This chapter uses the transactions approach to explain the characteristic features of the merit civil service. These features have defined the administrator's conditions of employment in many countries during this century.

The conclusions reached in this chapter will be controversial. It is common for students of public bureaucracy to suggest that its institutional arrangements undermine incentives for bureaucratic efficiency, responsiveness, and accountability. This leaves us at a loss to explain the persistent and widespread use of these arrangements. Part of the problem is that few critics are explicit about the problems these institutional arrangements have been designed to solve: “What” is public bureaucracy supposed to be efficient at doing, and “to whom” is it supposed to be responsive and accountable? It is difficult to believe that institutional arrangements that are so common and persistent are a clearly inefficient way of addressing the problems faced by the legislators who continue to use them. It is more likely that these problems have not been correctly identified.

The transactions approach suggests that civil service arrangements survive because they help enacting legislators solve the transaction problems they face, especially commitment and agency problems. In addressing the agency problem, the enacting legislature will look for arrangements that promote the selection of administrators who have the incentives to administer legislation in the way the enacting legislature intended. In addressing the commitment problem, the enacting legislature will also want administrative arrangements that explicitly limit the extent to which future legislatures can control administrative outcomes.