Monday, June 23, 2014

Shakman Decree

A piece of local news in Chicago is worthy of wider attention. As reported on the front page of the Chicago Tribune June 16, A federal judge lifted the 42 year-old "Shakman decree" covering city hiring.

Back in the day, city employees from garbage collectors on up were hired and promoted for political work. Literally, garbage collectors had to bring in campaign cash or get fired.  Mike Shakman and a group of other lawyers sued the city in 1969, and doggedly stayed after the city in scandal after scandal since.

Why do you care? An enduring puzzle to me, as a macroeconomist, and hence not particularly expert on political questions, is how do governments ever become clean and competent, or stay that way? We economists tend to throw up our hands, say "public choice" or "rent-seeking" and then assume regulators will always be captured and governments always corrupt. But that's empirically not true. Some governments and government institutions are remarkably honest and efficient, at least by libertarian economists' cynical expectations. How do they do it? What's the machinery? How do you fight corruption? This is one concrete example worth studying of just such machinery.

Quoting Shakman,
it is realistic to expect and recognize that the city has put in place the systems and the people and the commitment to clean up its act. 
And the judge
U.S. Magistrate Judge Sidney Schenkier declared the city in “substantial compliance” with a set of rules, procedures and internal policing requirements to keep politics out of hiring.
The judge noted that Chicago has put in place procedures governing hiring, firing, promotions, discipline, overtime and the like that are designed to remove the influence of politics from those decisions. It also has set up an internal policing process, under the auspices of the Department of Human Resources and the inspector general's office.
So it is possible to set up bureaucracy to police bureaucracy -- if the people at the top (Emanuel) find it in their best interests to do so.

It's not a magic bullet, and requires perserverance:
“None of us think there will never be another example of patronage hiring in the city or public employment influenced by patronage,” Shakman said. “That's unrealistic to expect,...
U.S. Magistrate Judge Sidney Schenkier ..cautioned that “substantial compliance does not mean the city has achieved a state of perfection.”

Killing off patronage is “not a revolutionary process, but an evolutionary one — it happens over time,” said Schenkier, the seventh judge to preside over the case.
Part of the machinery is dedicated lawyers like Shakman, who bring about such important change, at not inconsiderable cost. Fighting the machine for 42 years is not good career advice for a Chicago lawyer. Another part of the machinery is our local newspapers, who have pretty much supported the process all along. A sadder part of the machinery is Federal law. Local corruption is most often fought by Federal lawsuits and Federal prosecutions.  That leaves open the question, how do we fight Federal corruption?

Disclosure: Mike is a friend, neighbor, and fellow glider pilot, so I'm also personally glad to see his efforts recognized here and by a University of Chicago Distinguished Alumnus Award.


  1. Dunno Professor.... call me cynical, but there is this tidbit in the piece you mention:
    "Richard M. Daley was pushing to end the consent decree when a federal criminal probe of hiring in 2005 exposed a widespread system of subverting Shakman rules. Some of Daley's top lieutenants were convicted of rigging city hiring to reward political foot soldiers."

    This is - even as recently as 8 to 9 years ago, Chicago politicos subverted the Shakman rule and did not care. Rahm Emmanuel may protest "things are different now", but are they really, only 9 years after? Did Chicago pols become squeaky clean and Swiss-like honest politicians in such a short time? Sorry if I very very much doubt that.

    You ask how do bureaucracies become honest and clean? I do not have an Econ answer, unfortunately - I have a cultural answer: you have an honest bureaucracy if for centuries the rulers enforced it, like in Prussia or Switzerland or Sweden, so that it almost went into the DNA of the people to have a good, honest, functioning bureaucracy. It takes the example of generations to build this. Which is why I am very skeptical of the Chicago case.
    My pessimistic prediction: give it a few years, with new mayors down the road, and Chicago will revert to the same games as before the Shakman rule.

    As for your last question you pose: how to fight Federal corruption? That's the classic case of "who monitors the monitor" (there is a JET paper with that title, I think). You give a partial answer in your other post, on FERC: the electorate has to do it.
    And again, Manfred The Cynic tells you there: the electorate will not do it, because it is too comfy. So - how do you monitor the monitor? You can't, unless honesty is in your DNA.
    I know, I know, not much of an Econ answer, but I cannot come up with anything better.

  2. I used to do economics/finance research in rational & behavioral asset pricing, but a few years ago my interest shifted (to psychoanalysis, neuroscience, …) and I left academia last year.
    What I have realized is that economics does not appreciate the process of "creation of meaning and purpose" in life. This is believed to take place in the emotional area of our brain/psyche which is essentially regarded (by scientists/economists) as the "irrational" part.
    In your example, what Shakman has done may appear to be an irrational act by an outside observer, and yet, for him this is probably the most meaningful thing that he has done with his life. Is this replicable? Can we use a mechanism to induce such behaviors from more citizens?
    I "fee" the answer is yes! :)

  3. "Some governments and government institutions are remarkably honest and efficient, at least by libertarian economists' cynical expectations."

    Most of those are replete with career government officials - law enforcement, military service, court system - where the individual government official can focus on long term objectives without offending the often short term thinking electorate.

    Libertarian economists are cynical of government because they believe in term limits and decry corruption. A politician that is subject to term limits is going to be corrupt.

  4. I agree with Manfred (and I suspect many others) that it was too soon to lift the decree. (And I don't know how a federal judge could think otherwise.)

    But I remain grateful for all the good the decree did during the 42 years it was in effect, and hope the example provided by Mr. Shakman will continue to inspire others to fight corruption. Kudos to you, sir!

  5. Go to the base question. How do libertarian ideas lead to good people in gov't? They doesn't, which is its fundamental flaw. Now Franklins, Washingtons, Hamiltons or Lincolns or FDRs or Trumans will arise from libertarian ideas


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