UBS solves social problems faster and more efficiently than private alternatives

Efficiency The argument that markets enhance productive efficiency is well known and valid for many types of goods and services. The dominant argument in economic theory accuses public services of inefficiency, due to lack of competition coupled with the vested interests of bureaucrats and professions. These alleged shortcomings were used to justify introducing market rules into public services from the 1980s onwards. Yet the obverse failures of unregulated economic markets to satisfy consumer wants are also well known, and include tendencies to monopoly, the inability of markets to supply public goods, the self-defeating production of positional goods, and the inefficiency or ‘diswelfares’ caused by meeting wants in commodified forms. Transaction costs are often higher for both consumers and providers: the search costs for customers of comparing different pension or utility providers, the administrative costs of drawing up appropriate contracts, the policing and enforcement costs of monitoring large private companies such as Serco and G4S. Several sectors of the material foundational economy, notably the networked sectors, have large economies of scale, meaning they are ‘natural monopolies’. Moral hazards are encountered when profit incentives combine with unequal knowledge in markets. Competition between multiple providers, customer choice for service users and conventional cost-efficiency criteria for measuring success have largely failed to improve social outputs, let alone social outcomes. There are further advantages to a public— rather than market-based—system of service provision. Where efficiency is assessed in narrow output terms, calculations overlook the multiple dimensions of value, the many ways in which value is experienced and how it accrues. The concept of ‘social return on investment’ (SROI) has been developed over the last decade and adopted by government in the 2012 Social Value Act, which instructs public service commissioners to consider how to ‘improve the social, economic and environmental well-being of the relevant area’. Applying social value analysis to an assessment of service efficiency means taking account of longer-term and indirect effects, as well as shorter-term, direct ones. This does not sit easily with a market-based system. If staff delivering meals to people who are housebound take the time to sit and chat with them, this may reduce their sense of social isolation and generally improve their wellbeing, but it will increase costs by demanding additional staff time.