Over at Club Troppo, Nicholas Gruen has a thoughtful piece on the role of competition and choice in human services. He’s responding to the less-than-thoughtful boosterism of the Productivity Commission and the Harper Review on this topic. It’s well worth reading. Before doing so, though it’s important to take a look at the mounting evidence that for-profit provision of human services is almost invariably disastrous.
I’ll write a longer piece on this soon, I hope. But here are three recent examples from the United States, which has led the way in for-profit human services, and is now beginning to pull back
Shonky for-profit educator ITT closes down without notice, right at the beginning of a new semester.
Following a damning report, the US Department of Justice announces it will no longer use private prisons.
Charter schools (some openly for-profit, many others run as businesses) have been failing at a starting rate.
John Quiggin 
Interesting and seems sensible on the surface. But there is a flip side challenge to bringing back services back into the public sphere.
How do you get the government and quasi non government systems to work optimally/socially? And how do you reduce the stultifying control inherent in big organisations which is all the more ferocious these days since the rise of management systems culture. Certainly the neoliberals did a real job in their attacks on government services. But this doesnt means the latter were/are ideal either.
In the event of ‘unprivatization’ what structures would be used?
Unfortunately the models for public sector operation are now heavily managerialism oriented and so we have the spectacle of faithful and loyal senior public service being made ‘accountable’ via the process of getting them to reapply for their own jobs under the watchful eyes of parasites like McKinsey and Company.
Another interesting species are the QUANGOs. Sometimes they can be fine. Then we have the likes of IPART https://en.wikipedia.org/wiki/Independent_Pricing_and_Regulatory_Tribunal_of_New_South_Wales who being true believers in neoliberalism have recently crippled the roll out of renewable energy in favor through the use of dodgy economics models. Being unaccountable to the public they are essentially untouchable.
A related problem here is that now irrespective of which party is in charge, government agencies have been politicised even more than in the past and the potential is now much higher for ’emperors new clothes’ events.
A different problem is overbearing control of staff via the corporate mission. In smaller agencies less beholden to control from above and in the past more autonomy and experimentation were possible. Now though staff are disciplined into following management policy often developed by professional managers who dont understand the business they are involved in except based on the claim that all management activities are the same.
In a word ‘unprivatization’ does not feel like the panacea that taking a manichaean position againts privatization would imply.
My GP operates for profit, as does my dentist. So far, no disasters.
@Apocalypse
Do you think it is ‘profit’ or ‘a living’ that doctors and dentists work for?
John, I agree. Back in 1994-95 T worked as a Case Manager for long-term unemployed people for a for-profit company run by a man with the sort of ethics you’d expect from Eric Abetz (I can supply names). I was sole-in-charge of an office in an inner-Brisbane suburb where I did my best to provide genuine, non-coercive solutions for a very diverse range of clients. These clients were mostly pleased with the help I gave them and the jobs they found and statistically, I did achieve slightly fewer outcomes than some of my colleagues. But this was not good enough for the driven business man who was my boss. I was subjected to a psychological test, warnings and threats of dismissal and finally I was dismissed. I was ordered to breach a client who was sent to a boot-camp, taken out to a remote location on the outer ring of Brisbane and dropped off at 4 pm in the afternoon and told to find his own way home. At first I insisted on debriefing my client and hearing his explanation. The treatment he had received was unreasonable and downright dangerous. But I was brow-beaten into signing the form – for which I am ashamed.
I found it necessary to shield a number of clients who were suffering psychological problems, which I did with the help of a psychologist from the CES (our competitors, who could have been given more lateral-minded management, but were being demoralised and disbanded). Much of what I did was social work which obviously could not be done for a profit.
Only eighteen months after my sacking I heard that the company had lost its contract to provide employment services. The final slap in the face came when I discovered that I and my colleagues had not been paid our employer contributions of superannuation.
