Tag Archives: Public Choice theory

Public servants and their inefficient ways

Society has always needed scape goats for its many failures, it makes it easier if one can identify a person or group responsible for these failures, it avoids any difficult soul searching into the real cause of the problem. Usually these scapegoats are from an ethnic minority, it was only 50 years ago that boarding houses would have notices stating that the Irish were not welcome. Since that time new scapegoats have appeared usually from the new immigrants at one time is was Afro Caribbean’s who were blamed for the increase in crime in the 1980s, a role they have now vacated, which is filled by Eastern Europeans. However what is unusual is the addition of an occupational group to this list of scapegoats, that is the public servant. We are blamed for the lack of dynamism in society or as it is more usually termed economic growth. Public servants either through their adherence to bureaucrat practices make change so or impossible or they just syphon off tax revenues to little productive purpose.  
The outing of this parasitic group that feeds off the life blood of the economy was the work of the American public choice theorists. They highlighted our bad work practices, in the words of Charles Murray the public servants solution to a problem was always the same, to ask for more money to create a new department to deal with the solution and promote themselves to run this department. All that motivates us is the opportunity to increase our own status and incomes. Job security means that we don’t have to respond to public demand. Our customers the public lack any sanction to compel us to perform better. The solution is to break up these public sector monopolies into competing businesses that are forced to compete for the public’s custom if they are to survive. 
These theorists confirmed what society had always thought that we were a group of jobsworths who were only interested in feathering our own nests who provided the public with an abysmal service in return for our inflated incomes and job security. This is such an obvious truth that journalists such as Simon Jenkins can state with certainty that the education, health, legal and defence systems waste public money on a vast scale and that profligacy with public money produces little of value. It is such an obvious truth that he does not have to produce any facts or figures to prove his assertion, everybody knows that he is right.
Governments have long been persuaded of the truths of public choice theory, so much so that they have contracted out, wherever possible services to the private sector. Where services have remained in the public sector, they have created large external costly bureaucracies, whose only task is to ensure that public sector workers do their job, according to the principles of the free market. These inspectorates have names such as, the Care Quality Commission and their sole role is to police public sector workers. Neither the government or the advocates of public choice theory see the irony of having to introduce a large and costly bureaucracy to ensure that the public sector now works according to the principles of the free market. Public servants instead of experiencing the freedoms of the so called free market are in fact part of a new ‘Big Brother’ society. Winston Smith’s world is that of the new public sector.
Given that public choice theory teaches that public servants are only self interested of individuals who have little interest in serving the people the new inspectorate and public sector managers have to be vigilant to root out any of the bad practices and habits that are associated with bureaucracies. The only way they can achieve this is to monitor every minute of the public servants working day. However even the new bloated management teams and inspectorates cannot be physically present at every minute of the working day of each staff member. Consequently they have devised a system of targets which is constantly growing as inspectors are constantly thinking of new ones and workers are expected to provide evidence that they have been working to achieve these targets. This involves members of the staff team completing paperwork to demonstrate how they have achieved these targets.The demands on staff time for record keeping have reached such level that in teaching for instance the time spend on record keeping is creeping up towards 50% of time spent in work. The priority in the public sector has become not service delivery but record keeping which enables the manager to demonstrate the ‘appearance’ of staff adopting good working practices which is thought to be indicative of the quality of service provided. 
These new managers and inspectors have a fear of staff having free time on their hands, teachers provide perhaps the worst example in their minds. They have breaks when the children are going out to play or having lunch. Unfortunately for these new ‘public choice’ theorist children cannot be keep working without a break. This gives the teachers an opportunity to get together and talk, this give rise to the greatest fear of the public sector reformer, which is ‘canteen culture’. Given free time the teachers have the opportunity to discuss their teaching with their colleagues and what this enables is the dissemination of ‘worst practice’,the so called canteen culture or what others might call the ‘work ethic’. These reformers are terrified of the older staff passing on bad practice to new teachers. The only solution is to turn free or non teaching time into work time, this time can be used to complete some of the many records required of teachers to demonstrate good practice.
