In memory of Elinor Ostrom (1933-2012)

With the death of Elinor Ostrom, activist and campaigners for social and economic justice have lost an important advocate and supporter.

Ostrom who was a Professor at Indiana University was the first woman to be awarded the Nobel Prize for Economic Sciences in 2009.

Ostrom's work challenged and rebutted fundamental economic beliefs, particularly free market and neo-classical economic paradigms. Ostrom was particularly concerned with relational aspects of economic activity — the ways in which people interact and negotiate with each other to forge rules and informal social understandings.

Ostrom's early work focused on what she called co-production. Ostrom argued that many public services depend heavily on the contribution of time and effort by the persons who consume these services, i.e., the clients and citizens.Ostrom believed that services rely as much upon the unacknowledged knowledge, assets and efforts of service ‘users’ as the expertise of professional providers. It was the informal understanding of local communities and the on the ground relationships that make services more effective.

Co-production describes the relationship that exist between ‘regular producers’, like health workers, police, and schoolteachers and their ‘clients’ who may be transformed by the services into safer, better educated and/or healthier persons.

Ostrom defined co-production as

“…the mix of activities that both public service agents and citizens contribute to the provision of public services. The former are involved as professionals, or ‘regular producers’, while ‘citizen production’ is based on voluntary efforts by individuals and groups to enhance the quality and/or quantity of the services they use”

One implication is that privatization of public services and the turning over of services to the market fundamentally transforms the relationship between provider and service user and hampers the development of co-production and democratic governance.

Her later work examined how people and communities collaborate and organize themselves to manage collective shared resources like forests, fisheries and natural and social resources. The research overturned the conventional wisdom about government regulation and challenged the idea that private ownership of public resources is better and more effective. Ostrom's work provides clear evidence that the commons-based traditions of cooperation and communal management of resources is not a violation of basic economic common sense.

Her work undermines political conservatives and mainstream economists who denigrate collectively managed property and government and who argue that only private property and the "free market" can responsibly manage resources. Her work also directly challenges current ideas that privatization and private ownership and expert management of resources is the most effective strategy.

Ostrom advocated a “polycentric” approach to managing shared or common resources involving oversight “at multiple levels with autonomy at each level. Ostrom argued that shared management of resources helps to establish rules that “tend to encourage the growth of trust and reciprocity” among people who use and care for a particular commons.

Ostrim argued that key management decisions should be made as close to the scene of events and the actors involved as possible.

Her work showed that the people most affected by or with a stake in a particular resource are the ones best able to collaborate to use and manage those shared resources effectively and sustainably.

Ostrom's work demonstrates the importance of shared (collective) rather than expert or private management of resources and knowledge and emphasises the importance of active citizen partcipation. She cited a comprehensive study of 100 forests in 14 countries that detailed how the involvement of local people in decisionmaking is more important to successfully sustaining healthy forests than who is actually in charge of the forests.

David Bollier writes of the significance of Ostrom's work:

In the 1970s, economics was quickly veering into a kind of religious fundamentalism. It was a discipline obsessed with “rational individualism,” private property rights and markets even though the universe of meaningful human activity is much broader and complex. Lin Ostrom pioneered a different, more humanistic way of thinking about “the economy” and resource management. She originally focused on property rights and “common-pool resources,” collective resources over which no one has private property rights or exclusive control, such as fishers, grazing lands and groundwater. This work later evolved into a broader study of the commons as a rich, cross-cultural socio-ecological paradigm. Working within the social sciences, Ostrom proceeded to build a new school of thought within the standard economic narrative while extending it in vital ways.

Ostrom's work also has direct relevance to the current economic and environment crises. She wrote:

"We cannot rely on singular global policies to solve the problem of managing our common resources: the oceans, atmosphere, forests, waterways, and rich diversity of life that combine to create the right conditions for life, including seven billion humans, to thrive.....Success will hinge on developing many overlapping policies to achieve the goals,.......We have a decade to act before the economic cost of current viable solutions becomes too high. Without action, we risk catastrophic and perhaps irreversible changes to our life-support system.”

Articles written in memory of her work are here, here, here and here.

A reading list of her work is here.

The last article she wrote before she died is here

Her last book, published just before her death was titled Working Together: Collective Action, the Commons, and Multiple Methods in Practice, and describes the advantages of using several different research methods to study a problem.

Market based approaches are a threat to vulnerable people

images by Simon Bosch, courtesy of the Sydney Morning Herald

State and Federal Governments of all persuasion continue their love affair with "market based approaches" to the provision of health services and human and community services. 

These market based approaches take many forms, including privatization and contracting out of government services, competitive tendering of services to not-for- profit and for profit agencies, increasing use of for-profit providers and the private sector  to provide services, use of user pay and cost recovery principles, the application of business metrics and the imposition of corporate management models and approaches that have their origins in the for- profit business context.

But they all are predicated on the assumption that applying market principles to the delivery of health and human and community services will drive innovation, deliver greater efficiency and better quality services and save Governments money.

