1. I suggest that a distinctive Third Way approach to economic policy is to
tackle the micro-level mechanisms of the other two ways to elucidate what
works well, and why. This should be done by close observation and
experimentation to get evidence rather than by armchair analysis.
Definition of one or more Third Ways will follow from the results.
2. To over-simplify, we might say that all goods and services can be
provided either by:
WAY X: the market, where the decisions of individual producer and consumer
are paramount and reducible to money terms;
or by
WAY Y: where decisions are made by a body with some element of non-monetary
accountability. At its widest, this body is the state and the
responsibility is through, say, democracy. A narrower example is the
charity with responsibility to its beneficiaries and decisions exercised by
trustees.
3. Some organisations comprise elements from both Ways, of course. More
importantly here though, each Way has its pros and cons. Way X allows
competition for profits to drive improvements in quality, prices,
innovation, and so on. But it can also permit ruthless exploitation of the
ignorant and bring socially disruptive differences in incomes. Way Y
incorporates criteria beyond simple profit, particularly the welfare of
customers and consistency of treatment, plus greater opportunity for
motivations like the service ethos. But under Way Y, providers may turn out
to be bureaucratically indifferent to customers, to efficiency and to
innovation.
4. Effective analysis of the behavioural causes of these differences seems
to have been blanketed out by grand rationalisers on each side. Currently
the theorists of Way X happen to be in the ascendant. A more even-handed
exploration is needed to open up a Third Way.
5. The root mechanisms at work at the detailed level in both X and Y are
those of personal psychology, the behaviour of producers and consumers. The
new investigative disciplines of economic psychology and socio-economics
have much to offer. But how many policy makers and commentators have even
heard of them?
6. The various psychological and organisational mechanisms at work should
be explored through questions such as:
a) Why is competition "successful" in Way X but not in Way Y? And what does
"successful" actually mean here in practice? Are the methods of Y
inherently inefficient and stultifying? If so which behaviours are causing
this and are they modifiable?
b) What are the limits which X puts on welfare and fairness to the
individual? Are X's methods inherently inequitable and if so why?
c) If efficiency and fairness are inevitably opposed, how is a practical
balance to be defined and then struck? If they are not opposed, what style
of organisation will increase them both together, capitalising on the right
blend of personal motivations? If, for instance, "regulated" X or "internal
market" Y does this, then how are people actually behaving day-to-day in
each regime to make it so? Are there micro-level ways of substituting or
complemeting the profit motive by in-built mechanisms such as inspection
and control?
d) Decision-making in Y is inherently more complex: money value or "profit"
is only one of several criteria of decision. Good government is
intrinsically harder than making profits. What are the effects of this?
e) What are the perceptions and treatment of risk in each Way, and how are
they handled by decision-makers? Should a government be concerned to reduce
the citizens's contingent risks of life? If so how far should it go, after
simple defence of the realm? And is this better handled by X, by Y, or by
what combination of them?
f) How do the inevitable human propensities both to compete and to
cooperate act in practice in X and in Y, and can they be better combined in
a Third Way?
7. A prior question is whether these kinds of question are simply
intractable. Are we necessarily left in guesswork, axe-grinding and the
mindless pendulum of fashionable theory, swinging through history between
those who seek power through money and those who pursue it through direct
command?
8. Assuming optimistically that we are not doomed to such a state of
ignorance, I propose that the questions should be tackled at the level of
the individual as worker or consumer. What precisely is he or she doing
when reacting to the organisation's style and constraints? How do these
actions flow through to the general results of Way X or Way Y on the
economy and on welfare?
9. There are various science-based techniques available, from close
observation in the field, through small-scale trials, to deliberate
experimentation across a substantial sector. Post hoc it is hard to
identify the real pros and cons of privatisation, nationalisation or
hybrids, let alone the actual micro-level mechanisms which have been at
work. Grand rationalisers on either side give us lofty rationales, but
these so often seem blatantly tendentious. Good experimentation demands
something better. If there is interest in this approach, I can start the
ball rolling with a few suggestions.
10. The right investment in practical research would give great rewards.
But is evidence-based policy-making within our intellectual grasp yet?
Evidence may be expensive: but not as expensive as the alternative.
Derek Bradbury, 17 July 1998
brad@mail.eclipse.co.uk
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Hosting and email provided by new media consultants On-Line Publishing