Monstrous Strawman Argument Against Outsourcing In The NHS

One way to win an argument is to misstate your opponent’s logic, show that your misstatement is silly to ludicrous, then dance in victory at the lamentations of their women. This is also known as strawmanning. A useful example of which we get from the Alma Mater concerning outsourcing in the National Health Service:

The logic of outsourcing is that market-based production is better than public production because the governance of private organisations is more transparent, flexible, efficiency focused and disciplined by owners. But this idea is problematic on two fronts. In the first place the presumption of market superiority is an artefact of public choice theory; it’s not rooted in historical assessment of which regime, public or private, has better produced public goods.

Health care isn’t a public good, it’s both rivalrous and excludable – your getting that breast cancer op reduces the ability for me to have one and certainly the NHS will deny you the latest and most expensive treatment for breast cancer – so that’s that part of it dealt with.

The other part though, that’s not the argument for outsourcing at all. Rather, competition encourages productivity increases. Which, as Paul Krugman said, is pretty much everything.

Take it away from the state and private arena just for a moment. The NHS budget is around £150 billion a year. Budget and GDP aren’t the same thing but we can usefully compare orders of magnitude etc. So, the NHS, if it were a country, is about the size of New Zealand say.

Do we think that New Zealand would be better off without market based production? Nope. Do we think that New Zealand would be better off if all economic activity within it were protected from competition from outside it? Nope – we actually tried that experiment and the Muldoon NZ was very much poorer than the one that resulted from trade and competition.

And here is the standard view of the effects of trade and competition upon an economy:

In the long term, greater openness to trade and investment boosts the productive potential of the economy. Openness increases competition among firms, allows access to finance from abroad, improves the quality of production inputs, and creates incentives to innovate and adopt new technologies. The HM Treasury analysis estimates the impact on trade and FDI and what this means for productivity and GDP under EU membership and the alternatives. Higher productivity means better quality jobs which lead to higher real wages and household incomes.

The argument in favour of outsourcing is that the lust for profit leads to innovation so as to steal the profits currently being made by others. This then means that those who don’t pull thumb out of sphincter go bust, to be replaced by those then subject to market competition in their turn.

We even have proof of this in the NHS. NHS England is more open to outsourcing than NHS Wales or NHS Scotland. NHS England has been becoming more more so over recent years. Productivity in NHS England has been increasing faster than productivity in NHS Scotland or NHS Wales.

The point of outsourcing in the NHS is to remove thumbs from sphincters. Anyone who thinks that isn’t a problem that needs to be solved has been using private healthcare this past 71 years.

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Jonathan Harston
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Jonathan Harston

The argument for outsourcing is not efficincies or politics, but that (using the NHS as an example), the NHS is in the business of providing healthcare, not of making power cables, floor tiles, bandages, beds, knives and forks, electricity, farming, lights, oxygen, gauze, paracetamol, interferon, paint, glass, lifts, detergent, water supply, linen, shoes, desks, computers, mops, buckets……

Matt
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Matt

So why isn’t the NHS isn’t in the business of making the things you list? Because it’s cheaper for the NHS to buy (to take item 1) power cables from someone else who makes 100m a year of them than to set up their own facility to produce the 100k a year that NHS England might get through [source: anally extracted, but the principle stands]. Using fewer resources to achieve the same result has a name… “efficiency”

thammond
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thammond

Why have so many non-economists started using “public good” when they mean public services? Is it just because “good” sounds like something, well, good?

Anyway, the claim that it is unproven that the provision by the private sector isn’t better than the provision by the public sector of of many things classified as public services is just false. As can be seen by the switch from public to private providers whenever people can afford to do so.

timworstall
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timworstall

Public good has a specific meaning in economics. One which implies that state delivery, or involvement, or subsidy, is justified – and often it is. People are thus calling what they want the state to provide, be involved with, subsidise public goods.