Competition and switching in public service markets: Can they reduce inequalities?

Regulatory reforms to public infrastructure services across European Union (EU) countries were aimed at increasing consumer welfare by introducing competition and choice into service markets. However, empirical evaluations have questioned whether these reforms have benefitted all consumers, suggesting that vulnerable groups of service users (especially those with lower levels of formal education), might be locked into poorly performing services. We assess the relationship between the level of competition in electricity and fixed telephony markets in EU countries and evaluate the affordability of these services for different socio‐educational layers. Our findings show that – although in countries where there is a relatively high frequency of switching, inequalities between socio‐educational groups are smaller and eventually disappear – competition as such does not play a part. These results suggest that demand‐side regulation that successfully enables consumer switching has the potential to equalize social welfare, thereby reflecting a possible convergence of regulatory instruments and the central aims of the welfare state in this context.     

THE COMPARATIVE POLITICS OF AGENDA SETTING: THE EMERGENCE OF CONSUMER PROTECTION AS A PUBLIC POLICY ISSUE IN BRITAIN AND THE UNITED STATES

This article compares the emergence of consumer protection as an issue on the public policy agendas of Britain and the United States in the 1960s. Similar forces caused the emergence of consumer protection in both cases. Governmental responses to consumer protection issues also have been similar, but distinctive features of each country's political system are evident as well. The analysis draws upon existing consumer protection literature for each country as well as the author's interviews with a number of Britons involved in this policy area. The principal conclusion is that consumer protection gained each country's policy agenda as a discretionary item. Events of the past few years demonstrate that it is not yet a durable agenda item in either case.     

Long‐term care reform and the role of housing finance

Abstract

The Clinton administration's recently announced home and community‐based care proposals have potentially important implications not only for long‐term care policy, but also for housing policy in the United States. This article attempts to draw out some of those implications. The first section examines problems inherent in the current “medical/welfare” system of financing long‐term care, which constrains consumer choice by limiting the supply of providers to control costs and by increasing medical professionals’ control over the types of services provided in the name of quality control. The medical/welfare dominance of long‐term care policy has resulted in an overreliance on nursing homes as providers, resulting in both escalating costs and continued consumer dissatisfaction.

The second half of the article looks at recent market and policy developments in response to consumer demand for lower cost alternatives to nursing homes. These alternatives promote more consumer autonomy and control in supportive housing arrangements. A more comprehensive services and housing policy could promote these developments in an approach that combines the security of public financing of supportive services with the benefits of consumer choice, market competition, and legal protections that characterize housing markets. In such a scenario, housing finance institutions—including government agencies, lenders, developers, and investors—could play a pivotal role in the long‐term care debate not only by unlocking substantial financial resources but, equally important, by transforming the provision of long‐term care services to promote consumer choice and autonomy.     

Ownership versus competition: Efficiency in public enterprise

Certainly the introduction of product market competition into potentially competitive or, at least contestable, markets can improve performance. To take just one example, Morrison and Whinston (1986, 1986) estimate that even in the imperfectly contestable U.S. airline industry, the annual U.S. welfare gains from deregulation have been around $6 billion.But this paper argues, and further buttresses empirically, that ownership also matters and matters a lot. This does not necessarily imply that private ownership is always preferable to public ownership. PCs also engage in rent-seeking where possible, but they will try to maximize realizable rents by (relatively) keeping down production costs. Of course, where there are massive economies of scale and scope, high entry barriers, or externalities, public ownership may be preferred. (see Vickers and Yarrow, 1988).     

The provision of public services by government funded decentralized agencies

Public services are often provided by lower level agencies that are funded by higher level government. Since markets for such services do not exist, normal pressures to minimize costs do not operate; indeed, usually these costs are unobservable. We study a principal-agent model which emphasizes the distinction between the financing and provision of public services. Two broad situations are analyzed: (i) the agencies are induced to reveal true costs; and (ii) in addition, to minimize costs, agencies must be induced to exert effort. The characteristics of the optimal funding contract and the marginal cost of public funds are derived in each case.     

Outsourcing Public Service Delivery: Management Responses in Noncompetitive Markets

Capturing the benefits of competition is a key argument for outsourcing public services, yet public service markets often lack sufficient competition. The authors use survey and interview data from U.S. local governments to explore the responses of public managers to noncompetitive markets. This research indicates that competition is weak in most local government markets (fewer than two alternative providers on average across 67 services measured), and that the relationship between competition and contracting choice varies by service type. Public managers respond to suboptimal market competition by intervening with strategies designed to create, sustain, and enhance provider markets. In monopoly service markets, managers are more likely to use intergovernmental contracting, while for‐profit contracting is more common in more competitive service markets. The strategies that public managers employ to build and sustain competition for contracts often require tangible investments of administrative resources that add to the transaction costs of contracting in noncompetitive markets.     

