Co-ops, incentives & the state

Four years ago, I advocated that public services be delivered by co-ops. So you’d expect me to be pleased by Tory proposals to do just this. Except that I’m not so sure. My problem is that badly organized co-ops might be worse than useless.  This is because, as Will Davies says:

Mutualism makes private sector organisations more attuned to the common good, but equally makes public sector organisations more attuned to particular private interests.

To see the problem, take this from the the Tories statement:

Government would negotiate a tariff or payment-by-results contract [with the co-op] – based on national standards – for the desired services and outcomes expected, which would provide incentives for staff to provide better services at better value.

But what if these results and standards are badly defined?
Take for example primary schools - the proposals don’t seem to apply to secondary schools - though I fear my point might apply to public services generally.  Let’s say the school’s results are measured by the proportion of children achieving level 4 in KS2 tests.
Teachers can increase this proportion in several nefarious ways; intensive coaching just before the test; narrowing the curriculum to the bear minimum; and concentrating their effort upon pupils on the margin of levels 3 and 4, and ignoring both the brighter and less able pupils.
Now, if teachers don’t have incentives to “provide better services”, some might not bother with these games. They might figure: “It’s no skin off my nose if the school misses this silly target. I’ll do proper teaching instead.”
If, however, the school  becomes a co-op, the teacher’s reasoning changes, at the margin. Her pay now becomes dependent upon gaming the system. Worse still, because her colleagues’ pay also depends on it, she faces peer pressure to play the game. The result could be that co-ops actually displace knightly motives and encourage knavish ones. Results might improve. But teaching won’t.
It’s here that analogies with John Lewis break down. At John Lewis, the interests of customers and staff are aligned, because it operates in the market place. Tory proposals, however, seem to envisage co-ops in markets where the state is a monopsonistic buyer. This aligns workers’ interests to the state’s interests - but perhaps at the expense of the public’s interest.
I fear, then, that this is statism with a human face, rather than genuinely, properly, radical change.

Comments

[Leigh Caldwell]

Hmm. You found a whole different set of reasons to be depressed about this idea than I did. That doesn't make me feel better.

http://www.knowingandmaking.com/2010/02/private-ownership-public-services.html

[ian]

Still centrally funded, still centrally set standards. It is Thatcherite privatisation behind a mask of cuddly social conscience.

I prefer my approach.
http://ibanda.blogs.com/panchromatica/2008/05/a-strategy-for-moving-towards-minimal-government.html

[Jackart]

I know why you're against it. The Tories proposed it, and they can't be right on anything, ever.

[Frank H Little]

A non-economist writes: it resembles an artificial "market", like the one that was meant to make the railways more efficient.

[Robs]

The Tories are just neo-Blairites - Labour plan B. The BNP are the only party capable of ending statism (by making the country ungovernable).

[Auralay]

Gotta watch out for those pesky minimalist bears.

[john problem]

Eeh, lad. Yer should go into yer local Co-op. Reet good they are. All the lasses are smiling and helpful. Picking holes in't Tory policy is tert mug's game. All yer've got to do is vote bloody Labour owt. Otherwise, we're done fer.

[charlieman]

Why is John Lewis the only model that people think of when considering co-operatives? Some social services in the UK are currently provided by the WRVS. The RNLI provide sea rescue services. In neither organisation is there a profit motive for professional staff and the state is the principal buyer.

[Alex]

"I know why you're against it. The Tories proposed it, and they can't be right on anything, ever."

Or he could be against it because it's a bad idea.

If you think his reasoning is wrong, explain why.

[william]

"I know why you're against it. The Tories proposed it, and they can't be right on anything, ever."

Of course they can, but only by accident.

[chris strange]

The problem is the monopsonistic buyer, but the Tories also have policies that could get the market into that side as well. By making it easier for people to set up new schools and transfer their kids (and the money that follows them) to these new schools you start to break up the monopsony. Assuming that the parents that move their kids around do it in the best interests of the kids then this would make it in the interest of the schools to act in the interest of the kids, as viewed by the parents.

[Roger Thornhill]

I do not doubt that the Tory plans will result in more power to the centre. They will "approve" who can. They will have oversight.

What is the point in converting a State run monopoly into a co-operative running a State-mandated monopoly? That is worse.

Plurality is the key. Some suppliers might be co-operatives, others private. Customers shoudl be free to choose (and by "choose", I do not mean move house to get into another geographic monopoly!).

[Rich]

There I was thinking "monopsonistic" was a typo, but no, it's a wonderful new word and an interesting concept!

[Check out Wikipedia -- this blog won't let me post the URL]

[David Morson]

The idea of co-ops is pretty good and I have really liked it but the actual concern is that those co-ops should be properly organized and managed.

[alanm crisps]

Co-ops are no bad thing but:

- You need to make sure you achieve something and not spend all your time voting on paperclips purchasing (I have some experience here).
- I wonder about the efficiency of competition when you have all the start up costs all over again - new IT systems (another million on a website), years of knowledge lost (make same costly mistakes again).
- There are already trusts delivering services, does this not tick the competition box?