However, the worsening crises we face in so many areas of social and public policy are largely the result of an over reliance on market based approaches in service delivery and/or the increasing reliance on the private/corporate sector as a provider of services.

The crises in affordable housing, the collapse of corporate provider ABC Learning in childcare, the crises enveloping aged care, the problems resulting from the privatization of employment services, the costs and inaccessibility of many health, medical and dental services, the accelerating cost of public services such as water, gas and electricity, the rationing of services for children and families, are all examples of social policy problems that have been created or compounded by market based approaches.

Adele Horin's piece in the Sydney Morning Herald Sad Truth behind Closed Doors is further evidence of the dangers of relying on market based and for- profit approaches in the delivery of health and human services. Horin shows that a reliance on market based approaches is a threat to the health and well being of vulnerable people. 

Horin argues that the reliance on for- profit providers of boarding houses  to accommodate and support people with mental illness has failed to protect and improve the lives of  vulnerable people. Horin draws on the work of Sydney academic Gabriel Drake who calls the rise of licensed boarding houses in Sydney, as "the privatisation of the back wards". 

In a study of inner Sydney licensed boarding houses, Drake describes a situation where large numbers of people with only their disability in common,  live together with little to do, receive poor mental and physical health care, and have few chances to learn skills. Their pension is handed over. They can't afford a bus fare. They become highly dependent on the boarding house owner.

Horin describes how the failure by Governments to provide the funds  and support to people with mental illness who were "de-institutionalized" and moved out of large psychiatric institutions meant that they were thrown to the vagaries of the "market"

And so hundreds moved into the boarding houses which were run for profit with minimal or no accountability or monitoring. People with sometimes serious conditions, such as schizophrenia, went from the state being in charge of their welfare to a boarding house owner.

The state passed a law to license boarding houses that accommodated people with psychological or intellectual disabilities. But three Ombudsman's reports in nine years - two of them secret and the latest delivered to the Minister for Disability Services last month - testify to the failure of the responsible government department, Ageing, Disability and Home Care, to do its job of inspecting and monitoring the boarding houses properly.

A weak law, and some aggressive licensees, did not help the hapless bureaucrats in their role of protecting and improving the lives of the vulnerable residents.

It is time the state government took a serious look at boarding houses, both the licensed kind, and the unlicensed, which cater to a slightly different clientele of poor, single tenants often with alcohol and gambling addictions.

The failure of market driven reform in Australia

John Quiggin is one of a growing number of Australian economists who continue to make the case that the market-based reforms imposed by Federal and State Governments over the last two decades have not delivered the anticipated benefits for consumers and ordinary citizens, and in many cases have been unmitigated failures.

Market led reform assumes that market-based solutions are always best, regardless of the problem.

Other important contrarian economic voices about market driven neoliberal reform championed by mainstream economists and Australian governments of all persuasions can be found on the pages of Dissent, the excellent journal edited by the Age and Sydney Morning Herald economics writer Kenneth Davidson and in the Journal of Australian Political Economy produced out of the University of Sydney. Bloggers such as Billy Blog (Bill Mitchell) also provide important critiques of mainstream economics, as do academic economists and public commentators such as Con and Betty Walker.

In today's Australian Financial Review John Quiggin argues that:

The failure of reform is most dramatically evident in the infrastructure sector, and particularly for utilities such as electricity, telecommunications and water.

Quiggin argues that the benefits of market led reform that were promised by its proponents have not resulted. Whilst there were some benefits in the short term, in the longer term the proposed benefits for consumers and society have not been sustained. Prices have not lowered but increased. Supposedly, allowing the market to rip would bring more choice and better quality of service. Neither have happened.

As Quiggin points out, the privatization of telecommunications and electricity have been unmitigated failures for consumers and society. Electricity price inflation has reached double digit levels and the break up of electricity utilities into separate generation, distribution and retail sectors has created massive new problems.

Quiggin argues that it is time for policy makers, politicians and commentators to accept that the mantra of market led reform has been a complete failure in the infrastructure sector. He writes that:

Faith in reform has proved utterly impervious to contrary evidence. The only answer to the failure of reforms has been to conclude that more reform in needed.

But as John Quiggin notes the lure of market led reform is still all powerful:

Despite this and other failures, the incantation of ‘reform’ retains its magical power. The politically and economically disastrous privatisation program in NSW was justified entirely on the basis that it was needed in order that reform could continue.

It is, perhaps, too much to ask that such an appealing word should be abandoned. But can’t we at least admit that the 1980s reform program has had its day, and look for some reforms more appropriate to the 21st century?

The failure of market driven neoliberal reform in the infrastructure sector (water, telecommunications, utilities, and public infrastructure) and in many other areas of Australian social and economic life, including health, housing, social welfare, retirement incomes, aged care, education, child care, human and community services and the environment and climate change, are core themes in Australian journals such as Dissent and  the Journal of Australian Political Economy, which in each edition document the harm that has been done by market driven neoliberal reform in this country.

More Australians need to support and read the important work done by economists such as John Quiggin, Bill Mitchell, Con and Betty Walker and all those associated with journals such as Dissent and The Australian Journal of Political Economy.