@Julie Thomas
First, it is highly likely that your friendly local Dr Smith’s practice is owned by a company, Dr Smith Pty Ltd. Second, company structure or not, in order to make a living, Dr Smith aims to take in more in revenue (what you and Medicare pay him or her) than it costs to operate the practice (rent on the premises, equipment, salary for the receptionist, insurance, electricity, cleaning, etc). If Dr Smith succeeds in this aim, then he or she has made a profit.
@Apocalypse
So clearly you don’t have any idea that there is a difference between profit and making a living.
@Julie Thomas
In accounting terms, there is no difference. There is a difference in being (primarily) motivated by profit, or not, and most doctors, at least in my experience, are primarily motivated by the desire to improve the health of their patients. But they also like to make money.
John’s statement was that “for-profit provision of human services is almost invariably disastrous.”. The “almost invariably” part of that statement is just not true. There are actually very few disasters in the provision of human services, delivered either by for-profit or not-for-profit providers.
@Apocalypse
In accounting terms there is no difference a profit taker and a caring health professional and no human disasters because if people make the wrong choice it is their own responsibility.
But we are not all accountants and for many of us, there certainly is a big difference in human terms for an individual who needs services, between a doctor who is a profit taker and a doctor who lives in a community and who works in that community to make a living.
@Julie Thomas
You and I have different definitions of profit. On your definition, profit is synonymous with greed. On my definition, profit is simply where revenues exceed costs, which might or not might not be the result of greed. The opening piece, I think, referred to profit as I have defined it.
@Apocalypse
I think the “for profit” model that Professor Quiggin has in mind is one where investors own the business. So in the case of the local GP, it is where investors own the clinic, and pay the doctors and other staff a salary. Only after that has been done are they left with a profit.
And therein lies the problem. Where you have a group of doctors managing their own practice, I assume that they do it moderately efficiently, and pay themselves reasonably well. How is a business supposed to do the same, and still have money left over for profit? I suspect the explanation usually involves the underpants fairy.
@Apocalypse
Yes narrow definitions of profit are good for accountants but useless for understanding how profit driven services are failing to deliver good and efficient outcomes for the human beings who need them. Usually these people are not accountants.
@John Brookes
This is a good question. The short and simplistic answer is that investors make a profit the same way as investors do in any industry, after paying their staff. But this might not work in medicine because the prices can charge are regulated, or strongly influenced, by the Medicare benefits schedule. There’s anecdotal evidence that big corporate medical clinics churn patients with short appointments, unnecessary tests and getting them back for needless discussion of test results. The patients don’t care because everything is bulk billed. If this practice is widespread it needs to be stopped, but it’s hardly disastrous.
We hate to tell the neoliberals “We told you so!” No we don’t, so here I go.
HEY NEOLIBERALS, WE TOLD YOU SO, YOU BUNCH OF IDIOTS!
>
@Newtownian
n a word ‘unprivatizatio
“Unprivatisation does not feel like the panacea that taking a manichaean position againts privatization would imply”
Indeed. Lets take G8 universities with the head admin extracting $1mpa from the public selling out Australians by selling off places to foreigners for the perverse incentive of higher fees.
@Newtownian To the best of my knowledge IPART is a regulatory body comprised of individuals who lack the necessary skills to properly evaluate claims. Therefore, they take advice from those making the claims.
@ 2 Apocalypse
My GP operates for profit, as does my dentist. So far, no disasters.
Not sure about Australia, but in Canada we have something of a free-market in GP’s and dentists. I can just walk away from either if I am displeased.
We also have a strong regulatory environment in medicine and the practitioners typically subscribe to a very strict ethics code. While I am rather sure that doctors and dentists like to make money, it seems unlikely that their desire is simply to maximize profits like a hedge fund manager.
This is pretty well completely different than a private prison operator—most prisoners cannot just up and walk to a new prison if they don’t like the one they are in. Judging from some of the things I have heard about private prisonas in the USA, there is no strict guidelines other than “try not to lose money”. and “don’t let the press in”.
