Budget Policy Formulation Process Research: A Transaction Cost Analysis

The study of Public Management began to revive in China since 1980s. However, in this process, the domestic budget and budget policy research, mostly from the perspectives of Economics analysis. There are only a few studies on budget and budget policy from the study of Public Management. This case is disadvantage of the development on the studies of Budget and Public Management. We can develop budgets research in many ways in Public Management. And the transaction cost existing in the process of formulating budget policy is the very important factor ralating on budget and budget policy. More importantly, the transaction cost analysis of Public Management and Economics is very appropriate sides. Because, transaction cost analysis belongs to one of important theories on New Institutional Economics, therefore, transaction cost theory firstly belongs to economics. In addition, transaction cost analysis on New Institutional Economics mainly analyses unproductive costs on system operation. So transaction cost theory is also belong to Politics and Public Management. The author is trying to study the transaction costs existing in the process of formulating budget policy from the perspective of Public Management.The main contents of this article are divided into three parts:In the first part of this paper, the author elaborates the essence of the political process in the process of formulating the budget policy. This budgeting policy formulation process is the political process on the essence. The budget policy formulation process is essentially a political system including kinds of purposes and means to realize these purposes. Its political cycle is chaos and overlap. In the budgetary receipt and expenditures and balanced budget policies formulation process embody the political essence and characteristics.Therefore, we can say that the budget policy formulation process is essentially a political process.The second part of this paper analyses the transaction costs in the process of budget policy formulation in detail. There are diversified participator in the budget policy formulation process such an administration officials, lawmakers, interest groups and citizens and so on. They are not stop constantly bargaining, competitive game, compromising until a "consistent" results to be received in order to realize such main utility oxidization goal in the process of budget policy formulation. This is the typical "transaction" features. There are high transaction costs in the process of formulating budget policy, including information costs, the costs for coordination, supervision and management costs. The main reasons of these high transaction costs are: incomplete information and limited rationality, risk preference, uncertainty and asset specificity, etc.In the third part of this paper, the author puts forward some suggestion to reduce transaction costs existing in the budget policy formulation process. Providing four options: the first, constructing one property right incentive mechanism in the budget policy formulation process; the second, strengthening the law systems in the budget policy formation process; the third, improving the authority and representative in the budget policy formulation process; the fourth, opitimizing the means and methods of supervision and management in the budget policy formulation process.