Academic journal article International Advances in Economic Research

The Impossible Split? A Study of the Creation of a Market Actor

Academic journal article International Advances in Economic Research

The Impossible Split? A Study of the Creation of a Market Actor

Article excerpt

An Actor in Need of Re-configuration

During the last fifteen years, several studies have focused on public sector management models called New Public Management (NPM). The term, however, has no clear definition. NPM may be broadly defined as a movement towards management models within the public sector that are more similar to markets and private businesses. Empirical studies have shown that these models have not worked as intended. The market inspired management models have failed to meet expectations and scholars from various disciplines, including public administration, economics, sociology and business administration, have tried to provide an explanation. The theoretical field that covers the NPM reforms may be characterized as fragmented and there is no obvious starting point for new research (Ferlie et al 1996).

Researchers prefer to refer to the market solutions as quasi-markets in order to distinguish them from the concept of the ideal market (Bartlett and Le Grand 1993). The term quasi indicates that they differ from other markets. Quasi-markets have to be regulated in a specific way because of their connection to the public sector. Opinions differ with regard to exactly what aspects should be regulated, but there is some agreement. Several researchers (for example, Potter 1988; Propper 1993; Bartlett and le Grand 1993) have suggested important areas that should be regulated and supervised because the actors who provide the services are not part of the public administration. For example, Propper (1993) points out the importance of regulating prices, quality, and actors' access to the market as well as information. Researchers have also emphasized equity as well as the importance of ensuring that the actors not only take the best pieces, a behavior that is sometimes referred to as cream skimming. In this article, however, we focus on a different aspect of the regulation process: the regulation that is required for creating market actors, which is a less common approach. We will therefore also be able to provide new insights into the reasons for why quasi-markets sometimes fail.

We use sociological theories about markets to explain market models' lack of success. Our research follows a relatively new direction within sociological research that focuses on markets in general. Sociological studies of markets have hitherto, in many regards, only criticized neo-classical economics. They have not managed to present an alternative theory. The theoretical framework used in this article constitutes an exception. It builds on Callon's (1998) and Luhmann's (1995) theories of how markets are created. They view markets as being created through regulations rather than seeing them as the outcome of deregulation. In order for an exchange situation to develop into an ideal market characterized by perfect competition, a set of conditions must be fulfilled. These components are required because they reduce uncertainty, which is a prerequisite for every market transaction. Factors that help to reduce uncertainty include, well-known roles (such as the "economic man"), well-defined goods and services and information about alternatives. This paper's theoretical focus is on how all these components, or rules, are established and maintained. Sociological research has shown that these conditions are not fulfilled naturally, but have to be created and maintained.

Experiences from Quasi-markets

The analysis is founded on findings from a health care organization sector that uses an NPM control model, which distinctly aims to resemble a market: the purchaser-provider split. The purchaser-provider split has been a very popular way of organizing health care activities in many countries. When the model was introduced it was, among other things, expected to increase efficiency through business-like competition and contractual management (Locock 2000, Siverbo 2004). For the purchaser-provider split to work, the role of the actors within the health care organization has to be reconfigured. …

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