Privatization, Policy Instability, and the Pursuit of Effective Public Service

Session Submission Type: Panel

Abstract

The delivery of effective public services serves as a cornerstone of good governance. This session critically examines the relationship between the state, the private firms contracting to administer public services, and the beneficiaries they serve. We seek to stimulate critical discussion of the desirability of private contracting, its consequences, its alternatives, and the crucial role of power dynamics in establishing robust and effective governance.

The first paper revisits the tenants of New Public Management, a body of theory that emerged from advocacy for privatization and rooted in the principles of New Institutional Economics. This literature promised that privatization would enhance efficiency based on the assumption that public service provision incurs excessive transaction costs. This paper revisits the implied comparison, examining the transaction costs incurred when contracting out service provision, and considers efficiency implications of widespread adoption of privatization as a governance strategy.

Beyond the potential for higher costs, the second paper examines the additional challenge of policy instability that can result when private firms implement public aims. It illustrates how mechanisms like “termination for convenience” clauses in contracts empower elected executives to enact rapid and substantial policy shifts, bypassing traditional consensus-driven legislative or regulatory processes. The paper illustrates these mechanisms, and potential consequences for policy and democratic accountability, with examples from recent US presidential administrations.

The third and fourth papers explore alternative models of governance in effective program delivery. The third presents a case study of a state that transitioned away from contracting out its Medicaid system through insurer managed care, towards a publicly administered model. Detailing the key actors involved (activists, bureaucrats, executives), their actions, and the resulting design of the new system, the paper offers a concrete example of a state reasserting direct control over public service delivery, potentially mitigating the transaction costs and policy instability theorized by the session’s first two papers.

Finally, the session culminates with a focus on the often-overlooked perspectives of the intended beneficiaries of social programs. Drawing on extensive qualitative research with users of programs like Medicaid and SNAP, the fourth paper illustrates how a truly effective approach to governance necessitates a shift in power dynamics between beneficiaries and decision-makers, by incorporating the voices and lived experiences of program participants into decision-making processes. The paper underscores the multi-dimensional inputs necessary for effective policy. 

Collectively, the session begins by questioning the foundational assumptions driving privatization and its potential to create policy instability, then presents a real-world example of a successful shift towards public administration and ultimately emphasizes the critical importance of centering the voices of program beneficiaries in the pursuit of truly effective governance. The session aims to foster a nuanced understanding of the trade-offs inherent in different governance models and to highlight pathways towards more stable, responsive, and ultimately effective public service delivery.

Policy Area

• Public and Nonprofit Management and Finance

Secondary Policy Area

• Politics, Media, and the Policy Process

Chair

• Heidi Allen, Columbia University

Discussant

• Virginia Carr Schneider, Georgia State University

Organizer

• Naomi Bethlehem Zewde, University of California - Los Angeles

Individual Presentations

• Revisiting New Public Management: Overlooked Transaction Costs in Public Service Delivery - Presenting Author: Jason A Coupet, Georgia State University

• Terminating Policies for Convenience: The Role of Privatization in Policy Instability - Presenting Author: Benjamin Manning Brunjes, University of Washington

• How Activists Ended Insurer Managed Care in a State Medicaid System, and What They Built Instead - Presenting Author: Naomi Bethlehem Zewde, University of California - Los Angeles; Non-Presenting Co-Author: Colleen M Grogan, University of Chicago

• Shifting Power to Make Government Programs More Effective - Presenting Author: Jamila D Michener, Cornell University; Non-Presenting Co-Author: Carolyn Barnes, The University of Chicago