Limits to the role of markets in public service reform

The current agenda in many countries for public service reform was provoked by certain Widespread perceptions of public service failure. However, failures are now appearing with the reform agenda itself. In order to understand these, it is necessary to go back to the characteristics of the pure market, which is often in the minds of public-service reformers. It is therefore also necessary to understand the characteristic failures associated with the pure market, and the ways in which public services are to be understood as responses to those failures. This enables us to understand some of the weaknesses of the public service reform programme, and leads finally to some suggestions for a second wave of reforms. Many current attempts at reforming. public services include marketization and/or privatization as major components. These reforms are aimed at remedying identified public service failures. However, in appraising these it is necessary to remember that, at least in capitalist economies, public service provision often originated because of identification of a market failure. It is therefore important that reformers consider whether marketization and privatization risk exchanging a return to a market failure in exchange for remedying a public service one. In this paper I shall tackle this issue by starting with the basic characteristics of a true market economy, followed by an identification of the principal potential failures associated in practice with each of these. This enables us next to relate typical traditional public service responses to each of these failures, and then to considering the typical public-service failures associated with these responses. From there we are able to generate a list of the characteristic public service reform responses to these; and therefore to consider their potential failures, particularly where they risk returning to a previously acknowledged market failure. Finally, we can examine some potential responses to these public service reform failures, which might lead on to a 'second generation' public service reform agenda.