Investigating a real-options approach to modelling public policy investments, and implications for public administration

This thesis investigates the application of real-options modelling to policy investment coordination problems across government departments, with the aim of informing high-level institutional and system design choices in public administration. This analysis is motivated by recent and ongoing reforms to the legislative framework underpinning New Zealand's public service which, unlike the last major public administration reforms of the 1980s, are not expressly driven by or obviously supported by economic theory. We find that a simple real-options framework allows for a compelling illustration of the coordination problems that the current reforms are in part aiming to solve, and supports analysis of the types of mechanism that might be employed to address them. Such mechanisms include the promotion of structural integration, the broadening or alignment of departmental policy objectives, a relaxation of public finance restrictions, and joint decision-making over policy investments.