Jean-Luc Migué

Toward a general theory of managerial discretion

The basic idea behind the managerial discretion approach to the analysis o f bureaus and nonprofit institutions is that managers are assumed to derive personal satisfaction from allocating resources of their firm to other than productivity increasing expenses. 1 This assumption rests on the fact that in the noncompetitive world in which these producers operate a more or less substantial degree of freedom is allowed to the managers in the use of some portion of the firms resources. The whole analysis therefore revolves around two questions: First, what is the amount of resources available to the manager for allocation to his preferred expenses? Second, how are these resources allocated and with what results on the equilibrium level of output, cost and price? In the first section of this paper we will maintain that present theories of nonprofit institutions mostly provide partial and narrow answers to these questions. In the second part a more general model of discretionary behavior will be developed. Empirically verifiable consequences will be deducted. Among the conclusions derivable from the theory suggested are the following: The budgets of bureaus are always too large but output is not necessarily so from the standpoint of Pareto efficiency; this results from bureaucrats enjoying

Pollution Taxes, Subsidies, and Rent Seeking

In assessing the impact of pollution taxes and subsidies against the reference grid of a Coasean system of property rights assignment, the authors show that both policy tools give rise to rent seeking and nonoptimal results. In contrast to the conventional analysis of environment policy, congestion, entry by subsidized polluters, political competition for a share of the general public fund, and migration to regions endowed in environmental resources are seen as sources of rent dissipation to be subtracted from the welfare gain of pollution-control policies.