Wednesday, 30 September 2009

The Governance Impossibility Theorem

Kenneth Arrow famously fashioned an Impossibility Theorem 60 years ago which changed the course of welfare economics and social choice theory: no voting system can convert the ranked preferences of individuals into a community-wide ranking, while also meeting a certain set of reasonable criteria, each of which is likely to be widely supported.

In other words, we cannot base collective decision making simply on the individual preferences of the members of the collective – we need to trade off some ‘reasonable criteria’ against other ‘reasonable criteria’, when we made a collective decision. (And, of course, this means giving more weight to the values of some members than to others).

So what? Well, in the intervening period, we have learnt to live with Arrow’s theorem and have reconciled ourselves to the necessarily limited claims that welfare economics and social choice theory can make about the social rankings of different courses of action. However, we have allowed an entirely new substructure of criteria to grow up in relation to social choice and community decision making, without noticing that a similar logic is likely to apply to them – the ‘principles of good governance’.

I don’t wish to attack the desirability of these ‘principles’. I’ve actually written quite a lot on them in the past (see, example, my article with Elke Loeffler on “Evaluating the quality of public governance: indicators, models and methodologies”, International Review of Administrative Sciences, Vol. 69 No. 3 (2003), pp. 313-328). However, even in that article, we hinted that any full set of principles of good governance might be ‘over-determined’ – it might not be possible to achieve all of them simultaneously. Not a surprise, when you consider that we were proposing principles which related to all of the following dimensions of public governance:

• Citizen engagement
• Transparency
• Accountability
• The equalities agenda and social inclusion (gender, ethnicity, age, religion, etc.)
• Ethical and honest behaviour
• Equity (fair procedures and due process)
• Ability to compete in a global environment
• Ability to work effectively in partnership
• Sustainability
• Respect for the rule of law

Now I’m much more confident that there is indeed an ‘impossibility theorem for public governance:

no decision making system in any organisation or society can conform simultaneously to all the reasonable principles of good governance, each of which is likely to be widely supported by most members of most stakeholder groups

I was most recently reminded of the importance of this when reading Amitai Etzioni’s essay “Strength in numbers” in the recent RSA Journal (Autumn 2009, pp. 24 -27). Etzioni contrasts the obligations which arise from one’s commitment to the community (or communities) in which one lives to those obligations which arise to all our fellow men and women – universal human rights. He writes "One cannot maximise either individual rights (and in their name destroy particularistic values and the communities on which they are based) or community (thus ignoring our obligations to all human beings). Comunitarians like me see the tension between the two as a given; hence, it is best to seek out how the commitments to both core values can be combined.” In other words, bad news, a trade-off is needed.

So what? Well, I think the main implication is that we now urgently need to explore the grounds on which we might be prepared to make this trade-off between different ‘good governance’ principles. As with the reactions to Arrow’s original impossibility theorem, we are likely to find that the trade-offs we consider most convincing will actually differ significantly between contexts, and over time. And, of course, between stakeholders – so that there is likely to be disagreement (if not outright conflict) between parties as to which governance principles should have highest priority at any given time.

This is hardly a surprising lesson. However, much of the governance literature still suggests that there is always a potential ‘win-win’ situation for all stakeholders, if they only buckle down, engage with each other, seek compromise and accept the principles of ‘good governance’. Not so. These governance principles are indeed a basic part of human interaction. But human interaction requires collective choices and prioritization – and some people are always likely to lose out in such collective processes. We should not pussyfoot about in trying to hide this.

A further implication is that there may well be more important tasks in governance today than the endless elaboration of each of the ‘good governance’ principles. Of course, it is interesting and, in the long term, it may be valuable to make ever more sophisticated our understanding of what is meant by ‘achieving transparency’ or ‘respecting diversity’. However, many of these principles are likely to be only partly met in practice, so that finding better social and political methods for achieving an acceptable trade-off between these principles may bring far greater benefits to our citizens than pushing our definitions of the principles to their logical limits.

This is not to say that governance principles do not matter. Far from it. It is because they matter so much that we need to be become more adept at choosing which ones matter MOST to us, in the communities in which we live, at this particular time.