@ 7 Apocalypse
There are actually very few disasters in the provision of human services, delivered either by for-profit or not-for-profit providers.
Depends on what you call disasters but private prisions and illegal immigrants centres in the USA come to mind. And in many cases the level of service just is not as good http://www.cbc.ca/news/canada/ontario-to-take-back-control-of-private-super-jail-1.586052. Reports coming out of Nauru regarding the Nauru Regional Processing Centre—privately operated I believe are not reassuring.
And for non–profits, several of the provinces in Canada (Ontario and British Columbia come to mind) have ongoing problems their non-profit Children’s Aid Societies and have had for years. Some problems are likely due to budget and staffing levels but some appear to be blatant racism, management wasting resources and bob’s–your–uncle.
The charter school situation in the USA appears insane. A bunch of free-marketeers (neolibs?) have convinced themselves that competition among teachers is the best way to improve education. My uninformed guess is that teaching quality accounts for 12–15% of the variance in student performance with thing such as nutrition, quality of home life, and parents’ educational level being some other major determinants of student achievement.
Added to this is the fact that it looks like a lot of profit maximizers have decided that with a bit of creative student selection (cherry-picking, purging poor performers) and perhaps a bit of creative accounting one can make quite a nice profit. If US states had adequate legislation and oversight of charter schools even the for-profits might work but currently it looks like it’s more like the wild, wild west.
Notice how, when they (the Powers That Be) really want to make a program work they spend like drunken sailors and it is public money on public institutions. The money funnels to private contractors of course. Enormous amounts of money can always be found for Inhuman Services. I mean “Defence” which really means offence and unnecessary foreign wars.
Headline: “Trump vows US military build-up, proposing more troops, ships, warplanes”
The solution apparently is more war. I’d say this is like a drunk deciding his problems with alcohol will be cured by a lot more alcohol. And he may be right. After all, enough alcohol will kill a person and enough military actions will bleed a country dry and collapse it.
Meanwhile the Chinese sit back – or rather incrementally expand and slowly digest each piece (Tibet, Inner Mongolia, South China Sea) – while they watch the USA destroy itself.
“Never interrupt your enemy when he is making a mistake.” – Napoleon.
“The supreme art of war is to subdue the enemy without fighting.” – Sun Tszu.
@Apocalypse
Your #2
So does my barber and the cafe where I get my morning coffee and muffin. Is good, yes.
How about your local hospital ?
I’m sure it isn’t a case for / against for-profit service providers is not black and white. But putting that aside, even if you did want to bring the service delivery back into the fold of the public service, there will be some major challenges in my view.
Firstly, after 20-odd years of managerialism, public servants that can actually provide direct services are actually few and far between. A major up-skilling of the public services would be required.
Secondly, the salary of most senior public servants is a function of the inputs they manage (people and / or budgets), nit how efficient their divisions are. So there is actually a powerful incentive to ’empire build’ rather then be efficient.
Until governments make a genuine investment in upskilling the existing public servants and remove incentives to be inefficient I fear integrating services back into the public service is also a risky proposition.
@jrkrideau
Private prisons, at least in the United States, have a reputation for being awful. Mind you, state-run prisons aren’t exactly Shangri-La, either.
@Jim
Schools, prisons, hospitals and higher education, in Australia at least, are still largely in government hands, and the health, education and custodial services sectors still have large numbers of government-employed frontline workers. I think the point is not so much that large amounts of currently private economic activity needs to be returned to the public sector, but that the experiments in for-profit provisions of these kinds of services have been shown to be failures and any further moves in that direction would be folly. It’s not purely a government versus private sector issue, either. Private schools, for example, have been pretty successful in Australia run as non-profit institutions.
To believe that private prisons whether in Nauru or the USA are ever going to go well, for the inmates, or for society at large, you need to have a much, much rosier view of human nature than any proud-right type ever confessed to having.
But who cares, there’s profit there. And the beauty is, that the less you rehabilitate, the more profit!
Should note that in the USA it is only the FEDERAL prisons that will be un-privatised.
