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the consequences of blame avoidance in case of public organizations
2001) Joseph Stiglitz who also wrote about economics of the public sector. 6
A much less widespread theory, identified with the Marxist O’ Connor, the organic
theory of the state, nevertheless certain elements of it are accepted by other schools.
According to O’Connor, state institutions must create necessary conditions for capital
accumulation and social peace. On one hand when the state increases social expenditures
fulfill expectations of entrepreneurs it enhances better profit gaining opportunities. On
the other hand it needs to provide consumption products and services to reduce social
tensions, which brings an increase of the so-called social expenditures. Both induce the
growth of state. (Cullis-Jones, 2003. 577)
The behavior of public sector actors is discussed in all theories primarily when
ins titutional effectiveness is analyzed. The effectiveness at organizational level – the
proportion of input-output – and the improvement of rates are classic problems of economy.
Several studies prove that business organizations operate with higher efficiency than
public institutions. D. C. Mueller provides 71 comparative studies between 1965 and
1998 covering some 20 sectors from aviation through mining to weather forecast services.
In only 5 cases did business ventures turn out to be less efficient and further 10 cases
revealed no significant differences between businesses and public institutions. (Mueller,
2003. 374-379)
We need to bear in mind that, as a rule, several factors point to the lower efficiency
levels of non-business organizations. The most important is the lack of a profit driven
philosophy. Beyond this, lower efficiency levels are usually explained by the followings:
1. Operational specifications. Public sector organizations are often active in areas
where performance is difficult to measure (prevention in healthcare), only long term
performance can be conceptualized (education), consumer satisfaction as point of
measure cannot be used (protection), or the organizational operation cannot be
compared to anything since the main activities of the organization fall within a
quasi-monopolistic position (Constitutional Court).
2. Organisational specifications. Public institutions are not usually threatened by
bankruptcy, which means they can afford inefficiency. Their decisions are more often
regulated by legal provisions -like rules of public procurement-and these may very well
increase expenditures. Their operations depend on annual budget allocations which may
also limit the rationalities of economic decisions even if financing is either more or less
than what is reasonable.
3. Personal specifications. The strongest binds hindering efficient operations are
concerning employees; hiring and firing public servants is always cumbersome and
legal provisions of salary allocation may also prevent a rational management of human
resource. Tight budget and the system of payroll placement may obstruct the creation
of high quality workforce; employment, the retention of employees, even recruiting
6 Stiglitz, J. E. (2000): Economics of the Public Sector, W.W. Norton & Company, London
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