THE DOCTRINE OF STRICT LIABILITY: AN ALTERNATIVE APPROACH TO CONSUMER PROTECTION REGULATION

Using a legal system of strict liability allowing contributory negligence as a valid defense provides an alternative to consumer protection regulation. In addition, the strict liability system allows rapid and responsive compensation to injured individuals. Corporate uncertainty as to future costs and business environment are substantially reduced, thus allowing firms to make accurate and rational long-term, strategic plans. This paper presents the basic functional constructs required for developing a viable regulatory framework using strict liability and then looks at an example where it could be employed. The scenario deals with an environmental pollution and protection problem. In the example, a strict liability system allowing for a defense of contributory negligence is shown to be conceptually more efficient and desirable than the existing regulatory system and negligence liability procedures.     

Internal markets in the public sector: the case of the British National Health Service

This article discusses the application of internal markets to the publicly financed British National Health Service (NHS). The objective of internal markets is to obtain, through the stimulus of competition, greater efficiency, effectiveness, and responsiveness to consumer needs than would be obtained through continued direct government provision. There have been real advances in the NHS attributable to the internal market, not the least of which is a growth of debate, dynamism, experimentation, and entrepreneurial attitudes that contrasts sharply with the glacial pace of change prior to 1990. However, there is also a sense in which the reforms have, thus far, failed to achieve all their promoters hoped for. It is far from clear that efficiency gains exceed the high transaction costs associated with the reform. Competition remains restricted, information is inadequate, and the regulatory and legal framework is flawed. Lack of transparency and a clear publicly stated ‘end vision’ of the reform process, together with a refusal to evaluate it systematically, have heightened already intense controversy. This has blurred the fact that the internal market is not a panacea and cannot alone be expected to solve the problems of a health service where demand is accelerating faster than the resources available through taxation. (© 1997 by John Wiley & Sons, Ltd.)     

Attitude Change and Policy Decisions: The Case of Norwegian Alcohol Policy

In a democracy, political decisions ought to be based on public opinion. In practice, however, the mechanisms connecting voter preferences and public policy are complex, and it appears that public opinion may be partly policy-shaping and partly shaped by policy. In this article, some of these mechanisms are discussed. The article presents, first, three models of public reactions to policy decisions. These models are then applied in an analysis of the liberal trends in Norwegian alcohol policy as well as attitudes towards this policy. The results are consistent with a "consumer model", where citizens evaluate public policy according to their preferences, as well as a "support model", where they tend to follow and support decisions made by political leaders. A "discontent model", where implementation brings about less acceptance of a policy, is not supported by the data.     

Deregulation and Participation: An International Survey of Participation in Electricity Regulation

Amidst the wave of privatization and "deregulation" across the globe, a new set of regulatory structures is being created. The fact that deregulation actually involves "re-regulation" has been acknowledged in the recent literature, but the tension between regulation and public participation has been understudied in these new structures. While some private markets need effective regulation to reduce transactions costs and ensure stable market rules, consumers need regulation that is responsive to, and protective of, their interests. Consumer participation, therefore, is an important component of effective regulation. Effective regulation must also consider collective national or public interests, including the well-being of corporations. Therefore, regulatory agencies need to be both independent from, and responsive to corporate, consumer, and public interests. This article will briefly examine the tension among the competing goals of regulatory independence and responsiveness, and then conduct a broad survey of the status quo of public participation in national regulatory structures for electricity in the Americas. Our case studies demonstrate a wide variety of institutional mechanisms for participation, yet we find that no existing system seems to embrace direct participation by a wide set of consumers. The problems are even more acute in developing countries. We conclude by looking at recent experiments and proposals to improve the levels of participation in regulatory decision making.     

What have public affairs and advertising got in common?

The author argues that to be successful companies need to adopt a stakeholder view of how they interact with society—in short their communications need to be integrated. Rather than focusing purely on their consumer markets, advertisers should be aware of the impact of their messages on public opinion, pressure groups, politicians and others that make up the ‘political market’. Equally, public affairs practitioners should be more involved in the commercial activities of their colleagues in advertising and marketing. Integrated communications, in the author's view, is not only an operational necessity for companies, but a strategic imperative for sustainable success in a global world with differing local expectations. Copyright © 2002 Henry Stewart Publications.     

Markets in a Democracy

The global financial – and now economic – crisis has demonstrated that markets, and particularly financial markets, are not self-correcting and that, if left unregulated, they will inevitably overreach themselves and lead to excess. Governments have a duty to regulate markets in the public interest but where (as in the case of recession) markets produce adverse outcomes, governments also have a duty to lean against market logic in order to minimise those outcomes. These lessons extend well beyond purely economic matters. Unregulated markets will inevitably produce social and environmental outcomes that reflect narrow and short-term individual and sectoral interests rather than those of society as a whole. The whole point of democracy is that it allows the less powerful majority to use the power and legitimacy of government to offset and counteract the economic power of a minority. If the market cannot be or is not challenged, democracy itself is weakened, loses its point and forfeits the confidence of the people it is meant to serve.     

