The Influence of Economic (Ir)rationality on Public Sector Reforms

Purpose: The purpose of this paper is to review the development, the increasing influence and impact, direct and indirect, of economic rationalism on the financial recording and reporting reform agenda of the Australian public sector. A focus of this paper will be to explore whether these reforms could be more appropriately considered to be rationalised myths adopted for reasons other than their purported advantages. Design/methodology/approach: This paper explores the influence of economic rationalisation on public sector financial reform through a theoretical framework based on legitimacy and the lens of institutional isomorphism which considers the adoption of certain reforms and practices via coercive, memetic and normative isomorphic pressures. It these pressures which eventuate in the creation and strengthening of the rationalised myths associated with these reforms. Findings: The key finding from this research is that the influence of economic rationalism has led to the adoption and implementation of various reforms, (often based on private sector practices), which could be viewed as rationalised myths implemented to increase the legitimacy of the public sector, rather than to improve service delivery. The adoption of private sector practices is seen as a reaction to the institutional isomorphic pressures the public sector is experiencing to legitimise itself within society, and not necessarily as an attempt to improve efficiency, effectiveness and performance, which are the new recently promoted objectives of the public sector. To resist the isomorphic pressures would be a sign the public sector is not accepting of (best) practices based on notions of economic rationalism. Originality/value: This paper provides a new approach to exploring the recent financial reforms in the Australian public sector while providing some direction for future research in challenging the taken-for-granted assumptions upon which public sector reforms are often justified.