SERVICES, PROPORTION AND PRICE


Distinguishing between services that have (and do not have) proportion and price.

By Desaraju Subrahmanyam.


ABSTRACT

We continue to make fundamental distinctions in services. First the point is highlighted that there is magnitude of choice and no-choice corresponding to magnitude of gain and loss of state. The concept of 'proportion' in service is introduced, and is used to distinguish between 'proportionate' and 'non-proportionate' services . Services which have price are distinguished from services that do not have price. Proper areas for business and government to provide services are proposed on the basis of these distinctions.


MAGNITUDE OF CHOICE AND NO-CHOICE

In 'Business, Government and Services', we proposed that business should provide services in areas of choice, and government should provide services in areas of no-choice.

The dichotomy of 'choice' and 'no-choice', however, is not always sharp. In many cases there is graduation in choice and no-choice.

This follows from two principles:
a) 'gain of state' has a characteristic relation with 'choice', and 'loss of state' has its own characteristic relation with 'choice': broadly, gain of state makes for an area of choice, and loss of state makes for an area of no-choice.
b) state has magnitude; the magnitude of state is proportional to the magnitude of the desirability of, or desire for, the condition that it refers to; accordingly, there are higher states and lower states.

Putting them together, graduation in state means that there is graduation in choice over it as well. Thus, the principle that gain of state makes for an area of choice becomes the principle that the BIGGER THE GAIN of state, the MORE it is an area of choice. The bigger and bigger the gain of state, the more and more choice one has over seeking the product or service.

Similarly, the principle that loss of state makes for an area of no-choice becomes the principle that the BIGGER THE LOSS of state, the LESS it is an area of choice. The bigger and bigger the loss of state, the less and less choice one has over seeking the preventive/ restorative product or service.

If your car requires a denting-painting job, there is loss of state, but not of high magnitude; correspondingly the force of no-choice is not very strong. It is possible to get by without restoring state for a few days or weeks. (This and other factors help to keep auto insurance (by and large) from becoming the horror story that healthcare is. The other factors are - a) mandatory insurance; b) the price of restoring lost state can be derived from, and is limited to, the price of gaining state.)

Thus choice and no-choice often have extent, and in such cases it is meaningful to talk in terms of 'more choice' and 'less choice' rather than 'choice' and 'no-choice'.

We may note here that medical requirements have magnitude, whereby in healthcare services, no-choice has magnitude. If you stub your toe, there is loss of state but the loss is small (and temporary), so the force to go to the doctor over it is small. There are numerous such losses of state that are small (and temporary) and present little compulsion to seek any service, meaning that they are not areas of absolute no-choice.

However, there are many areas in which the loss of state is so great as to leave the person with absolutely no choice but to seek a preventive or restorative service.
To keep the focus on the principle that there are two different KINDS of requirements, and to preserve the impact of the term 'no-choice' to describe the condition of persons who fear, or undergo, loss of state, we shall in general talk in terms of greater 'choice' and greater 'no-choice', rather than in terms of 'more choice' and 'less choice'.


PROPORTIONATE SERVICE

An important aspect of having choice over buying a product or service is the choice of quantity and/or frequency in which to buy it: you can buy as much or as little, or as big or as small, as you choose, and you can buy as often or as seldom as you choose.

The choice over quantity and/or frequency make for 'proportionate products' and 'proportionate services'. If the consumer's requirement can be proportionate, products and services will, in general, be made proportionate. If consumers can use big cars and small cars, businessmen will make bigger cars on the one hand, and smaller cars on the other hand. Consumers can choose from small cars, medium-size cars and big cars that cost less and more. This 'proportioning' is a significant aspect of the phenomenon of business creating choices for consumers.

Areas of choice are, in general, well-suited to be made proportionate.

Areas of no-choice are, in general, not well-suited to be made proportionate - and the greater the no-choice, the more badly suited they are. In seeking firefighting services, the customer cannot choose from small firefighting and big firefighting (though there can be big fires and small fires) - for every fire, there is a certain level of firefighting that has to be done within small limits of variation; lesser than that is no good (and more than that is no good either). And of course, the customer cannot choose how OFTEN he wants the firefighting service.

Where there is no choice possible of quantity and/or frequency, the service is non-proportionate.

Though there is magnitude in medical requirements, any given medical requirement cannot, in general, be met proportionally. By and large, it is all or nothing. If you have typhoid, a quarter of the course of antibiotics is probably just no good - you need the whole course. You cannot choose smaller antibiotics or less frequent antibiotics. (If you have a headache, however, a quarter of an aspirin is probably better than nothing, though it is not as good as a whole aspirin.)