Tuesday, 22 September 2009

Participatory budgeting in a period of financial restraint

Last week, at a seminar for the KGSt (the German equivalent of theUK Improvement and Development Agency for Local Government), I gave a paper on ‘Participatory Budgeting in the Financial Crisis’, mainly focusing on the UK case. There were over 60 German and Austrian participants, mainly from local government or local government associations. It was clear that participatory budgeting is now a real issue in Germany. Moreover, it was clear that a key driver was the growing concern in Germany that the financial crisis is going to hurt German local authorities – they have been forecasting for years that this was likely to happen but, to UK eyes at least, German local government has continued to be financially well-off in recent years. It seems that real financial restraint may be about to hit German local communities, as it is now hitting UK local authorities.

The key issue, however, was whether a set of approaches to participatory budgeting which were fashioned through experimentation in times of ‘plenty’ will also be appropriate in times of financial restraint. The 32 PB pilots in the UK, all supported by the Department for Communities and Local Government, and the best-known German examples of PB (Berlin-Lichtenberg, Köln, Freiburg, Potsdam) have all developed at a time when service development was a key issue. Now attention is spreading to how PB might help in a period of cuts (or ‘decommissioning’ as some now like to call it in the UK, perhaps to make it sound less political).

However, there is one huge difference between participative approaches in relation to development proposals, as compared to proposals for cuts. When development proposals are put forward, people tend to focus on, comment on and promote those proposals about which they know something and in which they are interested. Their comments on these proposals are therefore based on strongly-held preferences and these preferences are (at least partly) well-informed. In this sense, many citizens (and certainly many service users) are actually more appropriate judges of priorities than politicians, service managers or professional staff. The views of informed and interested citizens deserve to be listened to – and, rightly, they are likely to have an effect on others who participate in the decision making process.

However, this is not the dynamic when citizens are asked to comment on proposed cuts. Here, citizens are likely to suggest cuts in areas about which they know little and have no interest. This is natural. They will lobby to protect the services which they value. So the dynamic is that most citizens will focus on services where their judgements are NOT well-informed and where they have very weak preferences. Relying on information like this in the decision-making process is dangerous. It leads naturally to widespread demands for the abolition of those services which are used by minorities and which are disliked by majorities – often ‘equalities’ units in local government come under threat, services to those disadvantaged groups seen as ‘undeserving’, and (in the UK at least) arts and cultural services are vulnerable.

This is not to say that PB can’t be useful in the cuts debate. But it has to be redesigned. It has to be undertaken in such a way that the preferences which people express are given most weight when they have knowledge and interest in the services concerned. It has to allow the strength of the preferences of those who benefit from services to be explored and understood in the decision making process. It has to ensure that the decisions on which people express their views are decisions about which they actually have views. Otherwise, major damage can be done to the balance of the overall public service system on offer to citizens. Worse, people who are highly dependent on public services may find those services withdrawn or seriously reduced in effectiveness for their purposes. And, perhaps worst of all, the faith of citizens in the democratic decision making system – already seriously weakened in these times of political scandals and media hyper-criticism – will be further damaged, as the implications of unthinking cuts slowly sink in and their impacts become evident.

So, the challenge is: how to design a PB system which can give citizens real voice in the cuts process which now faces us – without running into the potential pitfalls outline above? Comments will be welcome – and some innovative thinking is seriously required.

Sunday, 13 September 2009

Should we reward the weather?

“If the weather is to blame for the bad years, how can it be that the talent, wisdom and hard work of bankers, traders and Wall Street Executives are responsible for the stupendous returns that occurred when the sun was shining” (Michael Sandel, Professor of Government at Harvard University, in New Statesman, 14 September 2009 - Interesting starting point, and worth asking where it might lead us. One route would surely lead us back to the idea of a ‘betterment levy’ on capital gains?

Saturday, 12 September 2009

‘One-hand clapping': discussing the National Debt in a vacuum

In all the discussion of ‘stimulus’ packages in the newly Keynesian world of the 2008-09 recession, one highly misleading line of analysis has been given major prominence in the media. This is the argument that the National Debt is going to be increased by an enormous amount and will hugely increase the burden on the average citizen. The argument typically runs along the lines: “The annual government deficit has risen from 2.7% of GDP in 2007 to 11.6% of GDP in 2009 and the Treasury predicts it will hit 13.3% in 2010”. Scary stuff.

But, wait a minute, why are we comparing changes in the National Debt to GDP? This is like working out how well off a family is by comparing its increase in debt after taking out a mortgage with its annual income, without taking into account the value of the house bought - or calculating the value of a company to its shareholders by just comparing its debts to its annual dividend. Would anyone be so stupid? But we’re doing it all the time in relation to the government’s borrowing.

