Why is the Cost of Bigger Bureaucratic Structures Not Taken Into Account?
By Isaiah Ritzmann
Published in June 2019
The amalgamation debate in Waterloo Region has sparked passionate arguments for and against combining our communities into one, big city. Despite the strength of both arguments no one is addressing a vital, underlying assumption: that bigger is better. The amalgamation side builds their case on the idea that bigger, more centralized government will be more efficient. Those against amalgamation question whether local democracy is a worthwhile price. The problem is that the shared, underlying assumption is an unwarranted one: bigger is only sometimes better. Sometimes bigger is actually worse. If combining cities leads to efficiencies and economies of scale, it can also result in increased cost, reduced efficiency and less democracy. Bigger is sometimes worse for cities because bigger is sometimes worse for all aspects of human society. The challenge, for cities as well as other human institutions, is looking not for the biggest but for the best size.
A Right Size for Everything
In the middle of the 20th century a group of decentralist thinkers felt alarmed at the inability of our culture to distinguish between sometimes and always when it comes to bigness. They began to promote the idea that to every aspect of human society there is an appropriate size or scale. One of these thinkers, Leopold Kohr, wrote in point-making exaggeration that “whenever something is wrong, something is too big.” Technically this wasn’t true; there are other sources of dysfunction including being too small. The point, however, stands: there is a right size to everything and in a world that exaggerates the value of big there must be prophets that announce that small is beautiful and too big can exact a steep price.
Many of these decentralists were inspired by the essay “On Being the Right Size” (1926) by the biologist J.B.S. Haldane. Haldane observed that in the natural world size was a critical factor in the systems organisms needed for survival. Flies, for example, have no need for lungs because they are small enough to absorb the oxygen they need from the atmosphere around them. Human beings, on the other hand, can’t get their oxygen by osmosis. Instead their size requires more complicated equipment to get oxygen to each cell. They are too big not to have lungs. Haldane, after citing additional examples of the importance of size in the natural world, argues the law of right size applies equally to the human world. “Just as their best size for every animal,” he writes, “so the same is true for every human institution.”
The amalgamators argue that consolidating services will lead to more savings. They suggest that bringing together the various services in Waterloo Region under one government roof will save money by reducing duplication, creating a more efficient economy of scale. The flaw in this argument is that economies of scale are not about bigness per se but about optimum size. Costs actually start rising when things get too big.
Why Costs Go Up with Size
Take the textbook example of a bakery. As more loaves of bread are sold the more a bakery can buy in bulk. Buying in bulk means less in invested per loaf sold, meaning profits rise. This is the bakery’s economy of scale. At a certain point the bakery needs to hire another baker to keep up with the demand. Some of the previous profits from each loaf of bread are now used for the new hire. This is the bakery’s diseconomy of scale. The simple truth is that as businesses increase production, costs only decline to a point. Beyond that costs rise again. To apply the economic scale argument to city governments and service efficiency is important. It is necessary. However in all these public discussions diseconomies of scale are conspicuously absent. Why?
A few decades ago the Urban Institute did a comprehensive study correlating data from a variety of American cities tracking per capita service costs based on city population. Their findings followed a classic economy of scale U curve. They found that optimal population for cities ranged between 50-100,000. They had the least expensive per capita service costs. Beyond that they discovered that costs began to rise. Here are their findings:
There are various reasons why costs go up with size and the costs are not all measurable in monetary terms. In her book The Death and Life of Great American Cities (1961), Jane Jacobs proposes inventively decentralizing the bulky bureaucracies of American cities. In her observations these institutions are both too big to be meaningfully coordinated and too big to understand the detail necessary to do their work. They become chaotic and incompetent not by accident or intention but by necessity of size. The extra costs of unnecessary overhead coordination can reach the point of absurdity. In his book Human Scale (1980) Kirkpatrick Sale cites a curious statistic that in large cities in the US for every five officers added to a police force eight less officers are out past the 10pm shift, probably resulting from added layers of oversight responsibilities. Increased police officers resulted in more management, more missed shifts, and new bureaucratic responsibilities. The result is more police but less police doing street work. One cannot simply nickel and dime all these extra costs of being super-sized but they remain costs nonetheless, costs are often ignored, and misunderstood.
Size Matters for Democracy
Those who favour our current two-tiered system suggest that democracy is threatened by amalgamation. This is usually presented as a moral argument, and it is that too. But I want to argue that democracy is also cost-effective long-term even when it seems more expensive short-term. Size matters in terms of democracy. If the geographical reach and population are too large democracy becomes less meaningful. Last year researchers from the University of Toronto did a series of studies on the amalgamation of Toronto twenty years after that fact. In these studies researchers concluded that “the Toronto experience pre- and post-amalgamation conclude that the quality of civic engagement and democratic participation has declined” and Toronto has simply become “too big to be locally responsive in the same way lower tiers had been in the past.” There seems to be a ‘in name only’ critical threshold for representative democracies; a scale exists in which meaningful representation is no longer possible.
Meaningful representation is a necessary part of good governance. In their study Size and Democracy (1973) Robert Dahl and Edward Tufte found that smaller units of government, all things considered, generally yield higher levels of political participation: more people get involved, understand the issues, and believe they can make a difference. Earlier this year Doug Craig pointed out this sense of political efficacy leads to observable efficiencies in Canadian municipalities relative to their more wasteful provincial and federal counterparts. Municipalities are “accountable and transparent and they have yearly balanced budgets” because “they are closest to the people.” In his estimation democratic representation is more meaningful, and more effective, at a smaller, more localized scale.
In his books Making Democracy Work (1993) and Bowling Alone (2000) the political scientist Robert Putman argues persuasively that good government requires a strong, engaged citizenry. In his studies of democracy in both Italy and the United States he showed that what mattered most was not the state of the economy, the ruling party, or other common factors usually blamed or praised for the performance of government institutions. What mattered most, surprisingly, was things like membership in choral societies or soccer leagues. Putman theorized that as people become involved in community organizations they develop the relationships, skill, and civic culture that then spill over into their relationship with government, with beneficial long-term results. Similar effects can be imagined with the type of civic engagement smaller municipal governments encourage and support by virtue of their size. The higher rates of political participation and sense of political efficacy that Dahl and Tufte point to in their study have similar effects to the choral societies and soccer clubs, but with proportionately greater effect.
Not All Upfront Costs are Wasteful
With all this is mind what if the extra costs of smaller municipalities, of duplication and efficiencies, were looked at not as waste but as investment? After all in other political matters, let alone personal life, not all upfront costs are seen as wasteful. Whether the upfront cost is building a bridge or paying tuition we all recognize that short-term costs can yield long-term benefits. If democracy is viewed as wasteful it is only because we have fallen into the habit of seeing it simply as a moral matter and have ignored its potential benefits to good government. It is time to take seriously what both intuition and research demonstrate: that smaller democracies make good fiscal sense.
The amalgamation debate misses an important point – there is such a thing as being too big. Those for consolidating the region do not acknowledge limits to economies of scale and their opponents marshal a variety of arguments none of which, while valuable in themselves, question the dangers of big per se.
What we need are cities and governments and economies that are neither too big nor too small but just right. What we need is to remember Haldane’s counsel: “Just as their best size for every animal so the same is true for every human institution.”
