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DAWN OF A WORKING GOVERNMENT©

‘The Blood Moon Paper’

“Survival Dictates Adaptation”

Nov. 11, 2018

_____

_____

Robert William Crawford


Edited by D. Douglas Titus, J.D.
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Dedicated to the Memory

Of

Charles Wolf, Jr.

And

D. Douglas Titus

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Dawn of a Working Government©

A Means of Introducing Efficiency and Tax Reduction in Representative Governments


Without Compromising Public Services

Part One of Two

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“…The power of vested interests is vastly exaggerated compared with the


encroachment of ideas.” - John Maynard Keynes

The purpose of Part One of this paper is to state the problem, provide historic context, and to present
a framework of a solution. Part Two presents a politically realistic and practical execution plan.

Information technology revolutionized the world in the private sector. That same revolution may
now occur within government, to empower us to realize our potential.
The majority of problems are symptoms of root issues. The purpose of this paper is to address root
issues of government dysfunction - to not just identify the problems - but present practical
solutions.
Three basic factors present unprecedented opportunity to revolutionize government: 1)
information technology; 2) improved quality and standards of accounting information; and 3) a
new way to use things from the world of business that make it work, which we may now apply to
government.
The original purpose of this work was to develop practical, non-partisan ideas to address root
problems of government. Root problems of any system are actually root inefficiencies. This is to
present ideas that are expected to make government dramatically more efficient. The result of this
work is an opportunity to reduce taxes without a reduction in government services.
A system overview and historic context may allow us to see the big picture more clearly.

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The Paradox of Government. If all things ultimately arrive at a point of true contradiction, or
paradox (Graham Priest, Niels Bohr, Pierre de Fermat, Ludwig Wittgenstein), government is no
exception.
At its core function, representative government seeks to provide people freedom from
violations of their person and property by establishing a just rule of law (Aroney).
At the same time, laws - by definition - are restrictions of freedom (Pettit). A resulting
question is: “what are practical ways that may efficiently resolve this paradox of government?” To
which we must add, “how may we efficiently deliver the expanded definition of government that
now includes the many goods and services beyond the original design of government?”
The Constitution’s Answer to the Paradox. One answer to the paradox is the U.S. Constitution.
The Constitution was based on ideas and practical means to address the most basic challenge of
the human experience: the tendency of people to act in self-interest (Powell).
The goal of the Framers of the Constitution was to create an enduring foundation of
remedies to address self-interest and other basic issues and challenges (Powell) of governance.
When we listen to their words today, the Framers speak to us across time. They remind us that,
unless we defend the basic ideas of the Constitution, and maintain the roof over the temple of
Justice we have inherited, our rights will erode and be taken from us (Madison).
The Constitution provided a way out of the paradox of government for the people of the
United States. People in other countries took notice of the example - more than 100 countries have
copied our Constitution since 1776.
The Constitution provides a brilliant framework to address basic issues of governance and
rights. The question then becomes, “how may government efficiently deliver goods and services
which have expanded in proportion to industrialization?” Ideas are only as good as their execution.
An Important Idea. One of the most important - and overlooked - ideas in the history of economics
is that in the most basic terms, business and government have something important in common:
they both try to deliver goods and/or services (Charles Wolf, Jr.).
The central message of Wolf’s genius landmark work is that governments and markets
have not been recognized for having much in common. But once we understand the similarities
between business and government, we may then use the hard-won ideas that we’ve developed to
make business work, and apply those ideas to government.
Wolf’s profound observation gives us a starting point to apply ideas from business, together
with creativity, to make critically-important changes to government – to right the rapidly sinking
ship of state. According to most experts in academia, our survival depends on it - most economists
have little faith in the sustainability of complex systems. The discipline of economics, however,
when effectively applied, has demonstrated great power to solve complex problems.

A solution to the big problem, the survival of our economic system - as with any problem - requires
that we begin with faith that solutions exist. By combining faith in the existence of a solution to

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root problems, effective analysis, planning, and politically realistic execution - together with hard
work - the discipline of economics has the potential to pay all of us extraordinary dividends
(Galbraith).