I can confirm the worst fears of the public choice theorists, we did not spend non teaching time discussing good teaching practice, but we gossiped about television programmes, who was having an affair with who, argued about politics. In other words we never used this precious time to discuss how to improve our teaching practice, we were of target or whatever the management speak is for wasting time. I can remember that is one school a group of staff had set up in one of the staff rooms the board game ‘Risk’ and spent all their lunch times playing this fiendish game. This surely demonstrates best the horrors of allowing staff to do what they wish with non teaching time.
Fortunately reformers were able to see the horrors of the old well established service practices and were able to sweep them away. Now in schools staff are constantly on target and the obstructive ‘canteen culture’ of the past is fast disappearing. As an example of the latter I can remember receiving a survey from the education ministry asking to complete and return so they could work on the results to improve teaching practice in all schools. I with all my senior male colleagues threw the survey in the bin. Today no teacher would contemplate treating with such contempt a directive from the education ministry.
What I going to suggest is that when we consider the fruits of these reforms the question to be asked is have the expensive reforms achieved what was intended or could improvements have been better managed at a much smaller cost. As a sceptical economist I tend to the latter view, perhaps an example from teaching will demonstrate my view better. The governments of today and the recent past keep trumpeting the success of their reforms as demonstrated by the improvement in school exam results. What these politicians fail to understand is that there is a different between coaching students to pass an exam and educating them. Educationalists will admit what makes a good education is open to debate, as is how students actually learn, yet our education ministers claim they know, in fact they have very little understanding of what makes a good education. It may be elitist to say so but throwing out a few spurious statistics will impress a gullible press and media but that all it is the appearance of an improvement in the education system.
Unlike most critics of the recent reforms I am not going to argue that the previous education system in which the public service ethos was seen as the main motivator was perfect but that the reforms introduced at great cost have failed to achieve their purpose. There were much better ways to improve a system that actually worked quite well, methods better than adopting a ground zero approach to reform. What reformers believe is only by destroying the old system and practices will they will be able to change the system. 
What Simon Jenkins the journalist and all the denizens of Fleet St., Westminster and Whitehall fail to understand is that public sector work is undertaken by people for other people, it’s a personal relationship. People are different and have different needs they cannot all be fitted into one schema developed some Whitehall bureaucrats under the direction of a politician. Policy is directed in way that will win favourable headlines. The teaching of reading demonstrates this, any educationalist or teacher will say that children learn to read in a variety of different ways.Yet the education ministry has declared in all ignorance that only one method is acceptable and that is phonics. Good practice or reality matters little to the Whitehall bureaucrat or politician, why matters is conformity to what is seen as good practice.
What politicians and the media are good at doing is seeing perceived failures or inefficiencies and acting in a way that is often counter productive to good practice. Certainly it is frustrating when you are queuing at the Post Office when the counter clerk takes what seems to be an inexplicable break, when there are huge queues in the office. Yet this may be the only way the stressed staff can cope with the myriad list of rules, understaffing and the sheer monotony of the work. However it is on this perception of the service that our political masters decide policy. When I was in the teachers staffroom myself and my colleagues would often express in disrespectful attitudes our attitude to our managers and the latest government initiative. Our disrespect was often a way of coping with the stress of the job, can I suggest it was no more than skin deep moaning. Today that would be considered as heresy and such negativity would be discouraged quite actively in the staff room, denying the staff the opportunity to let go, now everybody has to be on message. 
When prejudice becomes policy it makes for bad policy, the fact that every body knows that public sector works abuse the system to their own advantage, is the poorest basis on which to form a policy. The evidence for the poor performance of public service has never been more than anecdotal, yet it is on the basis of this anecdotal evidence that the reforms of the past twenty or so years have been based. While there may be some evidence for improvements in quality of service the evidence is not overwhelming. Policy based on an obsession with the minutiae of the workers daily routine it is obviously going to miss the ‘wood for the trees’. Success is now measured in small percentage increases in statistics, the sight of the bigger picture has been completely lost. The old British civil service had the skills and resources to focus the whole nation’s productive effort towards fighting the war, the new British civil service was unable to organise the competitive tendering by rail companies for right to operate the West Coast railway line. It was so poorly organised that the losing bidder Virgin Rail was easily able to get the decision reversed at a court hearing. If mistrust is the abiding characteristic of the relationship between ministers and civil servants the quality service provided is going to be poor.
To this sceptical economist it appears that the politicians having identified faults in the public sector have devised reforms that instead of improving the service have on the whole made it much worse public service.  