COAG healthcare reform: A perspective from WA

This week the Gillard Government finally reached an in-principle agreement with state Governments about reforms to the Australian heath care system. In this piece WA health economist Luke Slawomirski consisers the implications of the in-principle agreement. This piece first appeared in Online Opinion (here).

Health (Care) Reform

by Luke Slawomirski

The in-principle agreement struck between the Commonwealth and the States at COAG on Sunday is good. It is not great. While Australians have reason to be cautiously optimistic that health care reform is back on, it is also disappointing that it doesn’t go far enough.

More transparency

Firstly the positives. These revolve around the emphasis on transparency, accountability and efficiency. The key drivers will be

(a)    introduction of Activity Based Funding (ABF) for hospital services - paying public providers an agreed fee per care episodes such as a knee replacement,

(b)   the development of ‘efficient prices’ for episodes - a difficult, but not impossible task as some commentators have indicated

(c)    a more transparent, pooled federal funding mechanism.

Health care is one of the most opaque industries around and reforming the ‘blank cheque’ block funding approach, at least for hospitals, has to be a good thing. Increased scrutiny brought about by these measures can help reduce pernicious aspects of health care such as unwarranted variation in clinical practice and over treatment. 

Efficiency

The creation of Local Hospital Networks (LHNs) also has the potential to translate into better, more efficient services. In metropolitan and semi-rural regions, hospitals will be able to establish partnerships with nearby peers, and consolidate and rationalise services. This can not only enable economies of scale but also improve quality and safety because increases in the volume of cases for procedures and treatments increases are often accompanied by improvements in quality and decreased complications. 

Also encouraging are the provisions built in to ensure smaller, rural hospitals are not swept away by the utilitarian calculus and rationalisations of ABF.

Lack of integration

Now to the not so good parts. Setting aside the likely mess of establishing Medicare Locals and GP Super Clinics, a key problem is the non-integration of primary and tertiary care. The health care system could operate much more efficiently if there was more clinical and administrative coordination between primary providers such as GPs, pharmacist etc, and hospitals. LHNs would be much more effective if the network included at least some local primary care providers.

Much of this is a result of the funding split between the Commonwealth and state budget – and this is, unfortunately not rectified in this agreement, counter to a key recommendation of the National Health and Hospitals Reform Commission’s 2009 Report.

No prevention or promotion

It is all very hospital-centric, much to the disappointment of those who know that in the long run, the most value for money in health is in prevention and promotion. This makes all the talk of ‘efficiency’ ring a little hollow.

Implied in the agreement is the misconception that the principal driver of health, and preventer of ill-health, is health care. It is now accepted that this is not the case at all. Health care (especially tertiary care) is, at best, only a modest contributor while the dominant factors are structural and societal. Even in developed nations such as Australia, health and disease rates are predominantly influenced by things like education, literacy, income equality, social mobility and cultural factors.

There is also not much mention of mental health and nothing on addressing Indigenous health status. Both are essentially a prevention problem, whose long-term solutions reside within the sphere of the cultural, social and economic determinants, well outside the health care sector and

Of course, selling prevention is politically extremely difficult as it lays outside the reach bio-medical technology. However, Julia Gillard explained parts of the deal very well on the 7.30 Report on Monday night (14.2.2010). There is no reason why she and other political leaders cannot begin to communicate with the community the real need for and benefits of prevention.

Cost escalation and lost opportunities

Health care is extremely expensive. Its costs, as a percentage of GDP, are rising. The reasons for the escalating cost are erroneously attributed to demand side drivers including demographic change and an ageing population. This is largely incorrect. The main driver of escalating cost is actually on the supply side - the constant development of new medical and pharmaceutical technology. The rising expectations these foster in the community then serve to amplify an already rising demand.

There is no mention of addressing these in the part of the agreement on efficient cost growth. One hopes that this will be adequately tackled in the setting of efficient prices outlined in the agreement. However in its negotiations with this (admittedly pre-Gillard) government does not have a solid track record in tackling vested interests within the medical industry.

The other problem is opportunity cost – each public dollar spent on a hospital bed or PBS prescription is a dollar unspent on schools, playgrounds or other preventive expenditure.

Likewise, each interview minute spent by the PM talking about hospital beds and Super Clinics is a minute not spent communicating the value of programs and initiatives that keep people out of hospitals.

Prevention, of course, requires expenditure of financial and political capital. In a world of scarce resources (and three year electoral cycles) it is often more expedient to talk about ‘more beds and more GPs’ than tackling the root causes of disease, which are notoriously difficult to explain to the public.

In summary, the agreement reached at COAG was definitely a win for the Prime Minister. However, it is very pragmatic and there is a lot of detail left to sort out. Most importantly, it could have been a lot better. If Julia Gillard wishes to be remembered as a reformist like her political hero Nye Bevan and mentor Bob Hawke, some of the shortcomings briefly outlined above may need to be addressed before the next election.

Luke Slawomirski is a Health Economist and has worked as a clinician in Australia and overseas. The views expressed here are his own.