Fred Thompson

Mission-Driven, Results-Oriented Budgeting: Fiscal Administration and the New Public Management

In this article, I explain how the fiscal-governance mechanisms - budgets, administrative controls, and financial management practices proposed by the National performance Review differ from those currently used in the federal government and how the federal governments legislative budget process would need to be modified to accommodate the changes proposed by the National Performance Review.

Effects of key state policies on private colleges and universities: sustaining private-sector capacity in the face of the higher education access challenge

Abstract The relationship between key state policy variables — (1) relative (private–public) tuition prices, (2) state student-aid funding, and (3) public institution density — and the competitive position of private colleges and universities is examined. Elite private schools are found to be nearly impervious to state policy. Large and moderately selective private institutions are adversely affected by public institution density and low public prices. Such prices divert students who would otherwise prefer these private institutions to similar public schools. State student aid funding most affects the enrollment market shares of the small, low-selectivity private colleges enrolling the greatest proportions of minority and modest-income students. The findings suggest state policies in this era of strong demand for higher education and constrained public sector capacity should use price signals (student aid and public institution pricing) to encourage students to consider seriously whether private higher education might serve their needs as well as or better than public institutions.

A Regulatory Model of Governmental Coordinating Activities in the Higher Education Sector.

Abstract In this paper we seek to develop some aspects of the analogy between governmental coordinating activities in the higher education sector and the governmental activities called regulation in other industries. Our purposes are to show the applicability of industrial organization theory-based prescriptive models of regulatory policy to the higher education sector and to suggest, on the basis of both theoretical and empirical analysis, the inappropriateness of dominant current policy trends in higher education coordination and regulation. Although this paper is primarily concerned with the cost behavior of institutions of higher education, its conclusions may be generalized to any public service that can be marketed to customers.

Responsibility budgeting and accounting

Abstract Information/transaction costs make it necessary to decentralize some decision rights in organizations and in the economy. Decentralization in turn requires organizations to solve the control problem that results when self-interested persons do not behave as perfect agents. Capitalist economies solve these control problems through the institution of alienable decision rights. But because organizations suppress the alienability of decision rights, they must devise substitute mechanisms that perform those functions. Three functions are critical: (1) allocating decision rights among agents in the organization, (2) measuring and evaluating performance, and (3) rewarding and punishing individuals for their performance. Responsibility budgeting and accounting systems are the most widespread mechanisms for performing these functions in business today.

Closeness Counts in Horseshoes and Dancing . . . And Elections

This article surveys the empirical literature on voter turnout in an attempt to determine whether the claim that individual behavior in public-regarding decisions conforms to the mini-max-regret rule (precautionary principle) is valid, and also to determine whether or not what we know about voting/not voting behavior provides any useful information for the design of regulatory policies and practices. The article concludes that voters do not practice mini-max-regret. That they maximize risk-adjusted expected value seems nearly as unlikely, unless it is assumed that votes are intended to influence the behavior of whoever is elected. On balance, Kahneman and Tverskys prospect theory appears to be the best guide to understanding voting behavior. It is also directly relevant to the design of regulatory arrangements.

Toward a Regulatory Budget

A regulatory budget would require the federal government to treat compliance costs incurred by the private sector as if they were incurred by the government, without requiring the government to actually assume those costs. For example, EPA could be given a regulatory compliance budget of say

Organizational Process Models of Budgeting

80 billion in FY98. A regulatory budget would provoke an annual debate in Congress on the size of EPAs or OSHAs budget. Such a debate would force the proponents to weigh the benefits and costs of various regulatory programs, something now lacking in the political process. Interest in a regulatory budget reflects the slight gains in the quality of regulatory decision-making resulting from mandatory regulatory review. It is now apparent that better information about the costs, benefits, and distributional consequences of regulation will not automatically improve regulatory decision-making - although it would not hurt.

Biased budget forecasts

There are several reasons for the obscurity of the organizational process model. Perhaps the most important is the widespread acceptance of the standard economic model, which holds that spending outcomes are determined by the supply of and the demand for publicly provided goods and services and that competition somehow constrains elected officials to serve the tastes and preferences of the median voter. The best way to define the organizational process model is to follow its interesting etiology across time and academic boundaries, focusing on the work of Herbert Simon, Aaron Wildavsky. John Padgett, John Patrick Crecine, and P.D. Larkey. We divide the development of the organizational process model into four distinct phases: pronouncement, formalization, differentiation, and diffusion, look in turn at each of these phases, and conclude that the time has come for scholars to revisit the model, exploring its potential for contributing not only to formal budget theory but also to other fields of public policy and management as well.

Understanding and Creating Public Value: Business is the engine, government the flywheel (and also the regulator)

Abstract This note assesses the received explanation of biased revenue forecasts using a state-preference framework. Presumably, personal rewards, together with tastes and preferences about these rewards, explain this bias and can also help us to explain observed variations in the degree of bias between jurisdictions. In this note, we endow public officials with conservative attitudes by making them risk averse with respect to pecuniary rewards. These rewards are presumed to be state contingent and to depend upon the degree of bias in forecasted revenue. This note demonstrates that conservative attitudes alone cannot explain biased revenue forecasts; bias (although perhaps not its absence) depends entirely on the reward structure faced by risk-averse public officials.

The Government Finance Database: A Common Resource for Quantitative Research in Public Financial Analysis

Abstract In this essay, we define the meaning and content of public value, show how government and business create public value, and briefly explain why their governance arrangements work the way they do. We deal first with business and then government. We conclude that government manages risks and that governmental value creation is distinctively concerned with stability. Hence, to make government work better, risk management ought to be central to the practice of public finance, public policy, and public administration. Understanding the importance of stability is potentially of even greater importance to those who research and teach public policy and administration. Indeed, we propose that the elaboration of a general risk assessment model explaining, among other things, government’s systemic inclination to stability, would take our field a long towards integration with mainstream positive social science and, therefore, holds out the prospect of considerable interdisciplinary consilience, although at this time we can do no more than suggest the contours of such a model.