PROGRAM CHANGE, REVENUE EFFECTS, AND THE PATHOLOGY OF IMPROVED PERFORMANCE

In certain circumstances, improved performance in government programs can actually lead to declines in program impacts. Ironically, increases in efficiency do not invariably lead to increases in effectiveness. Regulatory programs are especially prone to this pathology of improved performance, as the targets of regulatory actions may increase avoidance tactics of program efficiency increases. Declines in effectiveness may not be discovered until revenues from the regulatory activities decline, because of weaknesses of internal monitoring systems in local government. Data on the licensing of businesses in Chicago are presented that illustrate the phenomena.