectations shared across the network.

THIRD-PARTY SERVICE PROVIDER

Regarding the accountability aspect of collaborative budgeting, a fundamental consideration is that a third-party service provider adds another link to the accountability chain. This further distances citizens from decision-making. To maintain accountability, elected officials should take interest in the terms of collaborative participation, establish performance targets, and review performance to make sure compliance is achieved.

COMPLETE COST

Beyond accountability, the ability to determine the complete cost of collaborative activity also impacts both participants and the network organization. The advantages and pitfalls of “network-based costing” are similar to those found with activity-based costing. Beyond contractual terms, participant organizations devote substantial unaccounted amounts of personnel, time, and materials to collaborative activities, and to accurately budget for this activity the appropriate tools to capture the entire financial and non-financial cost of a collaborative activity should be determined.

LACK OF INSTITUTIONAL NORMS

Finally, the lack of institutional norms that are found in long-established governmental bodies may allow for enticing budgetary and management possibilities in newly established networked organizations. In other words, collaborative networks may be a viable vehicle to pursue transparent community outcomes and to develop transparent collaborative budgets to achieve those outcomes.

Involving Citizens in the Process

The retirement of the baby boom generation is likely to cause unsustainable structural fiscal imbalances in the near future. The need for budget process reform has intensified as a result, and it has become more challenging as policymakers have become more politically polarized.

Baby Boom Generation 1946-1964

One recent approach is to involve citizens in the budget process at the local level. This involvement can be modeled in six ways. One is participatory budgeting, can be conceptualized as social change. As such, ordinary citizens are more likely to be supportive of new processes if they help create them and they can identify with them.

Others include the following (Sintomer, Herzberg, Röcke, & Allegretti, 2012, pp. 21-27)

PROXIMITY DEMOCRACYHYPERLINK THE ABOVE TITLE TO PDF L8_MODELS Proximity democracy showcases proximity both in terms of geographical closeness and increased communication between citizens, public administrations and local authorities.

PARTICIPATORY MODERNIZATION Participatory modernization involves a context in which the state tries to modernize in order to become more efficient and legitimate, and in some cases in order to resist the pressures to privatize.

MULTI-STAKEHOLDER PARTICIPATION Multi-stakeholder participation involves a model where citizens who take part constitute just one of the many different actors, together with private enterprise and local government.

NEO-CORPORATISM Neo-corporatism involves a model where the local government plays a strong role by surrounding itself with organized groups (NGOs, trade unions, and employers’ associations), social groups (the elderly, immigrant groups and so on) and various local institutions.

COMMUNITY DEVELOPMENT Community development includes the phase of project implementation, in a context that dissociates municipal politics and incorporates a strong participatory process driven as much from the bottom up as from the top down.

Conclusion

Reflection:

· Do you believe that external controls or internal checks are better means of achieving accountability in public administration? Why?

· What role should ethics play in public administration? Is accountability entirely dependent on ethics, as some have suggested?

· What are your feelings about the privatization of public services? Will it create greater efficiency in public administration or the reverse?

· Do you think that a participatory budgeting process could work in your community? Do you think it might be an effective solution in your university’s setting?

· Are the alternative approaches discussed in these lesson improvements over traditional budgeting methods? Why or why not?

Accountability is a looming issue where public administration and especially public budgeting is concerned. The political scientists Carl Friedman and Herman Finer debated whether accountability should be treated as an internal matter or an external one. Today, most experts support a middle ground position. The role of ethics and a proper framework have been brought into question when debating this surprisingly complicated and difficult issue. Privatization has been suggested as a means of producing greater accountability, although it, too, has proven controversial when dealing with this question.

Recently, a number of alternative approaches to traditional budgeting have been proposed. One is participatory budgeting. Participatory budgeting engages the community by allowing citizens to deliberate and negotiate resource distribution in their areas. This form of budgeting promotes transparency, accountability, and decentralization while discouraging corruption and inefficiency, with the goal of improving government performance overall. Behavioral public finance has a strong basis in psychology and sociology and centers on the belief that individual citizens are more altruistic than self-centered. Collaborative budgeting involves cross-sector collaboration sharing networks to achieve collectively what cannot be achieved alone, increasing efficiency, innovativeness, flexibility, and enhancing community ties.