Saturday, 2 August 2014

Schools, hospitals and money...give me just a little more choice!

We live in a world of choice. Think for a brief moment about how many different types of cheese you can buy in your local supermarket. Consider the aisle filled with varied and exciting bread. And ponder on a world where one relatively small space can contain over 45,000 different products from, it seems, everywhere in the world. Still further, if you live in Bradford at least, a different journey can also take you to market stalls and shops selling great locally sourced fresh vegetables, fantastic hand-crafted sausages and super fresh caught fish.

Note as well that, when it comes to that convenient portable communications device we all love, there's a still more bewildering choice of handset, of contract and of places where we'll get some informed help making our decision. It truly is a wonderful world, a world created by that simplest of simple ideas - one that's been around since the dawn of time - free exchange for mutual benefit. Or if you want it put a different way - the market.

Yet when it comes to three things that are pretty fundamental to everyone's lives - education, health care and money - we're told that free choice is a bad thing and instead government must decide on the nature, quantity and distribution of these essential requirements. What makes this so very odd is that we can see how free choice in free markets improves the lives of everyone, yet we continue to tell ourselves that somehow markets would be a bad thing in these three vital areas.

Instead of the liberty of markets, what we choose instead for the provision of schools, hospitals and cash is a thing called 'government'. And what a thing that is - confused, secretive, lying, deceiving and troublesome. I was talking the other day with some public health folk and (I forget the precise details) the matter of 'who runs the NHS' arose. Scales fell from my eyes as I appreciated that no-one actually runs the NHS. For sure there's a chap called Simon who has the title 'Head of the NHS' or similar but he doesn't really run this vast many-headed hydra except that, because there is no consumer sovereignty in health care, there has to be a process for allocating the money set aside by government to pay for said health care. And Simon is in charge of that process.  He doesn't run hospitals, he has no say over primary care, he doesn't train doctors or nurses - he sits atop a pile of other people's money and uses it as a bully pulpit.

The same goes for schools - there's no-one in charge and no market either (although there is a chimera of choice in the ability of parents to 'express a preference'). We have Michael who is in charge of Ofsted, we have a collection of 'Directors of Children's Services' in 'Local Education Authorities' and we have the management of individual schools (governors and school 'leadership teams'). As with the NHS these people aren't 'in charge' of the system and there is no fair or efficient system - nor can there be outside of a choice mechanism - for the distribution of either funds or for the making of 'allocation' decisions.

For both health and education we use bureaucracy moderated by the unseemly rabblerousing that is political debate as a proxy for the market. But the systems are too large for effective central direction so some things are 'devolved' to different parts of the system. Except that two things remains - one is what we might call the Widdecombe Principle and the other is our expressed preference for consistency.

The first of these two things refers to Anne Widdecombe who explained that central direction would never change so long as the Minister was dragged kicking and screaming into the Newsnight studio to explain. Even though ministers - like the Head of the NHS and the Head of Ofsted - are not really 'in charge' of the system, they are the ones who get verbally berated when stuff goes wrong.

The second factor is what we say to opinion pollsters - essentially that we don't like 'postcode lotteries' and therefore we don't like difference and variation within national systems. Our slightly warped idea of 'fairness' tells us that everybody should get the same, even if that 'same' is mediocre because the avoiding of difference destroys innovation, initiative and creativity.

All this brings me to the third thing government won't let choice and markets play with - money. It seems to me that what we might called 'modern applied macroeconomics' is predicated on the continued 'control' of money by government. But, just as with health and education, there's only an illusion that someone is in charge of the system. There's Mark who is the boss at the Bank of England - he gets to set interest rates (and, were I a cynic, keeps his job if he doesn't stray too far from what HM Treasury wants to do) but it doesn't seem to me that he's really in charge.

There may be very good reasons for all this lack of choice - that idea of fairness, the convenience for all of a defined and guaranteed currency. Plus, of course, the big important thing for government - collecting taxes. Indeed the scared rabbit reaction of banking regulators to 'cybermoney' like Bitcoin is rather revealing of this fact!

It seems to me that the next few years - perhaps a couple of decades - will see a huge tug-of-war between these big three government monopolies and a set of technology-driven innovators. Some of these innovators will be looking for a fast buck through exercising some sort of arbitrage while others will be seeking to develop choice models within the systems themselves - building on the availability of data to disrupt that desire for sameness I described earlier.

I don't know how this contest will play out but I hope that, whatever the long term role for government systems, it results in more choice. Or rather in systems where consumer sovereignty is allowed to operate. I hope for this result because it will deliver the greatest rate of improvement for the least effort (and probably least money). There's a big debate in the NHS about a future funding gap - it seems to me that the solution to this challenge isn't running the good old centralised NHS and trimming a bit here or rationing a bit there. Rather the funding gap is closed by allowing innovators to innovate and the best way to do this is by the development of real choice systems rather than the current 'plan and provide' approach.

The same goes for education. And for money. Choice is the best driver of improvement both through consumers exercising that choice and through providers responding to consumers is developing new, different and better way to serve their needs. And what works for bread and cheese, what delivers for mobile phones, TVs and insurance, will given a chance deliver for schools and hospitals and will provide a more stable economy less open to the abuse of politicians buying their way into power or bankers manipulating their way into wealth.



Junican said...

I don't know that 'choice' is appropriate for health care unless we abandoned the NHS altogether and move to insurance. One huge problem is that few people know what might be making them 'feel ill', nor what the treatment should be. It seems to me that the whole NHS should be 'patient needs' driven, in which case, I cannot see how 'targets' and 'budgets' can apply. As a simple example, if the sewers get blocked, the blockage needs to be cleared, regardless of any budgetary deficit thereby created. But, obviously, that does not mean that efficiency and innovation can be ignored. In fact, on the contrary - those things are even more to be desired.
What really annoys me is the way in which the NHS has been exploited by charlatans in tobacco control, alcohol control, etc. Those matters ought not to be the concern of the NHS. They rightfully belong to Public Health England.
I would like to see the Health Dept split. It is just too big. It might be a good thing to have two departments: a) Dept of Health Services (IE. the NHS), and, b)Dept of Public Health.
The reason for the splitting is to break up the monopoly situation. There is too much 'cosiness' (and waste) within Government monopolies.832

Anonymous said...

Dear Mr Cooke

It is interesting that the government fails in even the simplest of the three, provision of a sound money, presumably because the abuse of that provision provides much extra revenues to the government.

The concern over Bitcoin and tax is spurious since it is no different from trading in cash. People have the option to declare income or not, depending on their view of how much the government ought to be taking from them, as opposed to the government's view of the same, although the government will lose some revenue from its addiction to legal tender abuse. (New York state's response to Bitcoin is sheer lunacy.)

Government is unfit to run any of these services. The sooner it is kicked out of any influence on health or education, the better.