Human Services Economic Paper 3: Markets and Human Services

This is a brief paper drawing attention to market economics terminology which is inappropriately used in policy and practice in human services systems. We challenge the description of human services provision as a ‘price’ clearing market. Economic descriptions which misrepresent the human services system as an opt-in consumer market rather than in terms of market failure and government response mislead decision makers and fundamentally undermine sound policy. Indeed, this rhetoric misrepresents the nature of human services and hinders the effectiveness of the working relationship between service users, service providers, and funders. In doing so, policy and funding decisions are viewed through a market economics lens which suggests that suppliers will respond to economic signals in the interest of consumers and that those consumers have decision-making power that they do not actually have because the government is a monopsony purchaser and system creator. It is known that governments set policy and funding for service providers to deliver services to community members who are either in urgent or longterm need of those supports. Hence, the typical characteristics represented in markets economics—such as demand, supply, and purchase preference—do not apply. Rather, in this
paper we seek to demonstrate the underlying economic model that applies to the human services sector.Framing the human services system as a market is not reflective of the nature of the human services system and has implications for the development of inappropriate funding policy based on an incorrect understanding of the economics of the human services sector. This in turn alters
the expectations and behaviours of the service providers and policy makers for these services as the description of the supply-side is at variance with how the current pricing and policy framework impacts the provision of human services and supports. Therefore, in order to achieve equitable, efficient and effective supply of human services and supports, there remains a need for the collaborative development of an industry plan within a governance framework that allows for local resource allocation decision making in the context of a national policy framework.