As a graduate of the U of Minnesota's Humphrey Institute of Public Affairs and previously of St. John's University (MN), I had the good fortune of spending time with the late John Brandl. Brandl was an economist by education, a long-time legislator in Minnesota, a government bureaucrat and a professor who recently passed away after a battle with cancer.
I recently was able to read a book Brandl wrote in the late 1990s entitled "Money and Good Intentions are not Enough: or, Why a Liberal Democrat Thinks States Need Both Competition and Community". As its title implies, the book is focused more on state governance as opposed to local (small town) governance, but it is worth reading for anyone interested in public policy.
In this book, Brandl sets out to debunk some common misconceptions regarding how best to achieve public goals. These are:
1. That government bureacracies and policy makers "automatically embody the public interest" because they are not motivated by profit. The misconception is that government employees are automatically inclined to focus on doing whatever is best to achieve the public good. Rather, Brandl says that civil servants and elected officials are just as likely to act based on motivations other than the public interest - such as maintaining their job or increasing the budget with which their agency has to work.
2. That because civil servants are automatically motivated to accomplish the public good, providing more money to support their work results in positive results. Instead, Brandl says there is very little connection that can be shown between a government agencies' budget and the results of their work. More money simply does not guarantee results.
3. That the answer to the above two problems is always more free-market (competitive) provision of services. Fro Brandl, competitive forces can certainly be used more often than they are for public purposes, but it is essential to note that certain services do require altruistic behavior. He emphasizes focusing on which types of organizations are more likely to act in altruistic behavior (including families in some cases) and ensuring that perverse incentives are not created when providing them with public monies as a means of accomplishing public purposes.
In reading the book, what I found most compelling was the argument that the most important factor in determining whether public goals are accomplished is not whether the provider is a civil servant or an employee of a private company. Rather, it is the incentives they face. Arguably, Brandl suggests that no one acts for the public good as their first objective. They either act primarily to increase profit (in competitive markets), to increase prestige or personal job security, or primarily to serve family or sub-groups of society to which they feel deeply connected or responsible for (and no one, however altruistic, can rightly claim that they are deeply connected to "the public" at large).
I would recommend the book highly. As one reviewer stated "Brandl is a thoughtful observer and analyst, and his book is full of insights. There is neither new theory nor new empirical findings to be found in this manuscript, but he packages what we know and what he observes in such a clever way that the reader is forced to think in a different way about old ideas. The book is readable by economist and practitioner alike and will make would-be students of state and local finances - liberal or conservative - sharpen their arguments."