Business v. Government
Business. After the collapse of a government, in the midst of civil war, even within a state of total
anarchy, business continues to function (Schweickart). It has to: in order to survive and meet our
needs, we must exchange goods and services (Schweickart).
Few of us would claim the world of business to be perfect. Given that we must meet our
needs, however, and that business must continue to function to meet those needs, we have created
five basic ways to keep business working:

1). Information Access; Price information exists for both parties to a transaction, open
information relating to public companies exists, as do objective means which allow us to determine
the point at which a business fails, for example: when it runs out of money (Morris, Schindehutte).
2). Standards of Information. We have reasonable accounting standards such as corporate
GAAP (Generally Accepted Accounting Principles) which we have the privilege to debate and
improve upon (Galbraith).
3). Fail-safe Systems. We have created a system to assure that business continues to
function even when it fails: the bankruptcy system (Galbraith).
4). Performance Benchmarks. Business uses performance standards and metrics; and most
important of all, there is personal accountability.
5). Personal Accountability (Galbraith). People are fired for incompetence and/or
negligence; public accountants lose their license.
Government. The five pillars which support business do not exist in government (Galbraith). As
any competent economist knows, any system without information access, standards of
information, a fail-safe system, performance benchmarks, and personal accountability, will
become increasingly less efficient and ultimately fail (Galbraith). Most economists who have
performed post-mortems on the Soviet Union concur (Galbraith). They will explain that, unless
we take corrective action, we are next (Galbraith). History shows that over time, every government
has failed (Galbraith). Technology now presents an opportunity for our survival.
Background of Government Dysfunction. At the time our country was created, it was the dawn of
industrialization. Our society was almost entirely agrarian, and without exception, the Framers of
our Constitution were businesspeople who understood what is required for any economic system
to survive (Madison). Over time, industrialization had three basic effects on government
dysfunction: the concentration of capital; complexity; and the creation of the professional
bureaucrat (Galbraith). The effects of these changes over time were obscured by the rapid pace of
industrialization and historic events (Galbraith).
The Concentration of Capital. Industrialization required the concentration of capital in order to
fund large-scale projects, like canals, railways and mining. To implement these projects, the
interests they represented and their concentrated capital increasingly influenced the political

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process (Piketty). Because of the progression of industrialization, proportionate increases in


concentrated capital influenced the political process more than the original constitutional design
of a representative Republic (Madison).
This occurred invisibly over the course of time (Galbraith, Wasserstein). When those who
control substantial resources desire to influence public employees immune from the law, they may
work against public interest.

Concentrated capital, however, may work in favor of public interest


when those who control substantial resources apply it to repair the flaws of
government at a root level.
By addressing root problems, benevolent capital has the power to prevent
countless acts of malevolent influence.
Complexity. At the same time, as industrialization evolved, it compounded the complexity of
civilization (Galbraith). Increasing industrialization created a kind of fog of complexity within
which it became easier for public employees to hide acts of self-interest, acts on behalf of malicious
capital, and thus gain power and control over the people they were intended to serve (Galbraith).
This was done in four basic ways:
1). The creation of immunity from law through public employee union contracts, contrary
to the Constitutional prohibition of “no special privileges or immunities (Galbraith);”
2). The hiding of public accounting records (Galbraith);
3). An absence of accounting standards, which allowed government employees to further
hide and obscure financial transactions (Galbraith); and
4). The creation and expansion of the administrative court system (Galbraith).
Over time - and again - within the increasing fog of industrial and social complexity, two factors
had the practical effect of voiding the power of the Constitution - public employee immunities,
and the administrative court system (Galbraith):

1). Immunity from Law. If people in positions of authority, specifically, people in positions
of public service, are immune from the law, do we live under the rule of law (Galbraith)? Can the
Supreme Law, the Constitution, have any effect (Posner)? Public employee immunities render the
Constitution effectively powerless (Posner). Public employee immunity is thus a central cancer of
the Republic (Posner).

