In many respects, the overall goal of advocates of quasi-markets is to make the public sector look more like the private sector, to subject public employees to the same sorts of market pressures, incentives, and sanctions as those encountered everyday by employees in the private sector. However, after analyzing the myriad problems in markets, agency, information asymmetries, contracting, and transaction costs, it is worth returning, at least theoretically, to what private-sector managers might do if confronted with agency and information problems as complex as those found in quasimarkets in social services.25 For a basic Coasian, social services would seem to be a classic case where contracts are too hard to specify and enforce, and the rational private-sector firms would therefore adopt hierarchy, make rather than buy. Of course, private-sector managers would assume the prior existence of clear goals (the bottom line), single principals, and the prerogative of firing hierarchical subordinates if performance lagged. One interesting hypothesis is that it is precisely the absence of these assumed features of private-sector management that make quasi-markets such an attractive option for policy reformers. If teachers and doctors cannot be fired, are subject to political interference (multiple principals), and serve multiple goals, then perhaps one of the few possible reforms to encourage better performance is through quasi-markets, even if highly constrained.
The central focus in this paper has been on introducing competitive market pressures into the provision of social services. However, in a more general vein, many of the issues here would come up in other reforms intended to enhance the quality of social services. As such, some of the methodological implications of this analysis may have broader application. The central focus on information flows, variable incentives, principal-agent dilemmas, and various routes of accountability is likely to figure in the analysis of most types of reform. The crucial analytical task is to identify how these factors vary across the wide range of stakeholders, from a variety of political actors (legislators, interest groups, executive branch reformers, and officials of subnational governments), to different providers (public, private, religious, non-profit, etc.), to various employees (directors and administrators, staff, and front-line employees), and consumers of varying capacities and interests. Simplifications in reform proposals or analysis are not likely to improve matters.
Another central conclusion from a survey of attempts to introduce quasi-markets is that each reform is partial and particular, as are reforms more generally in social services. Chile’s voucher program was very extensive, yet left other parts of the educational system (such as personnel policy and curriculum) unreformed. In Mexico, governments introduced stronger teacher incentives, but without changing other institutions. In other countries, school choice was available only to certain groups of families: poorer students in Bogota, or students with access to religious schools in Argentina and Venezuela. In other countries such as Brazil and Peru, families had little choice of providers, but some provincial governments opened up opportunities for private firms to compete for school management contracts (see Vegas 2005). For observers, it then becomes more difficult to isolate the net impact of the reform compared with other changes in the institutional or broader political environment. Given that there are so many ‘moving parts’ in any education system or other mass social service, isolating variables is complex at best. Although not a panacea, one methodological aid is comparative analysis, over time, across jurisdictions (where subnational governments adopt different reforms) or across countries. If variables have similar effects in different configurations of reform and different institutional contexts, then the grounds are stronger for confidence in the conclusions.