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This paper illustrates how two contemporary economic traditions - New Institutional and Austrian economics - may be used to add insight into the organization and governance of public sector investment programs. When combined, these frameworks offer a theoretical foundation that may be used for purposes of assessing relative levels of agency and transactions costs within different institutional settings. The insights provided suggest that one option for reducing these costs is to “outsource” the public sector investment function. The theories explored in the paper are not panacea for dealing with agency and transaction costs, but they do draw attention to key institutional characteristics that influence their size.

This paper examines the interaction between changes in governmental accounting, ideology and global capital markets. Based on a historical analysis from the late 1800s to the turn of the 21st century it provides support for the general hypothesis that the strength and support of global capital markets and pro-market ideologies is positively related to the likelihood of the adoption by governments of accounting methods geared toward exposing full costs and total debt. The analysis also illustrates that governments are more likely to use accounting methods that allow for greater flexibility for spending, borrowing and off balance sheet financing during times when global capital markets and pro-market ideologies are in decline.

Recent financial scandals in the private sector have led to widespread speculation that public organizations may be susceptible to similar events of financial misconduct and should, therefore, be required to adopt similar strategies to those that are mandated of private-sector corporations under the Sarbanes-Oxley Act of 2002. This paper looks at one of those strategies by examining the use of audit committees in U.S. local governments. Specifically, this paper explores (1) why local governments have heretofore voluntarily created audit committees, (2) the perceived benefits and problems of audit committees, and (3) whether the use of audit committees is compatible with the principal-agent logic that underlies their promotion.