Definition
- Excessive administrative costs
- Excessive administrative costs are when running an intervention costs more than the benefit it delivers, often because a tax-funded agency with no competitors has little pressure to cut costs.
Example
Can you think of an example of excessive administrative costs?
A grant scheme hands out £2 million a year but costs £3 million to run in staff, checks and paperwork. A firm with costs like that would lose customers to rivals; a government department has no rivals, so it carries on.
Test yourself
Can you name the four types of government failure the specifications list, and a fifth this page adds?