Homo sapiens equal ‘Homo administrativus’
Throughout human history, every time individuals come together in large numbers, sooner or later management structures were developed to sustainably manage the just created societies – the Ancient Egyptians and Greeks are early examples. In modern times, these administrative frameworks have been called public administrations, or bureaucracies. They oversee several aspects of the intricate relations between public and private modern states’ stakeholders – e.g., institutions, firms, citizens – to finally reach the highest society’s development. Therefore, public administration is somehow an implication of human aggregation. As Yuval Noah Harari claims, this organizational capability has been reaching unprecedented complexity in recent times and it is most likely the biggest difference between human and animal groups. But why is so important to establish an effective bureaucracy?
While we look at public administration specifically in this article, the problems and proposed solutions can be applied to any form of complex systems, including social services, charities, and companies.
Powerful (and rich) countries do bureaucracy best
When two or more human societies confront each other – militarily, economically, and/or culturally – the better organized is often the one triumphing. For example, in the 1920s, the British Empire governed more than 1/4 of the world and it did so also thanks to its superior organization. However, it is not as straightforward to develop and maintain an efficacious bureaucratic system. There is an evident trade-off between having a rigid structure capable of ensuring predictability, and a flexible organization proficient in guaranteeing the best ad hoc solutions every time.
Indeed, to start a new company, to invest in an emerging sector’s stocks, or to simply buy a house, it is necessary to have defined instructions on how to do that in a legal abiding way. It is, however, also necessary to maintain a degree of a system’s malleability to avoid economic stalemates. If this is not done, then there is the risk of trapping society in a Weberian iron cage of bureaucratic rules or of returning it to a Hobbesian state of nature. Fortunately, nowadays, neither extreme scenarios have occurred – yet – but it can be argued that, in some countries, Weber’s scenario is not so far from reality. Indeed, it is often preferred to ensure the calculability of results for every possible scenario rather than high discretion to each case administered. This is both the major advantage and weakness of modern-day public administrations. However, the extreme rigidity of public administration gives birth to two main dysfunctions:
Let us take a brief look to these shortcomings and how solutions have been designed in the past.
Modern public administration (usually) equate to inefficient public services
Depersonalization of public officials leads to a drop in motivation in employees, as they see their job tasks as monotonous and detached. Soon, they lose the will of providing the public good to the best of their capabilities. This erodes citizens’ trust in public institutions at large.
Ironically, the operative rigidity in managing individual cases often produces slowness in task accomplishment and a general lack of transparency. It can be extreme in the forms of corruption, absenteeism, and opportunism from the public officials, which then reinforce citizens’ resentment. In sum, the mean for delivering public goods can soon become the end itself, as public administration’s workers become interested in gaining only their highest personal benefits without incurring in any costs. This can ultimately pervade in the mainstream culture of managing public interest.
To solve such issues, several approaches have been developed. One of the most recent and prominent is the New Public Management theory. It recommends monitoring and evaluating closely the public servants’ performance to achieve the delivery of citizens’ needs. For example, introduction of customer-orientation mechanisms, decentralized organization schemes, or balanced scorecard which ultimately convert public administration into a much more ‘business-like’ institution.
But there are many challenges to this school of thought. The most prominent are Principal-agent problems. When one party – principal – hires another – agent – to carry out tasks without their supervision, there is no possibility to know exactly if the hired is delivering at its best due to lack of perfect information. This happens at least two times in public administration:
- Between citizens – principal – and public administrations – agents; and
- Between public supervisors – principal – and public subordinates – agents.
In both cases, the substantial information asymmetry implies large expenditures of economic resources – i.e., x-inefficiency cost – into supervising agents for ensuring high performance and productivity. Italy, Nigeria, Philippines are examples of countries with large x-inefficiency costs due to their public administrations’ structural issues – e.g., complex regulations, lengthy settlement of legal disputes. These government failures need to be fixed because they hinder countries’ entrepreneurial environment, national growth, national image, competitiveness in international arenas, and general citizens’ wellbeing.
