DP12081 From Weber to Kafka: Political Instability and the Rise of an Inefficient Bureaucracy
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.
