The effect of treating public services as commodities

IMPACT

The case for competition and marketization of public services, though widely accepted in government, has been made through the application of formal economic reasoning rather than practical experience. Efficient market production relies on a process of defining services in terms which allow for competition, choice and the substitutability of tradable products. The evidence for this theoretical position is mixed at best. This article provides policy-makers, those commissioning services and practitioners with support in arguing for public services to be judged by different criteria.

ABSTRACT

Within the frame of orthodox economics, only market allocations can be efficient, and markets can achieve any desired outcome. Public services, however, operate by criteria which are not satisfied by market allocations, including the requirements of policy (such as targeting, universality and equity), cost-effectiveness, and conformity with the requirements of democratic government (such as accountability and prior authorization). The efficient delivery of commercialized services depends on commoditization—standardizing commodities so that they can be traded on equivalent terms. That process changes the nature and character of what is provided, and compromises the effectiveness and quality of public services.

KEYWORDS:

• Commoditization
• effectiveness
• efficiency
• marketization
• public services

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No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Paul Spicker

Paul Spicker is Emeritus Professor of Public Policy, Robert Gordon University, UK. He has written extensively on social policy and administration, poverty, social security and housing policy, and the services of the welfare state.