From Weber to Kafka: Political Instability and the Rise of an Inefficient Bureaucracy

73 Pages Posted: 13 Jun 2017

See all articles by Gabriele Gratton

Gabriele Gratton

UNSW Australia Business School, School of Economics

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF)

Claudio Michelacci

Einaudi Institute for Economics and Finance (EIEF)

Massimo Morelli

Bocconi University

Date Written: June 2017

Abstract

A well functioning bureaucracy can promote prosperity, as Max Weber maintained. But when bureaucracy gets jammed - a Kafkian situation - it causes stagnation. We propose a dynamic theory of the interaction between legislation and the efficiency of bureaucracy. When bureaucracy is inefficient, the effects of politicians' legislative acts are hard to assess. Incompetent politicians thus have strong incentives of passing laws to acquire the reputation of skillful reformers. But a plethora of often contradictory laws can itself lead to a collapse in bureaucratic efficiency. This interaction can spawn both Weberian and Kafkian steady states. A temporary surge in political instability, which increases the likelihood of a premature end of the legislature, exerts pressure for reforms, or results in the appointment of short-lived technocratic governments can determine a permanent shift towards the nightmare Kafkian steady state. The aggregate experience of Italy in its transition from the so-called First to the Second Republic fits the narrative of the model quite well. Using micro-data for Italian MPs, we also provide evidence consistent with the claim that when political instability is high, politicians signal their competence through legislative activism, which leads to the overproduction of laws and norms.

Suggested Citation

Gratton, Gabriele and Guiso, Luigi and Michelacci, Claudio and Morelli, Massimo, From Weber to Kafka: Political Instability and the Rise of an Inefficient Bureaucracy (June 2017). CEPR Discussion Paper No. DP12081. Available at SSRN: https://ssrn.com/abstract=2984776

Gabriele Gratton (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Sallustiana 62
Rome, 00187
Italy
+39 06 4792 4858 (Phone)
+39 06 4792 4872 (Fax)

HOME PAGE: http://www.eief.it/faculty-visitors/faculty-a-z/luigi-guiso/

Claudio Michelacci

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Massimo Morelli

Bocconi University ( email )

Via Roentgen 1
Milan, 20136
Italy

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