Blockchain technology equates to the game-changer in managing bureaucracy
Many solutions have been proposed to reduce the extraordinary costs and perceived unreliability of public administrations. However, they were mostly palliative. To structurally solve the principal-agent issue, it is necessary to reconsider the ‘architecture’ of bureaucracies. We believe the introduction of blockchain technology can bring a breath of fresh air. This emerging tech is the underlying infrastructure of cryptocurrencies and its use can modify the configuration of incentives, which every agent will face in taking decisions.
Agents’ opportunity cost of freeriding and not delivering their tasks on time will be increased and so, it will be less appealing for civil servants and public supervisors to not work hard. Therefore, we avoid any direct changes in the workforce structure of public administration, but indirect modifications of employees’ attitudes.
To visualize better the final outcome, the blockchain platform used by bureaucracies will likely be in the form of a black box aimed at registering every single action a civil servant takes and making them available, only to those with authorization – agents – and otherwise encrypted. In this case, blockchain is not used simply as a ledger for storing data, but as an instrument to better manage a rigid and opaque structure. It facilitates structural modifications for social relationships. Its implications are:
- Increasing efficiency for almost every task currently done, as the current financial incentive scheme will be more precise to reward who really deserve rewards;
- Increasing fairness and equity in between agents, as there will be less room for freeriding without being spotted;
- Increasing security and privacy, as the already digital documents will be saved and encrypted on a blockchain more resilient than a conventional database. There is also room for making the remaining paperwork completely digital and upload them on the platform;
- Increasing the citizens’ ability to monitor and report if a specific civil servant or department is not delivering efficaciously.
Cutting-edge does not (necessarily) equate to empty talk
When talking about new emerging technologies, public opinion divides into super hyped supporters and harsh skeptics. Blockchain is no exception. Nevertheless, to innovate, the best approach is to avoid prejudices and be opened to carefully introduce changes one step at a time. Learning from best practices around the globe can also help and reduce the risk of failure. Unfortunately, there are still no specific case-studies that tackle the transparency issue in this manner, as far as we know. However, it is possible to make an analogy with the system used by the Estonian government to manage the national health service. Indeed, by 2016, “the Estonian E-Health Foundation launched a development project aimed at safeguarding patient health records using blockchain technology in archiving related activity logs”. As a result, the Estonian health care system has experienced an increase in management efficiency thanks to the blockchain’s values of privacy, integrity, and transparency.
Current technical limits equate to more innovation ahead
Blockchain technology is not flawless. It has different limitations, which hinders its widespread use. Namely, the problem of its scalability in terms of speed transaction, energy intensity, and users’ knowledge barrier. The Estonian case-study shows that public services and blockchain technology can work well together, but we must acknowledge its specificities. Indeed, Estonia has a very small population – almost 1/5 of Singaporean total population – which has a very high technological penetration – in every life realm. This inevitably raises some concerns on the replicability of its successes to other contexts, but solutions to these issues are already coming to life. Hyperledger, Ethereum, Lightning Network, EOS.IO are just few projects/companies, which are consolidating different and feasible innovations to cope with scalability issues.
Building trust equates to enhancing society
“I’m not upset that you lied to me, I’m upset that from now on I can’t believe you.”
F. Nietzsche
Trust in between humans is crucial, but why? Because, as the great XIXth century philosopher beautifully put it, future cooperation and progress between society’s stakeholders will be irredeemably undermined if trust is eroded. The innovative approach we have discussed here can foster or repair trust relationship in between principals and agents.
It can be applied to public administration, but also to any other form of management in which people’s relationships are key. A counterargument to this policy could be that even if principals were empowered, they would not monitor anyway agents’ actions. But, if this would be the case, the overall policy’s outcome should not vary much because the threat of being easily reported for not performing – as blockchain ensures transparency – is already an effective threat for working hard. And this is what makes a society thrives.
This article was written by Davide Brugola (e0404068@u.nus.edu), with editorial inputs by Rovik Robert.