Managing Markets for Public Service: The Role of Mixed Public–Private Delivery of City Services

The privatization experience of U.S. municipalities shows declining use of complete contracts and a dramatic rise in mixed public–private delivery (joint contracting) of city services. The analysis here shows that city managers have recognized the need to move beyond a simple dichotomy between market delivery and public planning to an approach that balances concerns with efficiency, market management, and citizen satisfaction. The New Public Management stresses the importance of competition and efficiency, transaction costs economics emphasizes the challenges of contract management, and New Public Service assigns primary concern to citizen engagement. Nonetheless, city managers see the need to balance all three. The analysis shows the evolution of a middle position where city managers integrate markets with public delivery and give greater attention to citizen satisfaction in the service delivery process.     

Varieties of consumer credit data regimes: A regulatory governance approach

Credit markets are expanding, and with them also the automated, large‐scale commercialization of personal credit data. The increasing use of data and scores for commodified decision making lends greater urgency to the study of credit data regulatory regimes. This article promotes a comparative regulatory governance perspective as the basis for theory‐driven, multidimensional measurement. In order to measure consumer protection, we distinguish three different subregimes (collection, profiling, and use) and construct a two‐dimensional index of consumer protection (market restriction and user empowerment). We then assess the index and demonstrate its applicability and validity, building on empirical analysis of the regulatory regimes in the United States, France, Sweden, and Israel for the year 2019. Our approach points to a new direction in researching and measuring regulatory regimes in a comparative manner, which looks beyond national analysis toward an in‐depth understanding of other, equally important, levels of variation.     

Public Support for Corporate Social Responsibility in the Welfare State: Evidence from Sweden

Several scholars have claimed that we are currently witnessing a growing saliency of so‐called ‘corporate social responsibility’ (CSR). Yet, while there is a lot of work suggesting that public opinion might prompt firms to behave in socially responsible ways, there is a lack of empirical studies exploring the extent ordinary to which citizens actually support CSR. Moreover, the state is conventionally theorised as the main institutional device for governing markets and their social consequences, and there is a growing literature exploring the relationship between CSR and the state. On the basis of these observations, this article juxtaposes public attitudes towards CSR and state intervention in the market. Considering that attitudes might vary across groups with different structural relationships to the firm, this study also looks at the social bases of support for different attitude profiles. Using Swedish survey data collected in 2011 and latent class analysis, the empirical results demonstrate that most Swedes in favour of CSR are highly supportive of state intervention in the market. The study of social cleavages restates this pattern: social groups with fewer marketable resources are strongly over‐represented in supporting a combination of CSR and state intervention in the market. No clear social profile is found for the relatively small group of people who support CSR but not state intervention. It is concluded that voluntary CSR is unlikely to offer a serious full‐scale alternative to the welfare state: Swedes continue to think of public authorities as the ultimate institutional guarantor of social welfare.     

Information, market government, and health policy: a study of health data organizations in the states.

Information is essential to the success of market-oriented policies. Information on health care costs and quality is collected and distributed by state governments through health data organizations (HDOs) to enhance competition and lower costs in the medical industry and to improve consumer choice among medical alternatives. This article examines the information collected, produced, and distributed by state health data organizations in Colorado and Pennsylvania. Findings reveal that information was not the objective determinant of choice and competition as market-oriented policy designers had hoped. Nor did market-oriented bureaucracies produce and distribute data readily accessible for public choice. Instead, information produced and distributed by these HDOs was the result of political and bureaucratic exercises that conform much more to classic interest group policymaking and captured bureaucracies than to contemporary market-oriented government ideals. The findings underscore the extraordinary difficulties facing federal-level policy designers as they contemplate introducing market-oriented health care policies on the national level.     

Reconstructing Citizens as Consumers: Implications for New Modes of Governance

This article examines the relationship between government and the public within a producer–consumer market exchange. Four conceptual problems are identified in relation to the application of market models to the relationship between government and citizen. These types of models fail to account for the essentially political engagement between government and citizens, the collective responsibilities of government, the absence of markets in many areas of government service delivery and the complexity of relations between government and citizens.     

Markets beyond politics? The state and the internationalisation of financial markets

Abstract. The role of politics is particularly difficult to discern in the domain of international financial markets, where the state's capacity to control or direct capital flows, without incurring considerable opportunity (and political) costs, appears so limited. In addressing this question, this paper argues that the process of internationalisation is first and foremost the consequence of political decision-making (to create open markets) and that many domestic interests linked to the international market have promoted internationalisation both through their policy preferences and economic activity. The paper will then go on to argue that the threat of financial instability and crisis, a consequence of the increased volatility of relatively unregulated capital flows, has prompted political demands for more concerted inter-state co-operation to maintain stability. Much of this takes place through transnational agreements among state agencies, such as the central banks, and much through 'reregulation' in the guise of 'harmonisation' of regulatory and prudential supervisory policies.
Some of this process has received considerable publicity, such as the harmonisation of EEC regulations to facilitate freer trade in banking and financial services as part of the preparation for the Single European Market in 1992. Likewise, the current Uruguay Round of GATT trade talks has the liberalisation of trade in financial services on its agenda. Other aspects of the process have been carried on quietly, far from public view, in such forums as the Bank for International Settlements. Such is the case of a recent agreement to harmonise minimum capital adequacy requirements for banks operating in international markets. The paper uses these three cases to support the argument about the role of politics and the state in international finance.