2). The Administrative Court System. Dedicated scholars will correctly argue that the
administrative court system technically began with railroad-related issues in the latter 1800’s
(Posner). However, the practical creation, expansion and widespread impact of the administrative
court system began because of error and historic circumstance in 1946 (Posner).

In 1936, the New Deal, and its expansion of government programs was proposed
(Abraham). No one knew how to implement it, so a 10-year study began (Abraham). It was called

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the Administrative Procedures Act report (Abraham). In the APA report, no less than the architect
of the new deal, F.D.R., stated to the authors (Abraham; McNollgast) (paraphrase):

‘If you implement the proposed APA, you are allowing each agency to promulgate,
execute, and adjudicate law through their own administrative courts, within each
executive branch. This is a violation of the most basic principal this country was
founded upon: the separate powers of government. The definition of tyranny is the
combined powers of government.’

The report, which began in 1936, was completed immediately after the end of WWII in
1946 (McNollgast). In historic terms, it is likely that at the end of the war, the people who created
and were responsible for approving the APA may have been in a celebratory mood, and simply
wanted to return to home, life, and work. Despite dire warnings (McNollgast) from the creator of
the new deal, the APA was put into effect by the federal government (McNollgast). Lower levels
of government saw the federal government creating and expanding the administrative court
system, and created their own, on an ever-expanding basis (McNollgast).

Administrative court proceedings, under each respective executive branch, have no judicial
oversight (McCubbins, Noll, & Weingast). Administrative judges often have no training in law
(McCubbins, et al.), and yet in some cases determine if people live or die. A critically flawed - and
unconstitutional - rule public employees have created for the administrative court system, is that
in order to make a constitutional argument, one must first exhaust the administrative process
(McCubbins, et al.).

Obviously, few people can afford the time, energy, and expense of being able to assert their
constitutional rights after exhausting all the requirements of an inherently biased administrative
court system (McCubbins, et al.) with no legitimate judicial authority. The practical effect of the
exhaustion rule is that the administrative court system is now a way that public employees, immune
from law, have managed to deprive citizens of their Constitutional rights (McCubbins, et al.).

Nowhere in the Constitution may one find a stipulation requiring us to be financially and
spiritually exhausted or depleted before we may assert our constitutional rights, which were paid
for with the ultimate sacrifice: the lives of millions of people who suffered agonizing deaths.

Immunities and administrative courts created a rule of government (Davis). The Constitution was
designed to prevent both violations of law (Skowronek), first with the constitutional protection
that “there shall be no special privileges or immunities;” and second, because of the most basic
design and fundamental architecture of the Constitution, which created separate powers of
government.
Asymmetric Information. In addition to these first two results of complexity - public employee
immunities and the administrative court system - having the effect of largely voiding the power of
the Constitution and the rule of law, the third most significant effect of complexity is what
economists call “asymmetric information” (Akerlof).

Bedrock economic theory tells us that any system made of two groups of people will stop
functioning when one group doesn’t have information about how the system is working. In other

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words, when two parts of a single system are not sharing information, or don’t have equal access
to information, that system stops working. An example of asymmetry information is the fact that
public employees now have unlimited information on the people they were intended to serve. Yet
many public servants often refuse to provide even their first name to their employers, the public,
assuring a total absence of accountability (Wolf).

Any economic system, whether called a business or a government, is a system (Wolf)


which relies on accurate information (Wolf). Without accurate information, any system becomes
less and less efficient until it fails by any objective measure (Wolf).

If depriving citizens their constitutional right to live under a rule of law is the second cancer
of the government, inaccurate information is the third most dangerous consequence of public
employee immunity.

The fact that inaccurate government information exists because of public employee
immunity is the reason immunity itself is the first and central cancer of government. Immunity
allows public employees to misrepresent critical information and hide the money (Wolf). Again,
the abuse of power is the abuse of information and money (Wolf). Asymmetric information is the
product of public employee immunities and the professional bureaucrat.

The Professional Bureaucrat. The Framers of our Constitution and creators of our country were
people with considerable practical business experience (Mansbridge). They understood that
government must function as a business (Mansbridge), and could not operate at a continuous loss.
Thus, the systems of government the Framers created, and related laws, were based on practical
reality (Mansbridge).

