Chapter 10: Market Oriented Government: Leveraging Change Through the Market

Osborne and Gaebler view cities as markets "vast, complex aggregations of people and institutions, each constantly making decisions and each adjusting to the other's behavior based on the incentives and information available to them" (p. 282). According the the authors, the most effective way for government to meet the public needs of this local 'marketplace' is not through central control, but by steering the decisions and activities of its players through restructuring the marketplace. Government can use policy to leverage the decisions and behavior of individuals, instead of attempting to directly control them through administrative programs.

Osborne and Gaebler believe government does not have the resources to fulfill all of the public's needs. However, by intervention in the market, government can create incentives for the public to find alternative ways to meet these needs. The authors believe the market can play the same role for social and economic activity as computers do for information, using prices as a signaling mechanism to "[process] millions of inputs efficiently and [allow] millions of people to make decisions for themselves."

Osborne and Gaebler identify eight problems associated with the programs that government employs to meet society's needs:

1. Programs are driven by constituencies, not customers
2. Programs are driven by politics, not policy
3. Programs create turf, which public agencies defend at all costs
4. Programs tend to create fragmented service delivery systems
5. Programs are not self-correcting
6. Programs that are obsolete rarely die
7. Programs rarely achieve the scale necessary to make a significant impact
8. Programs normally use commands, not incentives

In order to utilize a market mechanism in substitute of an administrative program in providing goods and services to the public, the good or service to be provided must possess several characteristics: there should be an adequate supply of the good/service and many providers; customers must have adequate purchasing power and a desire to exercise that power; sellers must be easily accessible to buyers, while buyers must have sufficient information about price, quality and risks; and finally, the government should establish rules of the marketplace and adequately police the participants in the market to enforce those rules.

The authors give many examples of ways in which government can restructure the market place many of these have been practiced for some time. Through such activities as setting rules in the market place, facilitating the provision of information, augmenting demand, catalyzing private sector suppliers and new market sectors, creating market institutions, risk sharing, and regulation through the application of market-oriented incentives, government can reinvent itself to implement any agenda - an agenda that should be determined not only by government, but also by the community.