THE NEW INSTITUTIONAL ECONOMICS: An application to public service governance design in UK primary health care

Abstract

Cur rent Engl ish pol icy tow ard s gener al pr act ice is a mbi val ent be tween devel op ing ne w for ms of cont ra ctu al gove rnanc e and cons truct ing mor e h ierarc hic ally or gani ze d bo die s. NHS pol icy docu me nts s ay that Primar y Care Tru sts (PCTs) will cont ract some pr imar y car e ser vices and dire ctly m anage ot her s. Dependi ng on the bal ance , PCTs c oul d either orga niz e gene ral pr act ice thr ough pr act ice- based c ontr act s or start deve l opi ng into hier archi es (albei t with som e subc ont rac tor s for the time bei ng) . New Inst itut ional Ec onomi cs , in par ticul ar Williamson’s ver sion, d efine s condi tions wher e hiera rc hies ar e lik ely to be m ore efficien t than mar ket s (in term s of what welfare ec onomi cs recog nize s as allocat ive efficiency) and con ditions wher e the rever se ho lds . Thi s ar tic le c onsi der s the imp lica tions of the New Inst itut ional Ec onomi cs (NIE) for redesi gni ng the gove rna nce of publ icly financed ser v ices su ch as gener al pr ac tice whic h allow direct publ ic acce ss, in which it is difficul t to def ine an d mana ge ser vice qual ity, a nd which hav e a pr ofe ssi onal ize d but fragm ent ed workforce. In cont ra st to thei r a lleg ed im pli cat ions for the hosp ital sect or dur ing the 1 990s, NIE theor ies imply that for publ icly funded prof es sional ser vice s suc h as gene ral pr act ice ther e ar e stro nger ec onomi c ar gument s for con stru cting h ierarc hie s than for recon stru cting quasi -mar ket s a t loc al level .