10.2 Which elements of the NPM of the 1980s require the most substantial reconsideration?
While many of the theoretical foundations that underlay the development of the NPM of the 1980s continue to be accepted as central to microeconomics, the addition of the incomplete contracts perspective does provide insights that may take policy and public-sector organisation in directions that are different from those pursued over the past 25 years. It is beyond the scope of this paper to suggest specific policy developments based the on theoretical perspectives outlined in this paper. As we have emphasised in discussing different sections of an analysis, the literature on incomplete contracts suggests new ways of thinking about problems, but does not provide policy templates that can be applied in a simplistic way: the value of the approach is the insight that it provides in ways of thinking about and analysing complex organisational, decision and investment problems. With those caveats, however, the analysis provided in the paper does identify some areas in which the conclusions derived from an incomplete contracts approach are likely to lead to some different policy directions from those developed as part of NPM:
- The split between purchase and ownership, and between policy and service delivery, which are based on theories of agency rather than theories of ownership, investment and decision-making.
- The boundary between the private sector and the public sector. An incomplete contracts perspective suggests that the definition of this boundary is more complex than the NPM implied, and that the fundamental decision about the boundary should be based on attempts to achieve the optimal allocation of decision and investment rights, since these are the core of ownership rights.
- Public and private/community ownership of assets and of service delivery, when full or partial government funding of services occurs. While not detracting from the efficiency benefits of competitive private delivery, where that can be achieved, an incomplete-contracts approach focuses attention on the importance of allocating ownership rights to the party who has the potential to add the most value to the asset or to the customer relationship, and would focus less on the benefits of private delivery arising from competition.
- The proliferation of public-sector entities, and the dispersion of information on, and ownership of, different areas of service delivery and policy development across a very large number of organisations would be reassessed against criteria focused on the effectiveness of investment decision-making.
- The governance and monitoring of state-sector entities would be reassessed based on ability to allocate the residual decision-rights which are necessary to make governance and monitoring arrangements effective.
