Efficiency and Quality

Abstract

The fundamental argument for the introduction of market principles into the management of the public service is that it will improve the efficiency and the quality of service, and reduce costs. It is seen as improving allocative efficiency, X-efficiency and technical efficiency. The incentives to overproduction analysed by public choice theorists will, it is claimed, be eliminated by the introduction of internal competition and market pressures to public bureaucracies. The separation of the political and managerial levels of control, with the establishment of clear standards and performance measurement systems, will prevent the dominance of the official. The reexamination of methods of working will lead to improved technical efficiency in the public service, through the elimination of waste and restrictive practices, and through the introduction of modern methods. The introduction of user choice will ensure that the public are able to get what they want, and that the providers take note of their wishes, improving allocative efficiency. The development of such processes as competitive tendering reduces the power of the producers and ensures that X-efficiency is increased.