Privatization's Progeny

66 Pages Posted: 11 Oct 2012 Last revised: 11 Apr 2013

See all articles by Jon D. Michaels

Jon D. Michaels

University of California, Los Angeles - School of Law

Date Written: August 31, 2012


Privatization’s proponents are branching out. They’ve traditionally relied on government contracting to boost regulatory efficiency, maximize budgetary savings, enhance unitary control over the administrative state, and reap political dividends. Now, however, these proponents are also blazing newer, bolder paths. They’re experimenting with more powerful instruments that offer surer, quicker routes to promote privatization’s aims.

One such instrument is marketized bureaucracy. For decades, the government offered its employees generous base compensation and considerable job security. During that time, privatization’s proponents found these public-sector arrangements anathema. Rather than tear down the then-prized civil-service framework, they simply circumvented it — replacing what they viewed as overpaid and insufficiently motivated government workers with contractors. Of late, however, the tide has turned against the civil service. Across the country, elected officials are reducing government workers’ wages and benefits, curtailing collective-bargaining rights, reclassifying tenured civil servants as at-will employees, and introducing performance-based bonuses. These efforts have made government bureaucracy far more like the private sector, thus reducing the need to contract out.

Another such instrument is government by bounty. Exemplified by regulatory vouchers, prediction markets, R&D prizes, and social-impact bonds, government-by-bounty initiatives shed the conventional contractual form. In its stead are high-risk, high-reward bets that shift financial and programmatic responsibility onto bounty seekers. Unlike traditional contractors, bounty seekers invest their own money and get paid only if they win the "bet" — that is, only if they successfully carry out their given tasks. As a result, the bounty seekers are, in theory, better-motivated and less susceptible to slack, abuse, and fraud.

This Article explores how these instruments uniquely challenge the administrative state, reorienting public programs, reversing longstanding practices, and forcing courts to recalibrate core administrative law doctrines in ways traditional contracting never did. Specifically, these new instruments enable school districts to “teach to the test,” states to barter away sovereign authority, and presidents to politicize the bureaucracy. They also test the robustness of foundational legal precepts undergirding hard-look review, Chevron and Skidmore deference, and constitutional due process. Ultimately, the emergence of these instruments reflects the extent to which government today is commingling political and business-like agendas in ways both liberating and threatening.

Keywords: Administrative Law, Public Administration, Privatization

JEL Classification: K23

Suggested Citation

Michaels, Jon D., Privatization's Progeny (August 31, 2012). 101 Georgetown Law Journal 1023-1088 (2013), UCLA School of Law Research Paper 13-02, Available at SSRN:

Jon D. Michaels (Contact Author)

University of California, Los Angeles - School of Law ( email )

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Los Angeles, CA 90095-1476
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