Over time, however, the increased complexity of society resulted in the creation of the
professional bureaucrat without real-world business experience (Mansbridge, Galbraith).
Economists who have equally limited business experience frequently advise government decision
makers (Galbraith). Thus, government decisions are often disconnected from practical experience
and a realistic understanding of the world of business required to support the existence of
government (Mansbridge, Galbriath).
The disconnect of the professional bureaucrat from the reality of the critical importance of
accurate and symmetrical information - to ensure our collective survival - compounds and
perpetuates the dysfunction of government.
The Theoretical Solution. The abuse of power is the abuse of information and money (Smith),
which has been made possible by public employee immunities from law (Smith). Both abuses now
exist in government (Smith). And both may be eliminated.
Transparency. Never before in history has the means existed for total transparency and
accountability (Galbraith), as a remedy to the increased complexity of government and the
invisibly evolving threats to our constitutional Republic (Galbraith).
History will likely regard with great curiosity how slow we were to recognize one
technological solution to these problems - a solution which has now existed for over twenty years
- The internet. This is an unprecedented social and political opportunity for efficient governance.

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Steve Ballmer’s USAFacts project, which posts government accounting information


online, is a critical component of the Dawn of a Working Government. The accuracy of the source
data, however, is equally critical. The accuracy of government accounting is proportionate to it’s
value to the public.
Truth in Accounting. Government accounting is commonly referred to by experts in the
field as “legalized fraud,” and “political math.” There are five basic reasons for this, according
Sheila Weinberg of the Truth in Accounting organization:
1) Political Math Deceives. Dishonest accounting allows politicians to achieve short-term
political goals by tricking the public. The real costs to the public of short-term political
goals are hidden, so the public does not know the true costs and expenses.

2) Government Accounting Standards—Conflicts of Interest. The people who set


government accounting standards at the Government Accounting Standards Board
(GASB) directly and indirectly work for the government. Their self-interests determine
what is or is not reported.

3) Public Mistrust = Public Disengagement. Government GASB accounting standards


have produced misleading government financial information resulting in public
cynicism, mistrust of government officials, and public withdrawal from the political
process.

4) Both Sets of Government Books are Deceptive. Government operates with two sets of
books, one set is budget, which is prepared using politicians’ version of cash-basis
accounting, and the other set is the financial reports.

Financial reports are prepared using GASB’s version of GAAP, which has allowed
governments to hide their true liabilities and costs. Neither set of books – budget or
financial reports - provide accurate accounting.

5) Government Auditors—A Second Layer of Conflict of Interest. The government uses


outside auditors, who are supposed to issue an independent opinion. They are,
however, employed by the government. The fact that auditors are employed by the
government creates conflicts of interest with both:

A). The creation of government accounting standards; and

B). The audits performed by government-paid auditors.

These are two massive barriers to transparency which prevent the public from
understanding where their money is, and how it is being used.
The importance of accurate government accounting increases with the greatly expanded
scope of government services. As government services have expanded, government spending now
takes up a much greater part of our total economy.

