While persuasive, there are some limitations to this model. First, the economic theories tend to focus on formal institutions (e.g., official wages, as opposed to career possibilities, as an incentive; formal auditing, as opposed to social/peer pressure, as a monitoring mechanism).'" Second, crude economic theories may draw our attention disproportionately to the "minimal state" agenda with its accompanying mantra of "reduce bureaucratic discretion". Third, the whole rationale of the principal-agent theory breaks down if we accept that part of the bureaucracy's functions is to protect long-term public interests by not being fully responsive to particular short-term concerns of the government of the day.<sup>1</sup> Finally, unlike profit-seeking private firms that presumably operate with a clear ownership pattern and an unambiguous line of accountability, public bureaucracies usually operate under supervision from multiple principals.1<sup>2</sup> In sum, _the principal-agent perspective_ emphasizes:

1. Monetary incentives;

2. Mechanisms for monitoring contracts; and 3. Clarity of agency mission.

Critics complain that such economic theories offer relatively little in the way of explanations for non-opportunistic behavior in the public bureaucracy.<sup>3</sup> Such seemingly selfless actions are perplexing within the principal-agent perspective. However, the perspective is also limited by its focus on performance that can be observed and measured. Some other tasks require such a high level of discretion with virtually no possibility of effective monitoring that the principal cannot rely on economic incentives. Other non-monetary incentives, such as identification with the agency's mission or with the agency itself as well as esprit de corps, must be considered.

_The principled-agent perspective_ purports to offer more empirically accurate account of organizational dynamics and bureaucratic behavior, but at the same time its analytical power is somewhat more limited than that of the principal-agent theories. Leadership is seen to be key'<sup>4</sup> , as is "a strong sense of mission, effective managerial practice, and high expectations about employee performance".,<sup>5</sup> The perspective builds on the sociological traditions that have tended to see organization as an organic entity and have emphasized '° See Heyman (1988) and Miller (1994).

> 3' A large-scale survey-based study of senior bureaucrats and politicians in five western countries found that "policymaking by bureaucrats is characterized by continuity, stability, and predictability" in clear distinction to the views of politicians who see themselves as "advocates, partisans, and tribunes" (Aberbach, Putnam, and Rockman, 1981, p. 25 6-7).

12 See Moe (1984), Moe (1990), Simon (1991), and Fukuyama (1995).

1 3 They are "far better at explaining why bureaucrats shirk, subvert, or steal than they are at explaining why bureaucrats behave as 'principled agents' - workers who do not shirk, subvert, or steal on the job even when the pecuniary and other tangible incentives to refrain from these behaviors are weak or nonexistent" (Dilulio, 1994, p. 277). Herbert Simon also provides a critique of the principal-agent variant labeled transactions cost analysis (Simon 1991).

14 Dilulio (1994). Other influential organization theorists including Selznick (1957) and Wilson (1989) have also underscored critical roles of leadership in accounting for organizational performance. IS See Grindle (1997, p.491).

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