There is an interesting article at Mother Jones by Shane Bauer who spent 4 months as a guard undercover in a private prison, if you’re interested.
“I fear integrating services back into the public service is also a risky proposition.”
I’d argue that the dynamics of moving toward something positive for society and/or the local community are different from the dynamics that moved us toward seeing profit as equivalent to making an income, and I’d think it will be easier and have less disastrous effects than moving toward profit driven services produced.
I know my circumstances are not typical but I can see how willingly people out here in my little free range old people’s home would vote for more services. Our only service currently is a franchised Post Office and the operator is paid a stipend or something and is supposed to make a profit to make up the diff between poverty and a living.
But we are all poor and can’t afford to buy the overpriced useless merchandise the PO try to market to our disgusted and depressed post officer. He is the only public servant in the village. 🙂
But you know what? Some of the old people out here remember when accountants gave up their time to be the treasurer on the hall committees and progress associations that used to be a feature of our country towns.
I suspect we may disagree about the meaning of the terms “very few” and “disaster”. So, to clarify, do you disagree with the application of the term “disaster” to the three examples in the OP. How about:
*For-profit VET in Australia
* The US health system as a whole (it’s by far the most profit-driven in the developed world, and has had by far the worst outcomes)
* For-profit school companies like EdisonLearning in the US
If you don’t agree that these are disasters, please explain (as the latest member of our coalition would say). If you do agree, how many examples do you need?
@John Quiggin
VET – agree
Edison – don’t know anything about it, but I’ll take your word for it
US health system – I agree it’s poor, especially per dollar spent.
But, in Australia, vast swathes of human services are provided by for-profit providers, with very few horror stories. There will always be some, but then there always be some with not-for-profit providers, like at the Bundaberg Base Hospital. It’s just not true that private provision “invariably” is disastrous, because there is variation in the quality of the service, which by definition is not invariably.
US with 25% (apparently) of the worlds incarcerated population has people saying that population is being used as very low cost units of production of a large range of products sold on the “free market”.
as well as receiving public money to run a prison at a profit, a profit is made from the inmates productivity.
is this true?
if it is true ,are these products exported under “free trade”treaties?
The biggest categories of for-profits in the Australian system, AFAICT are pathology labs and nursing homes. Both have been problematic, to say the least, .
It’s a category mistake to treat individual private practitioners as “for-profit”. The fact that you’re happy with your dentist has little bearing on the question of whether a corporate provider of dental services would do,
@Apocalypse
#12
“The short and simplistic answer is that investors make a profit the same way as investors do in any industry, after paying their staff.”
It is indeed simplistic.
Consider 2 alternative institutional modes of providing services S = {S1, S2, …, Sn},
1. Maximise [1] the quality of services S provided, subject to the constraint that it is financially feasible, ie. Accounting Profit P = Revenue – Costs is non-negative
2. Maximise Profits P by providing services S.
And now apply it to the example of medicine.
Under mode 1, a single medical practioner or a group of medical practitioners are ‘free’ to determine the quality of services provided according to their professional opinion, subject to financial feasibility. This is the case irrespective of whether or not they channel their costs and revenues via a company (eg a Pty Ltd).
Under mode 2, the corporate finance model, medical practioners are no longer ‘free’ to determine the quality of services provided according to their professional opinion. As you said, they are employees of ‘investors’, rather than independent professionals. (In this mode, there are no professionals but there are so-called ‘knowledge workers’, or simply workers.)
I believe this is exactly the distinction Julie Thomas wished to establish. Your digression to motivation such as greed is not required.
Since there is no natural limit on profit numbers (real numbers), the corporate finance model, mode 2, allows for competition, not in quality, but in cost cutting to increase accounting profit. The provision of outside finance (other than plain vanilla bank finance) brings with it competition for higher and higher profits. (The corporate finance mode entails additional costs such as marketing managers, cost accountants, risk assessment managers, ….. Only if physical capital expenditure is very high, relative to professional remunerations, and there are some some kind of economies of scale are these managerial costs covered.)