Nietzsche and the Economists


Nietzsche made many criticisms of philosophy as taught in Europe. One of his main criticisms was that it was written in ignorance of its real subject matter, that is man. Free will is one of the main tenets of moral philosophy yet Nietzsche cast doubt on its existence. How free he asked was tge criminal when he conducted his crimes? He argued that psychology taught that many actions of the individual are pre determined by their biological drives. Is the criminal freely committing his criminal acts or is he not acting in a predetermined manner. If this true how can the criminal be responsible for his actions? 

While Nietzsche’s  reasoning was founded on a rather crude biological determinism his argument is still valid. Moral philosophy was wrong when it assumed that an individual was responsible for his actions. Therefore all philosophers such as Kant were wrong when he based his moral philosophy on the categorical imperative. Kant’s categorical imperative states  that one’s actions should be capable of serving as the basis of a universal law,a philosopher’s updating of Christ’s injunction, to do onto as others as you would have done onto yourself. Nietzsche would argue that the individual man was incapable of acting rationally as Kant believed, as his actions were driven by a series of biological drives which could be quite irrational. To put it simply the rational man of the philosophers did not exist, so all philosophy was flawed, because of this fundamental error.

Nietzsche’s scepticism applied to economics

As a student of economics I do believe that although many of the insights that economics has developed are invaluable in understanding the economy, too much of the subject matter of economics is based on assumptions about the nature of human behaviour and the workings of the economy which are flawed and therefore much of economics is just plain wrong. What economists never practise is self reflection, they never question the assumptions on which their predictions about economic behaviour are based.

One of these fundamental assumptions of economics is that the economy runs most effectively when consumers are free to choose without constraint between a variety of options. Economists believe that they know best what they want. They don’t want some remote body such as the government making choices for them. If it does it because of its remoteness from the individual citizen will make the wrong decision. This philosophy underpins much of the reform of public services in the UK, which is about giving the user choice. Now when you go to your doctor you are given a variety of options to choose from. Last week when I saw my doctor I was given a choice of health care providers at which to have my chest X-Ray. Politicians and health care economists see this as an unalloyed good. They believe it is preferable that Individual such as myself have a choice about which health care provider to use. Rather than being directed to be health care provider by the government, to a help care provider that I would not have chosen. However there is evidence that this apparently self evident good is not always a good.

What evidence there is suggests that whatever we want as consumers it is not always choice. Two American economists conducted an experiment into choice. They ran two market stalls selling jam, on one stall they had an almost infinitely large selection of jams and on the other a very limited selection of jam types.  The second stall sold the most jam, as it appeared that when  people faced a large range of products from which to choose an almost they found it difficult to decide which one to buy. When choice was limited they found it easy to make a decision. Tesco Britain’s largest supermarket discovered this truth through its falling sales . In its stores there could be up 30 different varieties of one product on display, whereas it’s more successful rival Lidl would have one or occasionally two examples of one product. Customers did not want a large product range, they preferred the Lidl approach. Lidl also by limiting its product range was able to buy in bulk and could negotiate large discount through being a bulk buyer. This fed through to lower store prices which made Lidl a formidable competitor for Tesco. 

Economists by recommending the break up of public sector monopolies its several competing private suppliers to offer the service user more choice may be mistaking the public mood.  Until 1993 railway services were provided by the state owned British Rail. Then the state monopoly was broken up and rail services and divided up among various competing rail companies, so to give the rail traveller a choice of service provider.  After 22 years of privatisation the majority of the people want railways to be renationalised. Rail fares are now some of the highest in the world and the conditions travellers are subjected to are distinctly second class. The term ‘cattle truck’ as a description of how people are transported at peak times is a frequently used term. Also the costs to the government of a privatised rail service are much higher than the costs of running the former nationalised rail service. Private firms require from the state a huge subsidy to run what they claim is an unprofitable public service. They claim that they need subsidies to break even or to make a modest profit. Yet all the companies make a significant profit,a profit that up is massaged downwards for reasons of public relations and tax avoidance. Only a free market economist would find something of value in a rail service which charges some of the highest fares in the world for what are some of the worst of travelling conditions. 


Economists lack the skills of self reflection, they never question the core principles or truths on which the subject is founded.  These founding principles of economics are little more than assumptions about human behaviour which are frequently wrong, which be proved on reflection. Until economists can apply a little Nietzschean scepticism there subject will continually provide the wrong answers to the questions asked of it.

