Dilemmas and Tradeoffs
Marketization creates four dilemmas that lead to change in governance. (1) Cost versus quality: squeezing prices siphons resources out of services that could be used to employ qualified workers on the front line, and the prescription of services that price-based competition requires drains the capacity of providers to innovate. (2) Payment by results versus equal access to services: while payment by results is consistent with the ethos of market governance it bears the risk of “creaming and parking.” (3) User choice versus user compulsion: NPM principles of consumerism are difficult to reconcile with the principles of compulsion built into the work-first welfare state. (4) Openness/transparency and transaction costs: openness, transparency, and equal treatment require costly administrative capacity. Insourcing provides one solution by taking services out of the market, but it is not a panacea.
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