So, a ‘disaster’ in service provision can be characterised by a reduction in quality, as assessed by ‘free’ practitioners, such that the services provided under mode 2 are s1 < S1, s2 < S2, … sn< Sn. The services remain the same only in the ordinary language classification but not in the opinion of professionals.
My personal experience is not in medicine but in higher education. The structure of the difference between the two modes of service provision remains unchanged.
I forgot the footnote.
[1] ‘Maximise’ in this context refers to a math description of an objective rather than an applied math calculation.
@Ernestine Gross
But the quality of human services is (supposed to be) regulated, by governments or professional bodies, so there are (meant to be) limits on how much corporates can increase their profits by cutting the quality of services.
@John Quiggin
Nursing homes is the classic example of where generalisation can lead you astray. There are very good private nursing homes and very bad ones, and all points in between.
Nursing homes have had to fall into line with increased regulation making it difficult for the more shonky operators. Nursing homes rely on means tested govt subsidy which comes with many strings.
Ohhyess, I am enjoying this posting and thread. What a redoubt is John Quiggin.
A point not mentioned so far is equity. It is much harder for for-profit organisations to make a profit from low income groups, so you tend to get either a poor standard of services for low income users or a ‘safety net’ second class public system, when services such as health and aged care are mainly provided by private for-profit providers.
Publicly funded services can have standardised quality of care standards regardless of income level of users because there is no direct link between the user’s income and the funding that pays for the service. In private for-profit services you will generally get a better standard if you pay more money.
@Val
Fair point.
John,
Thanks for bringing the issue to the attention of your audience. And I look forward to your further development of your thoughts in a subsequent post.
But allow me to confess my disappointment in the ideological nature of your contribution – and as a result the discussion that it has triggered.
It’s certainly an important high-level question whether ‘the market’ is well suited to the delivery of such services. But it’s the question that everyone loves to debate. You are of course welcome to contribute to it, and I not only respect your contribution, I’m in sympathy with it. But we don’t have a shortage of that kind of debate.
Would you say government systems or NFP systems have been good at the delivery of human services? I haven’t noticed. They will be better than (bad) market delivery in some ways. And there might be quite a lot of mileage in the naïve assertion that surely markets wouldn’t be any good at delivering all sorts of human services.
But there are huge difficulties in getting systems to learn what’s working and what’s not and to optimise accordingly. In the meantime we have professionals and bureaucrats supervising systems of soft-tyranny over those who they are supposed to serve.
I think of my contribution as being to the question of how we can do that. My exposure to these new approaches has led me away from a kind of tragic view of these things – the poor will always be with us but we can at least be generous toward them – to having quite a lot more optimism about what might be possible in the delivery of human services.
I have another (political) point to make – and I too have another whole blog post on this in me 🙂
I think if people started seeing improvements of the kind I’m suggesting might be possible, there’d actually be a lot more popular political support for such programs – and they’d stand a much better chance of being funded.
After all, the basic logic of the welfare state is pretty well baked into the basic values of most democratic voters. They’re all on board with the hand up. They’ll vote for it and not just because it might be them. Certainly Australian culture valorises the ‘fair go’ in a way that continues to resonate in our politics.
In her nasty way I expect Pauline Hanson feels the same way. The right have been successful in peddling the idea that welfare contains a good dose of elite self-interest, self-absorption and self-righteousness because it’s true! So shouldn’t we be trying to address that point? Shouldn’t that be absolutely central to the concerns of those who profess their concern for the disadvantaged?
Moreover it’s one of the keys to why systems of human services tend to be much less efficacious than was hoped at the time they began being ramped up in various wars on poverty etc. And things like human centred design, prototyping and testing as one goes seem to be quite powerful. How could we build the institutions to support such approaches and interdict professional business-as-usual at the system level?
That’s the conversation I’d like to have.