On the other hand, MORE than the required course of antibiotics is not required, and is no good - it does not make for gain of state, it does nothing that the consumer would desire.

In areas of choice, 'more' (or 'less') is generally better. In areas of no-choice, this relation generally does not hold; 'more' (or 'less') is not generally better. (This does not mean that NO variations are possible; it just means that the possible variations are much smaller and fewer.)

We can generalize therefore, that areas of no-choice are non-proportionate, and areas of choice are proportionate.

With 'proportionate service' defined, we observe that the services provided by government are generally non-proportionate.

We can list all the things government provides to citizens, and ask for each -
can the thing be proportionate: can it be had a little more or less of, and can it be had a little more often or less often?

Consider the passing of laws; the protection of civil liberties and human rights; the providing of courts of justice; police and law enforcement; national defense; disaster relief; firefighting services; the preservation of forests and wildlife; the safeguarding of public health; the maintenance of a money system (which, along with other things, enables business to function).

On the other hand, we observe that the services provided by business are generally proportionate. We can list all the things business provides to citizens, and ask for each the same question.


STATE AND PRICE

There are states that can be purchased (ie bought for a price), and there are states that cannot be purchased.

As we saw in 'Business, Government and Services', life, liberty, human rights, way of life, community, national pride, natural and man-made resources are states. Family, friendship, optimism, skills and reputation are other states. These states have no price (and most likely cannot have any price).

For states that can be purchased, the price of the service for preventing loss of state or restoring lost state can, in general, be derived from (and limited by) the price of gaining it. For states that cannot be purchased, the service for preventing the loss of that state cannot be priced.

If it cannot be priced, it stands to reason that it cannot be provided by for-profit business. (Indeed, it is beyond the pale of economic theory.) Thus states such as civil liberties and human rights, as well as preventive and restorative services for such states, cannot be provided by a for-profit business.

On the other hand, we observe that the services that government provides are largely services that cannot be priced; again consider the passing of laws; the protection of civil liberties and human rights; the providing of courts of justice; police and law enforcement; national defense; disaster relief; firefighting services; the preservation of forests and wildlife; the safeguarding of public health; the maintenance of a money system.

We propose therefore that business provide only those products and services that (can) have a price, and government provide those those products and services that do not (cannot) have a price. (This does not mean that government necessarily has to provide preventive/restorative services for EVERY state that has no price.)

For the most part, areas of no-choice, areas on non-proportion and areas of no-price ARE ALL THE SAME.

A significant exception is general insurance - that is, insurance for cars, homes, factories, farms, art collections and so on. General insurance is a service for restoring loss of state, but state that can be purchased - it is therefore a gray area.

UP NEXT: Market and areas of no-choice.

BUSINESS, GOVERNMENT AND SERVICES

BUSINESS, GOVERNMENT AND SERVICES
Distinguishing the kinds of services that it is appropriate for government and business to provide.

By Desaraju Subrahmanyam.

KEYWORDS
State, gain of state, loss of state, area of choice, area of no-choice

ABSTRACT
Individuals and communities are viewed as having or existing in 'states'. With their states, individuals and communities can go in either of two directions - one, the direction of losing state, and two, the direction of gaining state. Loss of state and gain of state are related in different - indeed in opposing - ways to choice. Individual and community requirements fall into 'areas of choice' and 'areas of no-choice'. The kinds of services that it is appropriate for government and business to provide to the public are distinguished according to the 'area' they cater to.

1. STATE
'State' is loosely defined as having or being in a condition that is desirable or desired.

Nothing more - and certainly nothing formal - will be said here to make the definition rigorous. A clearer meaning of the term is expected to emerge from the way it is used, and that is deemed sufficient for present purposes.

It is emphasized, however, that 'state' has an essential component of desirability or being desired. Indeed, 'state' may be regarded as short for 'desirable state' or 'desired state'. There are many states whose desirability is controversial or philophically problematic, or both. But there are also many states whose desirability is neither highly controversial nor highly problematic. In the present discussion, we are concerned (it is hoped) with states of the latter kind.

States can be associated with individuals and with communities. (There are different levels of community - national, regional, local).

State has magnitude. The magnitude of state is proportional to the magnitude of the desirability of, or desire for, the condition that it refers to. Accordingly, there are higher states and lower states.

State can be gained or lost. At any moment, an individual (or a community) stands to gain state that currently does not obtain, or to lose state that currently obtains.

Money-value is often a useful measure of state, but not always. Many high magnitude states do not and probably cannot have any money-value. Therefore, magnitude of loss of state can sometimes but not always be determined by magnitude of money-value of state.

