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Economic theory implies that the incentive for a manager of a publicly operated firm (for example, a state university or the post office) to promote internal efficiency of their operations will be a

Economics Dec 23, 2020

Economic theory implies that the incentive for a manager of a publicly operated firm (for example, a state university or the post office) to promote internal efficiency of their operations will be

a. weak because government employees are less educated than employees who work in the private sector.

b. weak because it is difficult for voters to detect inefficiency and for public officials to gain from actions that would improve the efficiency of government.

c. strong because inefficiency is easily detected and it will lead to the loss of voter support.

d. strong because public officials are unconcerned about personal gain.

Expert Solution

The answer is c.

A public manager's incentive to promote efficiency will be strong because of the easy detection of inefficiency, which may lead to an individual getting voted out by the public. According to economics, incentives or disincentives shape people's behaviour. Incentives mean rewards, while disincentives may mean some punishment. For example, when the price of a product increases, consumers will purchase less of it, than when its price is lower. The high prices act as disincentives as they eat into a consumer's pockets.

From this case, the public is on the watch out and realizing instances of inefficiencies, like the public office's underperformance, is an incentive for a public manager to promote efficiency in the office. If the manager cares about his next election from the public, then, there will be a need to maintain adequate records so that the public does not have a reason to vote him or her out; this realization facilitates a given line of behaviour which translates as efficient in the eyes of the public.

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