To clarify, the two institutional modes of service provision I characterised do not imply a difference in regulatory requirement or the usefulness and role of professional bodies, although there may be differences in how regulatory rules are implemented. That is, the institutional difference between mode 1 and mode 2 is preserved for given regulations and professional associations. (For example, professional accreditation has a role in mode 1 and mode 2 but without ensuring equality in the quality of services provided.)
@Apocalypse
#30
” But the quality of human services is (supposed to be) regulated, by governments or professional bodies, so there are (meant to be) limits on how much corporates can increase their profits by cutting the quality of services.”
To clarify, the two institutional modes of service provision I characterised do not imply a difference in regulatory requirement or the usefulness and role of professional bodies, although there may be differences in how regulatory rules are implemented. That is, the institutional difference between mode 1 and mode 2 is preserved for given regulations and professional associations. (For example, professional accreditation has a role in mode 1 and mode 2 but without ensuring equality in the quality of services provided.)
@John Quiggin
The word “corporate” is missing from the OP.
It’s clear that the Gruen essay is focussed not only on fair-sized capitalist corporations but on modern managerialist ones. There are still successful companies operating under old-style patrimonialism (look at the wine industry). But the projectors who have worked their way into education, health, and prisons do not argue: “I am am enlightened tyrant from a family with a hundred years’ experience in this industry”, but “we are MBAs with superior Management skills who can do much better than the public-sector bureaucrats innocent of magic Management.”
On ideology vs terminology.
The suggestion has been made by Nicholas Gruen that JQ’s post has triggered an ideological discussion, involving “high-level question whether ‘the market’ is well suited to the delivery of such services. ”
Speaking for myself, my post #12 contains characterisations of two institutional modes of service provision, both of which belong to the general conceptual framework of ‘the market’ (as opposed to central planning), with the only difference being in the legal policy framework (institutional environment), if implemented.
It is indeed the case that there are many discussions on the internet that really are echos of the mid-1940. However, these discussions have largely disappeared from JQ’s blog for several years, IMO.
On what ‘markets say’.
In the world of ‘high level’ abstract theoretical models in economics, ‘markets’ don’t talk but they say something – relative prices.
Today I read in the Sueddeutsche Zeitung statistics on the entry income levels of university graduates in Germany; relative prices.
The average entry income of graduates from ‘private’ (for profit) universities are 7% lower than those of ‘public’ (government funded) universities.
@Ernestine Gross
Your #39
Isn’t that what the markets say about women and men ? The market values the work of men more highly than the work of women – even in exactly the same job – so therefore men are paid more.
Is the market ever wrong ?
@Ernestine Gross
Your #38
I’m just trying to understand where Hotelling’s Law comes into this. Certainly multi-outlet publicly provided services could, and should, be completely standardised, thus achieving the ‘principle of minimum differentiation’.
But under your model 2, we seem to reach the Hotelling paradox: “Businesses in fact follow both product differentiation and Hotelling’s law, as contrary as they may seem.” But I guess it doesn’t seem all that contrary if one is trying to present a ‘service level compliant’ public face whilst trying to cut costs “to the bone” (as we say) out the back.
And would you be so kind as to elaborate on what are these “echos of the mid-1940.” to which you refer. And why would “these discussions” have largely disappeared from ProfQ’s blog ?
@GrueBleen
Is it a fact that the work that women do that men can’t do, like giving birth to the next generation is difficult to marketise? It is dangerous work. Women die giving birth. Where is our profit?
I’m sure that accountants could work out how to make pregnancy and childbirth a profitable activity in this economy that we live in. Apocalypse must have forgotten his four horsemen when he came here.
so which ever way it’s looked at the public purse pays for services.
non-government providers accept recompense for providing those services.
their aim is to benefit their bottom line.
they are in the market and are constrained by the neccessity to stay solvent.
if they don’t manage to do that the public purse pays for the damage.
also, why does “the market” seem to be referred to as an entity when as far as i can see it is a process?
if Megan is around:
balk derives from baulk.
and Bork is an American political expression referring to a judge who had a bit of a problem sometime in the 1980’s.