Let’s look at it another way. Figures calculated for the BBC ( show that household wealth (including housing wealth and financial wealth) dropped in 2008 from £6,730bn to £5,920bn, a fall of £820bn. The increase in the national debt in 2008 was £60bn and in 2009 is likely to be around £83bn. If these increases in debt, due to the financial stimulus package, do succeed in reinvigorating the economy, promoting house price increases and recovery of the stock market, then they would appear to be a very small price to pay. (And there is the danger that, without such a stimulus package, the UK economy could be stuck in zero or low growth for a long time – see David Blanchflower in the New Statesman (14 September 2009 - Certainly, most voters would consider that an attractive package. But that is not what they are being told is happening.

Of course, economists will blanche at such a simple way of picturing what is happening. For them, the real pay-off from the stimulus is the increase in the stock of assets (not simply their financial value) and the increase in annual consumption goods which the stimulus allows. Funnily enough, this hasn’t been talked about much, either, in the media, although there have been widely expressed concerns about job losses. But it’s pretty obvious that the recovery will bring significant gains along these lines – and the debate should be about whether these gains outweigh the disadvantages. (The problems with the economist’s line of argument are well known – the calculation of the value of increases in the stock of assets, and indeed the flow of consumption, is fraught with contentious assumptions and there is still major debate on how to calculate the damage to ¬economy efficiency through the methods used eventually to repay the debt – either cuts in public services or tax increases).

Moreover, all of this analysis leaves out one major element which, in the long run, may be the most important piece in the jigsaw – the value of public sector assets. In large measure, public sector borrowing is undertaken in order to invest in public assets – schools, hospitals, roads, museums, social housing, etc. To worry about the value of debt without considering the value of the assets which it has bought is plain silly. And to allow these assets to deteriorate in value simply in order to avoid an increase in debt would be utterly foolish. Yet, we very rarely hear about the value of these assets ( even though this value now has to be calculated on a regular basis as part of the government’s resource accounting process).

Taken as a whole, these arguments suggest that the National Debt is often a symbol of an active and successful government. Having a high debt is highly desirable, if matched by high public asset levels and if it has seeded fast growth in the economy, and therefore in household wealth. Having a low National Debt is a symbol of government incompetence, if matched by very low public asset levels and if it has constrained the economy, and household wealth, to very low growth levels.

These arguments are not simple and, even more awkwardly, they are hard to encapsulate in one headline or one soundbite. However, they are about the things that are fundamentally important to every voter when deciding how well the country is run. To discuss increases in the National Debt as if they are unambiguously an evil is to engage in one-hand clapping – lots of gesturing, no results.

Wednesday, 9 September 2009

Strategic commissioning: reframing or just relabelling public decision-making?

I had the chance to make a presentation this morning to the PAC conference at University of Glamorgan - topic: "Strategic commissioning for services - or for citizens and places?". Lots of useful comments to take on board for the next draft of the paper (let me know if you'd like me to email you a copy).

One line of discussion was especially interesting. How new, really, is 'strategic commissioning'?

Seen as 'the whole set of activities which enable the needs of citizens and service users to be met' (essentially the CLG approach, and the DH approach in the 2006 Health Service Reform report), is it anything more than a relabelling of the old 'rational management cycle'?

On the other hand, if it is meant to distinguish planning/design/procurement/review stages of decision-making from the 'delivery' stages (an approach adopted in some other initiatives of DH), then we may be revisiting a very longstanding argument. In its last guise, this argument turned up as the debate on whether we can divide 'policy' from 'implementation' - either in theory (one set of critics disputes this vigorously) or in practice (and many have argued that this has turned out to be a wrong turning in public management in the last 25 years).

So, what do you think? Is strategic commissioning just a relabelling of an old set of concepts? Or a new way of making a useful distinction between the 'delivery' and the policy' areas of public decision making?

Tony Bovaird

Welcome to Public Service Matters

Welcome to my blog site. I intend to use it for posting ideas and arguments arising from research and training programmes that I'm involved in. And to start, pursue and nail arguments. That means arguments with you, of course!

So I'm hoping that a lot of the blog entries will stimulate you to provide your views in return. And that some of the ideas we co-create together, through this discussion, will feed back into research and training programmes - mine, yours and those of other readers, too.

So, welcome - and please help me to develop some new, rigorous and practical demonstrations that Public Service Matters!

Tony Bovaird