Misplaced Scepticism – Public Choice Theory


Today when reading my paper my eye was caught by the headline for an article on the ‘Benefit Culture’. The journalist is a self proclaimed sceptic and his articles exposing the follies of the great and powerful make good reading. Scepticism is the necessary tool of the journalist, only the journalist has the licence to speak the truth to the powerful. This scepticism has permeated upwards from the journalists to the politicians in contemporary Britain. Disappointingly the scepticism in its upward trajectory has morphed into a shallow scepticism, a scepticism of the type that ‘everyone knows’, known as ‘public choice theory’ it is one that sees public servants as only interested in feathering their own nests. A scepticism derived from the stories circulating amongst the great and good. They know for instance that NHS consultants don’t operate on Friday afternoons, as they want an early exit so they can get a round of golf in before tea. If they are making an early exit so it is more likely to being doing so to attend to their profitable private practice to service the needs of the great and the good.

Public choice theory states that it is mistaken to put more money into a public service to improve the quality of service, as that money will be spent on public servants on increasing their salaries, recruiting more staff so as to push the existing members up to higher levels of management to manage all the new staff, anything except improving the service. The solution is to introduce the free market into the public service, if public servants had to work for a private corporation they would be motivated to provide a better service. If service users become customers they will have a choice of service providers. Those that provide a poor service they won’t be used, so they will lose business and income putting so salaries and jobs will be put at risk. Only the discipline of the market can ensure a good quality service for users say its proponents. This is why the UK government has put most of its services out to tender. Security is no longer provided by the public services but is increasing replaced by private contractors, mercenaries instead of soldiers contractors provide security on dangerous overseas missions. Mercenaries instead of the army provide security on merchant vessels under threat from piracy.

Public choice theory is a foreign import, imported from the USA. Where it’s most vocal exponent is Charles Murray, a libertarian who has written ceaselessly on the evils of the state provision of public services. Know doubt his books are required reading for government ministers, along with Hayek and Friedman.

Kierkegaard devised a classic phrase to describe the thinking of the type ‘everyone knows …’ or what passes as public opinion. It is the ‘dog’s opinion’, that is equally meaningless as the noises that emanate from my dog’s mouth.


Being imbued with the spirit of scepticism the government is paralysed by a crisis of indecision. If it wants to undertake a large scale infra structure project, such as the construction as the high speed rail link between London and Birmingham, it can’t trust the project to civil servants. Civil servants would spend a large proportion of the cash on themselves on either self promotion to higher grades or spending it on new departments to take on the responsibility for the project. All of which would make the project far more expensive than if undertaken by a private construction company. To avoid this problem, the government employs for-profit private consultants. At present a £1/4 billion has been spent on HS2 largely on consultant fees. To this outsider it does not seem to be the cheaper option.

Entrusting private sector companies to project manage and construct government infra structure projects can lead to all sorts of problems. When the Labour government decided to upgrade the London Underground system, they awarded most of the work to a consortium of construction companies, who would project manage the project and also undertake the construction work . They awarded the contracts to themselves at very generous prices, with the result that the money long ran out before the project was completed.

Public choice theorists in government believe that the civil servants can’t be trusted, as they are only interested in feathering their own nests. To reduce the scope for the abuse of public funds, as few as possible of them should employed. Conservative and Labour governments have made it a priority to get rid of as many state employees as they can. This can have unfortunate consequences, the HMRC has been slimmed down so much that it tax collecting powers have been severely diminished. Now as a consequence the UK comes increasingly to resemble Greece, where large numbers of individuals and businesses avoid paying tax. Three of the multi national giants (Google, Microsoft and Starbucks), while earning vast revenues in the UK pay little or no tax on their incomes.

There is a solution to the crisis in government and that is a return to the mixed economy or Social Democracy. In the Social Democratic state it is recognised that it is the role of the government to provide those services which the free market cannot provide effectively, such as universal health care and education. This however will not happen while the current generation are in power. Conservatives, Labour and the Liberal Democrats are all wedded to the ideas of Neo-Liberal and ardent practitioners of public choice theory. Only when the next financial crises comes is there any chance of change. Hopefully after that the three main Neo-Liberal parties will be decimated at the polls and replaced by a new generation of politicians with very different ideas.