Dr Simon Bastow and Professor Gwyn Bevan

This course is available on the CEMS Exchange, Global MSc in Management, Global MSc in Management (CEMS MiM), Global MSc in Management (MBA Exchange), MBA Exchange, MPA Dual Degree (LSE and Columbia), MPA Dual Degree (LSE and Hertie), MPA Dual Degree (LSE and NUS), MPA Dual Degree (LSE and Sciences Po), MPA Dual Degree (LSE and Tokyo), MPA in International Development, MPA in Public Policy and Management, MPA in Public and Economic Policy, MPA in Public and Social Policy, MPA in Social Impact, MSc in Management (1 Year Programme), Master of Public Administration and Master of Public Policy. This course is available with permission as an outside option to students on other programmes where regulations permit.

The course examines innovations in different models of governance (defined broadly as the overarching mechanisms) that organise the delivery of public services.  We look at variations across three key governance models in particular, namely hierarchy, markets and networks in recent decades, and assess their strengths and limitations.  We look at their application in both developed and developing countries, to a wide range of core public services, including healthcare, education, criminal justice, and public utilities.

Many public services have seen a broad global shift from traditional hierarchical bureaucracies towards markets and networks.  Many countries have experienced, and will continue to experience, extensive marketisation of public services and we cover key innovations and their impacts. Markets, in particularly privatisation, create high-powered incentives to challenge inertia that can beset the public sector, however marketisation is no panacea: indeed the characteristics of some public services mean that this brings new risks and problems and governments have often struggled in recent decades with managing the consequent market failure.  We look at the use of 'quasi-markets', voucher systems, full-scale privatisations, Private Finance Initiatives (PFIs) and Public-Private Partnerships (PPPs), Payment by Results (PBR) and Social Impact Bonds (SIBs), and assess their impact on public services.  We also look at innovations in networked, mutual or collaborative forms of governance, particularly the relevance of new developments, such as the 'sharing economy', the 'digital economy' and social media.

A central theme of the course is the relationship between institutions and innovative mechanisms for change.  Markets and networks offer a wide range of innovative mechanisms, but their success or failure is often determined by the institutional context in which they are implemented.  Looking across different models of governance, the course will consider issues around optimisation of design and integration of models, and the impact of institutional path dependence on success and failure.  We explore how to align new mechanisms for change with existing institutions in complementary ways.

The course draws on a range of disciplines and analytical approaches, including transaction cost economics, political science, institutional economics, and developments in behavioural economics beyond 'nudges'.  These include the economics of identity, reciprocal altruism and the power of reputational mechanisms of 'naming and shaming' and 'naming and faming'.  The lectures and seminars are organised to enable you to understand key theory/concepts through illustrative cases and discussion.  The seminars are organised around group-based presentations.

15 hours of lectures and 15 hours of seminars in the LT.

Students will be expected to produce 1 piece of coursework in the LT.

A detailed essay plan of two pages with introduction, one key paragraph and conclusion written in full in preparation for the summative essay.

Students will be directed to key texts throughout the term.  Course literature draws from public policy and governance, the economics of transaction costs and behavioural economics among other disciplines.  Some indicative readings throughout the course include:

- C. Wolf (1993) Markets or Governments (Cambridge: MIT Press)

- AO Hirschman (1970), Exit, voice, and loyalty: Responses to decline in firms, organizations, and states, (London: Harvard university press)

- J. Le Grand (2007), The Other Invisible Hand: Delivering Public Services Through Choice and Competition (Princeton University Press)

- M. Barber (2015), How to run a government so that citizens benefit and taxpayers don't go crazy (Allen Lane)

- OE Williamson (1985), The Economic Institutions of Capitalism: Firms, Markets and Relational Contracting (New York, The Free Press)

- A. Shleifer (1998), State versus private ownership, Journal of Economic Perspectives 1998 12(4): 133-150

- D. North (1990), Institutions, Institutional Change and Economic Performance (Cambridge, Cambridge University Press)

- D. Acemoglu and J. Robinson (2012), Why nations fail: the origins of power, prosperity and poverty (London, Crown Business)

- DM Hausman and MS McPherson (2010), Economic Analysis, Moral Philosophy and Public Policy (Cambridge, Cambridge University Press), chapter 2

- W. Powell (1990), Neither market nor hierarchy: network forms of organization, Research in Organizational Behavior 12 pp.295-336

- A. Sundararajan (2016), The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism (MIT Press)

- S. Bowles (2016), The Moral Economy: Why Good Incentives Are No Substitute For Good Citizens (Yale University Press)

- G A Akerlof, RE Kranton (2010), Identity Economics: How Identities Shape Our Work Wages and Well Being (Woodstock: Princeton University Press)

- A. Oliver (2019) Reciprocity and the Art of Behavioural Public Policy (Cambridge, Cambridge University Press)

Essay (50%, 3000 words) in the ST.
Presentation (20%) and policy memo (30%) in the LT.

An essay of 3,000 words critically examining governance of a public service (preferably) in the student’s own country (50%).

Presentations as a member of a seminar group in the weekly seminars (20%).

A policy brief for a minister, either for proposed reform or analysis of an existing market-based or network-based model of governance in action (30%).