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5 - Competition and choice: the place of markets in connecting information and performance improvement

Published online by Cambridge University Press:  05 July 2011

Carol Propper
Affiliation:
Imperial College Business School
Deborah Wilson
Affiliation:
University of Bristol
Kieran Walshe
Affiliation:
Manchester University
Gill Harvey
Affiliation:
Manchester University
Pauline Jas
Affiliation:
University of Nottingham
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Summary

Introduction

The ‘invisible hand’ of competition is a common textbook mechanism for improving performance. Provided there is sufficient information, the autonomous choices of individuals will improve efficiency of provision. The competitive pressure consumer choice creates helps make private firms more efficient, and they cut costs and improve their goods or services in order to attract customers. Is the same true in the context of public services such as healthcare and education? It seems easy to transfer the logic to the provision of public services. Giving service users the ability to choose applies competitive pressure to public service providers and, analogously with private markets, they will raise their performance to attract (or retain) clients. The aim of this chapter is to subject this assumption to the scrutiny provided by both the theoretical and empirical economic evidence on choice and competition in the healthcare and education sectors.

Extending competition between public service providers is currently a popular policy, in the UK and elsewhere. In the UK public sector some form of competition has been present since the quasi-market reforms of the late 1980s (Bartlett et al. 1994), which emphasised competition between service providers. More recently the policy discourse has focused more on increasing direct consumer choice (Le Grand 2007). The key question we address is whether policies that promote market-like pressures create the incentives for hospitals and schools to improve their performance and, if so, under what circumstances. What may be other, possibly less desired outcomes, and why?

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Chapter
Information
Publisher: Cambridge University Press
Print publication year: 2010

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