For a long time, economic theory has shown little interest in the administrative traditions of nations and the functioning of public administrations. While the role of the state in the economy has been highly debated, public administration has often been considered a “black box” by economists, leaving the study mainly to legal scholars and political scientists. Economists generally viewed public administrations as devoid of economic principles such as economic freedom, pricing mechanisms, equilibrium, and competition. Only Taylorism, if considered part of economics, had a significant theoretical and practical influence.

Classical liberal economics focused on individual and economic freedom while respecting the state's role, even if conceived as merely a facilitator for economic development driven by private enterprises. Given the historical context, they advocated a state based on the rule of law, limited to essential functions such as internal security, defense, and justice, and supported a hierarchical model of public administration and management (Hood, 1998). Heterodox classical economists (e.g., Marx, 1887; Hodgskin, cited in Screpanti & Zamagni, 2010) had a different view of the state's importance but paid little attention to public administration, focusing instead on class conflict and economic dominance of capitalists through the state. The only major exception was Fabianism, which believed in a strong state role with dual functions: traditional hierarchical administration and modern oversight of markets and welfare programs (Barker, 1984).

The only area where economic theory has significantly influenced public administration is public finance, especially in taxation theories. This area has been debated intellectually in several countries, including Germany's Cameralist tradition (Hood, 1998) and Italy's "Scienza della Finanze" (Faucci, 2022).

The expansion of the state since the 1929 crisis increased economists' interest in public administration. The larger state involvement in the economy, the creation of large public firms, and Keynes's contributions made economists more aware of the public sector's importance. However, most Keynesians focused on macroeconomic phenomena and policy, failing to recognize that the state's evolving functions required a revision of the Weberian model. Ironically, more liberal economists like Tullock (1965) and Buchanan (1977) paid attention to public administration, using neoclassical traditions to highlight government failures caused by information asymmetries and bureaucratic self-interest. Principal-agent theory, which emphasizes bureaucratic misalignment with political will, became theoretically dominant and supported reforms in the UK and US under Margaret Thatcher and Ronald Reagan. These reforms, framed under the New Public Management (NPM) umbrella, included measures like agencification, deregulation, outsourcing, pat-for-performance and competitive practices within the public sector (Hood, 1991).

NPM initially impacted Anglo-Saxon countries and, to a lesser extent, other nations despite endorsements from institutions like the World Bank and OECD. Notably, Julian Le Grand from LSE popularized NPM through works on quasi-markets and financial incentives for public administration reform, influencing public policies, including in Italy. His work, supported by sociologist Giddens, increased NPM's popularity among the left, although empirical studies showed it was more prominent in right-wing political manifestos in Italy (Fattore et al., 2012).

A body of micro-economic literature now offers theoretical and empirical contributions to public administration studies, primarily rooted in neoclassical economics and quantitative approaches (e.g., Cunningham, 2021). However, the boundary separating dominant economic theory from public administration began to erode. For instance, Acemoglu and Robinson's "Why Nations Fail" revived interest in public institutions, drawing economists to study public administration as crucial for socio-economic development. Several economists now work on public management (e.g., Bloom et al., 2012; Lucifora, 2023), while others critique the neoclassical view of the state (e.g., Mattei; Mazzucato). However, they often fail to deeply understand or theorize public administration operations.

The 2009-2011 crisis prompted some economists to challenge neoclassical theory and focus more on the state's role at macro and micro levels, studying public administrations (Colonnelli et al., 2024; Mastrococco & Teso, 2023; Spenkuch et al., 2023). These studies aim to open the black box using modern econometric techniques but still public administration in economic theory is marginalized.

It is well established that strategy in public administrations differs from the private sector due to the blurred distinction between policymaking and administrative decisions. My thesis is that economic theory shapes the strategic space of public administrations. The Wilsonian view of a clear separation between politics and administration, conceiving public administration as merely an execution entity, limits this space. Principal-agent theory, still very popular, complain that bureaucracy do not execute political orders. But result are paradoxical: if managers are not controlled they have strategic space, if they are asymmetries require their involvement in policy making. Either way they have a strategic space. no On the positive side it openly recognizes that top management can not be aligned to political will and this means to recognize that it can make strategic decisions. On the normative side, interventions to fix the “problem” creates the conditions for alignment of the agent (public administrators) to their principals (politicians), thus trying to limit of the second of the former. In practice, however, the alignment may embark bureaucrats in policy making. A similar paradoxe exist in behavioral economics, where traditionalists view human behavior as a deviation from rationality needing correction, very difficult to realize given the deep psychological roots of cognition and behavior and modern scholars who recognize the behavior as a complex system with multiple rationalities and heuristics; in practice both traditions back the strategic role of public management.

Prime Minister Marin's government program set an ambitious goal that Finland will have the best public administration in the world by 2030. In 2019–2020, a common strategy covering the entire public administration was drawn up to support this goal. The goal of our study was to produce information on the state of public administration reform and the degree of integration of the public administration strategy into the operations of public organizations.

The project examined the suitability of strategic guidance for the systemic reform ofpublic administration, how public administration organizations have responded to the identified development needs of the administration and the promotion of systemic reform, how the preparation and implementation of the strategy has been experienced, and how the implementation of the strategy has been monitored and evaluated. The group also applied AI-aided tools and language models to map how strategic priorities and guidelines have been adopted and utilised in public administration organizations the different levels of government.

As part of the evaluation, we conducted a thorough literature search in top international science journals focused on public administration and public policy. A search restricted to the years 2015-2023 yielded a total of 569 peer-reviewed studies. After reading the abstracts, we chose 20 studies to analyse. Based on this, ten were areas of strategic insights were highlighted and scrutinized through theoretical discussions and later integrated to the empirical analysis of Finland´s Public Sector Strategy.

The results show that the implementation of a multi-level strategy without sufficient resources and "sticky and contagious" goals and objectives is very challenging. In the strategy process, one has to balance between clear top-down goals and bottom-up goals arising from customer and citizen experience. The most successful public sector organizations know how to combine the setting of goals from above with rich experience in a rapidly changing service ecosystem. However, this requires innovation, adaptability and systemic understanding.

Democratic governance is a value-determined concept. This paper presents a critical appraisal of the use of organizational values in public sector organizations. The concept of “value” is often referred to in terms of the result of strategic management, e.g., which values organizations produce for their stakeholders or, in the case of public sector organizations, which public value the organization creates. However, in many strategic plans for public sector organizations, organizational values are stated, sometimes along with expressions of “organizational vision”. The literature on organizational values in public sector organizations is limited and often connects to topics such as organizational citizenship behaviour or public sector motivation thus leaving an explanatory gap for how such statements function in light of mechanisms of strategic management. In this paper, organizational values collected from 69 government agencies in Norway are analyzed using an established multidimensional mapping technique (Bourne et al., 2019) measuring dimensions like competence focus, character focus, interpersonal focus, and community focus. Also, interviews with senior management in selected organizations shed light on their understanding of the function of organizational values. The findings are discussed in light of implicit values given by the concept of ‘democratic governance’ and the strategic significance of espoused organizational values in public sector organizations.