Friday, October 31, 2008

Efficiency of bureaucracy

Under some conditions efficiency can be impossible to achieve. For example in an article by Dr Anthony Berglas one can find the surprising fact that costs for maintaining the australian tax office hasn't changed in terms of percent of the GDP per year over the last 50 years. Sure the tax office nowadays have more computer systems. This automatization has however just increased the complexity of the tax process, not decreased the amount of human effort. 50 years ago the regulations governing taxation was one order of magnitude shorter. Same seems to have happened with banking.

I find it good to know that even bureaucracy cant grow without bounds. For a tax office budget, anything below 2% of GDP seems to be acceptable to society, and the organization will try to grow until that limit. Growing would mean adding complexity to the bureaucracy, and hence also complexity is limited. Without a limit on the complexity or too much money to spend, there will be real big failures ahead.