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Because of how much of our total economy is now government spending, accurate
government accounting becomes more important by the day. To quote the Association of
Government Accountants (AGA):
“AGA believes that it is difficult to overstate how efficient reporting of
government financial information contributes to a healthy democracy.
Without accurate fiscal information, delivered regularly, in an easily
understandable format, citizens lack the knowledge they need to interact
with—and cast informed votes for—their leaders.
In this regard, a lack of government accountability and transparency
undermines democracy and gives rise to cynicism and mistrust.”
New Zealand has set an example of legitimate government accounting for the world,
by having a single set of outside auditors for both government and business. Their
accounting system is based on high standards of accounting practice. It is likely that
the strength and stability of New Zealand’s economy is not a coincidence.
The United States would benefit greatly from the example of discipline, honesty,
and professionalism of New Zealand’s accountants and government.
The Execution of Ideas by Example. Guns, germs and steel have significantly changed the course
of history (Diamond), and resulted in the imposition of ideas and will on other people and cultures.
History, however, shows us that the most effective and lasting means of implementing ideas is by
example (Drucker).
When people and cultures see how they may benefit from an idea, history shows that people
and societies often put those ideas into practice themselves - at their own effort and expense
(Howkins). Such is the basis of this proposal - to create an example of change by the execution of
one example. An ideal example is a large and dysfunctional state agency, Washington State’s
Department of Social and Health Services, by the following means:
1). Removal of the Checkbook. The accounting function of government may be
managed by a government-independent outside accounting firm employing CPAs, with the
accounting firm assigned to the job rotating between top 10 firms every 3-5 years. This would be
the equivalent of appointing a trustee to manage a business bankruptcy (Deming).
2). CPAs. The administration of public funds through the rotation of top-10 CPA firms
is an alternative to unaccountable and unlicensed government bookkeepers, who are promoted
when they refuse to disclose financial information, and who create their own accounting systems
to obscure the disposition of public funds (Galbraith);
3) Conversion to Corporate GAAP Equivalence. Government agencies use their own
budgeting rules, and the fraudulent accounting standards set by GASB to obscure the use of public
funds. Thus, the first job of outside government-independent CPAs is to convert the budget and

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books to an honest corporate GAAP equivalent for government, such as that proposed by the Truth
in Accounting organization, and their counterparts.
4). Transparency. Once accurate information is available from licensed and objective
CPAs, an accurate accounting of the public’s money may be posted on the internet with five-
element detail of each line item expense: who, what, when, where, and why.
5). Accountability. Reclaiming control of public funds will mean reclaiming control
of public accountability. Elements of certain public employee union agreements, which allow
public employees to be immune from personal responsibility and the law, significantly detract
from the legitimate purpose and credibility, of organized labor. Public awareness of union support
of the removal of immunities may also enhance public image of organized labor.
With regained control of public funds, public employee unions may be positively
encouraged to eliminate public employee immunities.
A bedrock idea of the Constitution, accountability, may be restored by eliminating
immunities from public employee contracts.
6) Performance Standards. Agencies must have objectively verifiable performance
standards (Wolf) which may be presented with public accounting reports.
The Practical Solution and the Example.
Proactive Strategy. While potential opponents of the innovations described herein are predictable,
a proactive, practical and politically realistic strategy has been developed to implement the ideas
within this paper. This is the purpose of Part Two of this paper.
Net objectives: Within any government system, applying the ideas of this paper should result in
substantial efficiency gains. Efficiency gains of less than 10% should be considered a failure; 10-
15% expected at a minimum; and over 15%, a success. The psychological gain, however, of a
successful practical example which demonstrates what may be achieved in government reform:
priceless.
The Importance of Example. The importance of executing an example of functional government
cannot be overstated. When one looks at a graph of increasing public employee immunities in the
U.S. from 1776 (Rosenbloom), an inverse parallel line represents reduced voter turnout, and
increased public apathy (Rosenbloom).
Public Disengagement. The less relationship the public sees between their vote and the
effect of their vote of public affairs, the more they have withdrawn from involvement
(Rosenbloom). In contrast to voter apathy, the popularity of gaming and sporting event
(Rosenbloom) participation is at an all-time high.
The Public’s Need for Perceived Control. When we play video games, or attend a sporting
event, the objective is clear. We have information on the scoreboard which allows us to understand
the progress of the game. The information flow of gaming is symmetric - both sides have it
(Akerlof). Most of all, the information gives us a sense of power and control, which is a basic
human need (Galbraith).
The High Cost of Government Dysfunction. Presently, in representative governments
worldwide, information flow is asymmetric. The result is a continuous decline in government

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efficiency and constitutional power, which takes an increasing psychological and financial toll on
the public (Tanzi & Schuknecht). A system with asymmetric information is not a sustainable
system - the question is not if it will fail, but when (Tanzi & Schuknecht).

An Example is Needed. The Dawn of a Working Government may occur


through a single example - by applying the solutions presented to the
referenced failed government agency, the Washington State Department of
Social and Health Services. Gains in efficiency would allow the State of
Washington to have substantially more resources to pay for public services
without an increase in taxes.