PS looks like sammy cut a bit close to the bone questioning the banks earlier this year.
one way or another he was in the firing line.
In my analysis there is always ideology. It is either explicit or implicit or denied but it is always there. I am highly suspicious of any argument and indeed any scholarship in the economic or political economy realms, which claims to be ideology free. I mean even fully mathematicised material. Both the abstractions and idealisations made to mathematicise an analysis and the resulting prescriptions (if any) to apply the results of mathematicisation in political economy practice in any way, unavoidably contain ideological assumptions. The ideology (any ideology) is a doctrine or credo which unavoidably makes all sorts of ontological, epistemological and moral philosophy assumptions about physical and social reality.
In arguments about economic efficiency, I always ask “Efficient at what? Efficient for whom?” We have to choose goals first and then methods for the goals. The choosing of goals depends on your picture of reality (ontology), your picture of knowledge (epistemology) and your picture of moral philosophy or ethics. I have, for quite a while, liked the way John Ralston Saul points out that economics is a relatively low order concern for a democratic (and scientific-technological) society. Given what I have listed here (ontology, epistemology and ethics) it is pretty clear, at least to me, that economics is properly a fourth order concern.
So why have we made the decision that economics should lead our society? I agree with JRS when he points out that this is a really, really stupid decision. It is very much akin to taking one’s hands off the steering wheel and letting the car lead us i.e. letting the car “decide” where to go. Each is an example of a system. (Here I go again.) A car is a human created system. An economy is a human created system. FFS people steer the system, don’t let it automatically take you where it will.
Neolioberals and neocons like to mystify the (market) system and claim that it is automatic and automatically best. It is only automatically best for plutocrats and oligarchs and it is automatically best for them because it is axiomatically constructed to be so.
GrueBleen has spoken about Hotelling’s Law. It’s a good example of whether you let a market system solely steer results (e.g. the market optimum in the two competitor model) or whether you apply other standards (e.g. a social optimum criterion) to get a result which in itself would not hurt the competitors. Letting markets solely run your society (any construction or variant of markets) would be a really, really stupid thing to do. And we don’t do that in practice anyway. Completely removing markets (absolute central planning) would also be a really, really stupid thing to do.
We must decide social goals and then apply appropriate tools. Sometimes some form of market is the appropriate tool and we certainly need to work on how to complete incomplete markets as far as possible. Sometimes no form of market is the appropriate tool. Sometimes a degree of central planning, nationalisation of natural monopoly is the the appropriate tool. It’s case by case after the social values and goals are set.
@Ernestine Gross
Your #40
Oh I’m slow; I’ve just realised that your “mid-1940. ..discussions have largely disappeared from JQ’s blog for several years, IMO.” is Hayek and his ‘Road to Serfdom’.
Ok, slow but steady gets one thwere in the end 🙂
I agree with you ikon about the ‘ideology’. I was quite puzzled by Nicholas Gruen’s claim that this discussion (presumably suggesting that his discussion wasn’t). I went and read his discussion and of course there is ideology there, in your sense.
However in fairness I used to use the term in a similar way when I was working in politics – I used to say that the LNP obsession with privatising services was ‘driven by ideology’. In that sense it meant that they believed ‘the market’ was always superior to publicly funded and publicly provided services.
In your sense, I guess ideology means a set of ideas and assumptions about the world (which we all have, and which tend to affected by our personal circumstances and experiences even if we don’t always recognise that) – in the political sense in which I was using it (similar to what Nicholas Gruen means I guess) it means something more like strong beliefs (in an almost religious sense) which you won’t subject to empirical verification or non-verification (you will prefer not to see empirical evidence that contradicts your beliefs).
I don’t think Mr Gruen is being quite fair in criticising this blog in that way, btw (if that’s what he is doing).
‘Nicholas Gruen’s claim that this discussion was too ideological’ I mean of course