However, losing money in business is not loss of state; losing money in the stock market is not loss of state (a stock purchase is indirectly a business investment); losing in games or competitions of any kind is not loss of state; paying taxes, undergoing penalties and punishments imposed by courts of law is not loss of state; complying with restrictions imposed by lawful authority is prima facie not loss of state (though these restrictions may be challenged in courts of law).

There may be other conditions that do not count as loss of state. Indeed, there may be conditions of seeming gain of state that do not count as gain of state.

No principle is provided here for determining what is and is not a gain or loss of state (it is not required here).

Liberty, way of life, community, national pride, natural and man-made resources are 'states' (and external aggression makes for loss of these and other states).

Family, friendship, optimism, skills and reputation are other states.

Just as there are desirable conditions, there are undesirable conditions, that is, conditions that we desire NOT to be in. It is possible to propose a term, say 'anti-state', for such conditions. However, this is academic and rather superfluous for present purposes; 'loss of state' is interchangeable with 'anti-state'.


2. STATE AND CHOICE

'State' has a characteristic relation with 'choice'.

To be precise, 'gain of state' has a characteristic relation with 'choice', and 'loss of state' has its own characteristic relation with 'choice'.

Gaining state is intimately bound up with making choices. At any time, a person can always (and usually has to) choose from among many different states to gain. At any time a person may choose to go to a Mexican restaurant or an Italian restaurant or a Chinese restaurant.

Choice of state includes choosing no state, and this is an important aspect of choice. At any time, a person may choose to go to NO restaurant, preferring, say to eat at home or not eat at all.

Choice of state includes choosing the time of gaining it, and this is an important aspect of choice as well. A person may choose to go to eat out at a restaurant today or tomorrow or on Friday night, or not at any given time.

A person can choose state according to his resources and according to the timing of his resources; he can choose from among different expensive cars today, or he can choose a less expensive car today and choose to buy a more expensive car after three years.

Having choice itself is a state.

Based on these indicators (and possibly others), there are 'areas of choice' in society. An area of choice is characterized by personal decisions, preferences, goals, convenience, discretion and planning.

Loss of state, on the hand, is characterized by lack of any choice.

A person who is in any state has no choice in the matter that it has to be maintained; a person cannot say of any state of his or hers, "I do not really care about having that; it makes no difference to me". If he or she does, it is not a state at all, as being desired is essential for anything to be a state.

A person who has lost any state has no choice in the matter that it has to be restored; a person cannot say of any state he or she has lost, "I do not really care about getting that back; it makes no difference to me".

A person who loses a state cannot be said to CHOOSE the service that restores it. A person who is drowning cannot be said to choose being rescued.

There is also no meaningful choice in the manner or the means of restoration.

Restoration of state occurs - and has to occur - in accordance with the prevailing knowledge and technology, through established procedures or best practices, which are known or regarded to bring maximum restoration possible with minimum loss of other states or side effects. But a person cannot really be said to 'choose' it when he requires a service that does this. It is meaningless to assert "I choose maximum possible restoration with minimum possible side effects"; it has nothing to do with choice and is really a trivial assertion.

To a person trapped in a burning house it is irrelevant what equipment or techniques the firemen use to save the person; just about anything they use or do is irrelevant. Considerations such as not using abrasive gloves that injure the person, or ropes that are unsafe and can snap, or bringing the person out using unnecessarily risky stunt-like maneuvres are not really about choice at all.

A person who is in any state has no choice over the time at which the state is maintained, or restored when it is lost. When a person is in any state, he or she requires it to be maintained all the time, and when a state is lost he or she requires it to be restored immediately. A person trapped in a burning house needs to be rescued NOW.

Based on these indicators (and possibly others), there are 'areas of no-choice' in society. An area of no-choice is characterized by personal duress, desperation, loss, inconvenience, urgency and abruptness.

3. AREAS OF CHOICE AND NO-CHOICE

By and large, biological requirements are areas of no-choice - food, air, water, clothing, shelter; the significant exception is sex, which is an area of choice. Why is that so? There is no loss state by not having sex. On the other hand, a person can choose to have sex with X or Y or Z, or with none at all (the person may prefer to watch football on TV). A person can choose to have it now, or later, or not at any given time. So sex is about gain of state, and is an area of choice, though the inability to gain it can be frustrating and painful.

Marriage and starting a family are, similarly, areas of choice.

Often, areas of choice and no-choice are indentifiable, not with this or that category of things, but with the state and magnitude of state gained by them. There is no choice in having clothes and footwear, especially warm clothes and shoes in winter; yet there is a large area of choice in clothing and footwear FASHION, which is not the same thing. There is no choice in having food to eat, but there is a large area of choice in fine dining.

