William A. Niskanen's (1971, 1975) theory of bureaucracy has been a source of much debate and research.^ The theory assumes that utility-maximizing bureaucrats will seek to maximize their agency's discretionary budget. A central implication of this theory is that bureaus will supply output inefficiently or in quantities greater than that desired by citizens.

The authors test Niskanen's hypothesis by examining the decision of cities to contract out for services. Their premise is that city managers fit the characteristics of the greedy bureaucrat Niskanen describes. If his theory is valid, then city managers should be expected to avoid contracting out because it would expose their discretionary budget and make it more difficult to use for their own purposes.