The Public’s Books. It is difficult to imagine any business or household able to survive in the
absence of accurate accounting records of its own money, or a business that is unable to hold
employees accountable to performance standards or the law. Yet isn’t the government actually the
public’s largest and most important business and collective household?
The Tail Wags the Dog. Currently, the tail is wagging the dog. Public servants currently hold the
public’s constitutional rights and money hostage through self-created immunity from the law and
by the intentional misrepresentation and absence of accurate accounting records.
Accountability is the Basis of Accurate Accounting. Obtaining critically important and accurate
accounting information will only be possible if people are held accountable. Public servants will
only be held accountable if we assume control of our money, and if we are in a position to
encourage the elimination of unconstitutional immunity from the law, and the resulting inaccurate
accounting information.
The Lessons of History. History clearly shows us that the health, wealth and prosperity of a nation
– as well as its ability to survive - directly relates to the accountability of public servants, and the
transparency and accuracy of a nation’s accounting (Weinberg).

The Stakes are Higher. Nations are now economically interdependent. Recent events prove that
the economic failure of a single nation has the potential to cause billions to suffer. Providing a
successful example of a functional government is critical for global economic health.

An End Run. By applying a completely ‘out of the box’ approach to improving government, and
thus, doing an end-run around existing political structures, we have an opportunity to address root
dysfunction with great efficiency.

Three things must happen for us to realize this unprecedented opportunity and set an example:

1) Convert the budgets and books of a dysfunctional government agency, Washington


State’s Department of Social and Health Services (“DSHS”), to an accurate accounting system,
based on concepts created by the Truth in Accounting organization;

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2) Remove the checkbook from DSHS, and appoint a government-independent trustee; and

3) Post the books online with Steve Ballmer’s USAFacts system.


The Three Elements of the Opportunity. Three basic factors present unprecedented opportunity to
revolutionize government: 1) information technology; 2) improved quality and standards of
information; and 3) an understanding of how we may benefit from things we’ve learned that make
business work, which we may now apply to government.
The Basis of the Opportunity: Efficiency. The original purpose of this work was to develop
practical, non-partisan ideas to address root problems of government and present practical
solutions. Root problems of any system are actually root inefficiencies. The ideas presented herein
are expected to dramatically increase government efficiency. Efficiency is the only sustainable
means of wealth creation.

Information technology revolutionized the world in the private sector. By combining the profound
work of Economist Charles Wolf, Jr. with current technology, that same revolution may now occur
within government, to create a more efficient government.

One effective example, the application of these ideas to a single failed government agency, DSHS,
may result in a domino effect for the benefit of all people: the over-taxed, as well as the most
defenseless– the elderly, the disabled, veterans, and those in foster care.
We live in a time of radical change. In a time of great change, the truly radical action is to do
nothing, or the same things that have been done before.
The right response to radical change is to rise to the challenge in equal measure—with calculated
and creative solutions.
Because survival dictates adaptation.
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References (Edits and Corrections in Process)

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quarterly journal of economics, 488-500.

Aroney, N. Justice McHugh, Representative Government, and the Elimination of Balancing.

Sydney Law Review, 28, 505.

Davis, K. C. Administrative law and government. West Pub. Co..

Deming, W. E. The new economics: for industry, government, education. MIT press.

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Morris, M., Schindehutte, M., & Allen, J. The entrepreneur's business model: toward a unified

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Rosenbloom, D. H. Public administrators' official immunity and the Supreme Court:

Developments during the 1970s. Public Administration Review, 166-173.

Schweickart, D. After capitalism. Rowman & Littlefield Publishers.

Skowronek, S. Building a new American state: The expansion of national administrative

capacities, 1877-1920. Cambridge University Press.

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Wolf, C. Jr. “A Theory of “Non-Market Failure:” Framework for Implementation Analysis.


RAND 1978
Wolf, C. Markets or Governments: Choosing Between Imperfect Alternatives. MIT Press. 1986

Contact:
Robert Crawford
Robertcrawford777@gmail.com
(206) 478-3844 direct
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