Today the key word . . . in economics is 'character' . . . [the reason] why individualist economists fear socialism is that they believe it will deteriorate character, and the reason why socialist economists seek socialism is their belief that under individualism character is deteriorating.
(Stefan Collini, 'The Idea of “Character” in Victorian Political Thought', quoting an unspecified socialist commentator from the 1890s)
Previous chapters have argued that, in the design of public policy, policy-makers have to consider how the people who implement those policies are motivated. 1 In doing so, consciously or unconsciously, they tend to work with either of two crude assumptions about human motivation. One incorporates the belief that individuals are fundamentally motivated by their self-interest: knaves, in our terminology. Alternatively, policy-makers assume that individuals, especially those associated with the public sector, are motivated by a self-denying altruistic ethic that puts the interests of the people they are supposed to be serving above their own: not knaves but knights.
It was also argued that in recent years we have seen a shift in policy-makers' beliefs about the motivation of those involved in the public sector in general and the welfare state in particular. There has been a gradual erosion of confidence in the reliability of the public service ethic as a motivational drive and a growing conviction that self-interest is the principal force motivating those involved in public services. Since the market is the quintessential mechanism for corralling self-interest to serve the public good, this in turn has led policy-makers to develop the use of quasi-market mechanisms in the delivery of public services. These are mechanisms that rely on taxation or other revenues to finance the service concerned but that use market incentives to ensure that the service is provided in the most efficient and responsive manner possible.
The extent to which these changes in belief were well-founded and, more generally, whether the market-oriented policy changes to which they gave rise have had the desired outcomes will be discussed in subsequent chapters, and I shall not dwell further on these questions here. Instead, I concentrate on