As a member of the ABA Administrative Law and Regulatory Practice Section’s Scholarship Award Committee, I would like to recommend this year’s winning submission, Professor Nicholas Parrillo’s book, Against the Profit Motive: The Salary Revolution in American Government, 1780-1940. Not only did the book win the ABA Administrative Law Section’s award for the best work of administrative law scholarship published in 2013, it also won the 2014 Law and Society Association’s J. Willard Hurst Prize for the best book on socio-legal history. The book focuses on a seemingly mundane, but ultimately decisive topic: how government compensates its employees. Understanding why the government moved to a salary-based pay structure is actually fundamental to understanding how the modern administrative state became viable, functional, and—critically—legitimate.
For much of the eighteenth, nineteenth, and even the twentieth, centuries, public officials were paid in ways that today we might find shocking:
Judges charged fees for transactions in the cases they heard. District attorneys won a fee for each criminal they convicted. Tax investigators received a percentage of the evasions they discovered…. Policemen were allowed rewards for recovering stolen property or arresting suspects. Jailors collected fees from inmates for permitting them various privileges, and the managers of penitentiaries had a share of the product of inmates’ labor. Clerks deciding immigrants’ applications for citizenship took a fee for every application. Government doctors deciding veterans’ applications for benefit did the same, as did federal land officers deciding settlers’ applications for homesteads. Even diplomats could lawfully accept a “gift” from a foreign government upon finalizing a treaty. (P. 1.)
Professor Parrillo usefully sorts these surprising compensatory arrangements into two categories he calls facilitative payments and bounties. He defines facilitative payments as sums that public officers received for performing a service that a citizen wanted or needed, such as issuing a permit. He defines bounties as sums that officers received for performing a service that the citizen did not want, such as arresting someone or finding a tax discrepancy. These two types of payments gave rise to different social relationships between the public officials and those they regulated. On the one hand, the facilitative payment system fostered a customer-seller relationship, rather than a public service relationship. Because not everyone could afford to pay public officials or pay the same amounts, the facilitative payment system fostered inequality, leading many to view the system as corrupt. On the other hand, bounties fostered an adversarial relationship between the public official and those who were targeted. Bounties directly conflicted with the voluntary nature of most governmental compliance. Ultimately, salaries replaced both compensation systems because the systems failed to promote democratic principles and legitimacy. Citizens will only cooperate with a government they believe to be legitimate; Professor Parrillo shows how facilitative payments and bounties undermined legitimacy.
While Against the Profit Motive is certainly of historical significance, it offers a cautionary tale about moving towards privatization (and the for-profit business model) and moving away from salarization. If we fail to remember lessons from the past, we may be doomed to repeat them. Privatization permits service contractors working for profit to handle duties previously entrusted to salaried government workers, thus, bringing monetary incentives to the forefront. Should employees have a financial stake in how governmental programs are run? According to Professor Parrillo, the answer to that question is a resounding “no”; however, arguments have recently been made to privatize government functions from education to prison management to national security. Moreover, some federal programs, such as Medicare, contain facilitative payment-like incentives. Such arguments neglect the teachings of our past.
Against the Profit Motive is well written, extensively researched, and offers interesting insights into a once-common approach to remuneration, which has now been, wisely, abandoned. At a time when local, state, and even the federal governments are considering privatization, Professor Parrillo’s historical examination cautions us against embracing profit as motive for government function. It is an impressive work of legal scholarship that without a doubt has relevance for contemporary debates about agency structure and incentives. While there is much to commend the book, it is imperfect. Professor Parrillo could have been much more instructive regarding how the historical implications of his work relate to contemporary administrative structure and practice. In other words, he fails to fully explore the relevance of the past to the possibilities of the future, leaving it to the reader to make those connections. In addition, the book is highly repetitive and overly detailed. Had Parrillo used a more critical editing pen, he would have had significantly more room to develop the relevance of his topic to the modern administrative state.
In sum, the book is an interesting, albeit comprehensive, read. It is an exhaustively researched and sophisticated analysis of the transformation in the way public officials are paid. Notably, the conclusions Professor Parrillo draws offer an important cautionary tale for using economic incentives to motivate public officials in modern times. He teaches that if we believe in a professional and politically insulated government service and if we want broad participation in administrative government, then we must fight against those who argue that government should be run like for-profit businesses.