As society progresses, that is, gains more and more states, more and more areas count as areas of no-choice. That is, there are more requirements for maintaining state and preventing loss of state.

For example, city roads, electricity and K-12 education are areas of no-choice in modern society. People use city roads not because they choose to, but because in modern society they HAVE to get from place to place in a city (and often between cities); if they cannot use the roads there will be loss of state. Remembering that state has magnitude, we can understand that there is less and less choice in moving over relatively small distances - say within a city. Similarly, there is less and less choice about people having lights and heating in the house. And there is less and less choice about people having primary and secondary education - to participate in a modern, high state society individuals MUST have basic education.

However, how people travel over the roads can be a matter of choice - walk, bicycle, public transport, private transport; at the high end, what kind of private transport people use is largely a matter of choice. And there is more and more choice about moving between cities, states and countries. Similarly, there is a large area-of-choice in the use of electricity, and in undergraduate and graduate and yet higher education.

With cultural and technological progress in society ('social progress'), areas of choice as well as areas of no-choice increase and diversify for individuals and communities.

4. GRAY AREAS AND OVERLAPS

As reality is not cut-and-dried, it does not always fall neatly into areas of choice and areas of no-choice.

That is, it is not always a simple matter to identify choice and no-choice in real situations; therefore there are gray areas of choice.

However, there are significant areas that fall largely to one or the other side, and are not entirely gray.

Aspects of choice and no-choice may overlap in products and services.

As state has magnitude, small choices sometimes overlap with large no-choices and large choices sometimes overlap with small no-choices.

Also, as state has magnitude, there is a band of small states whose gain and loss is trivial to discuss, and to identify with areas of choice and no-choice.

5. GOVERNMENT

We now come to the normative part of the essay.

It is proposed that the kind of services that it is appropriate for government to provide are services in areas of no-choice.

That is, the proper kind of services for government to provide are services that prevent loss of state or restore lost state (including states that have been gained through services provided by business, such as cars and homes).

All the familiar things that government does can be seen as efforts to MAINTAIN state, and RESTORE state: passing laws, including laws to protect the environment; providing courts of law; police; national defense; disaster relief; firefighting services; regulating business, so that business activities do not bring loss of state to anybody, including antittrust regulation that checks businesses from preventing others from gaining state.

However, proposing that it is appropriate for government to restore lost state is not the same as proposing that every lost state has to be restored by the government.

There is a set of states that government happens to be responsible for maintaining and restoring at any time and place ('place' being country, state and district); government providing preventive/restorative services beyond the prevailing ones is the stuff of genuine public debate over public policy - it is the stuff of genuine politics and genuine election promises. IT IS IN PRINCIPLE NOT INAPPROPRIATE FOR GOVERNMENT TO PROVIDE ANY PREVENTIVE/RESTORATIVE SERVICE to individuals and communities.

Government-provided services may be either free of charge or not-free of charge. No attempt is made here to determine which government services should be free-of-charge and which should not be free-of-charge. The point is simply that 'government-provided service' does not necessarily mean 'free service'.

Given that there are gray areas, and that society progresses, government may identify areas of preventive / restorative services beyond the prevailing ones; for example, affirmative action and public transportation are gray areas; public access to new technologies like the internet may become required on account of social progress, and investment in backward areas may become required on account of uneven social progress. A case can be made for loss of state in such cases. This again is the stuff of genuine public debate over public policy - it is the stuff of genuine politics and genuine election promises.

Such issues involve myriad details which do not concern us here. Does government directly provide jobs in affirmative action, or provide incentives for it (such as scholarships on the one hand and tax breaks for businesses on the other)? Does goverment directly invest in backward areas or provide incentives to industry to do it? Should public transport be a government service or a regulated business? Should it be free, subsidized, at cost or cost-plus? Should the government provide internet service to homes or make it available at public libraries?

Given that areas of choice and no-choice overlap in products and services, those aspects of products and services that relate to loss of state should be subjected to high government regulation.

It is proposed that government should not DIRECTLY provide to the community or to individuals, services for gain of state, or in areas-of-choice; the more it is clearly an area of choice, the more government should keep out of it. It should not engage its officials to do this and it should not engage or own corporations to do this or that do this.

It makes no sense for government to provide commercial gain-of-state services to the public. Government is terribly inefficient at this, and in relation to this right wing commentators have a valid point.

However, government can indirectly provide or promote gain of state by giving incentives to businesses and individuals. That is, there is a layer of business insulation (of real free enterprise) between government and the public in these areas. BUT BECAUSE THERE ARE GRAY AREAS, PUBLIC DEBATE IS REQUIRED AND SHOULD BE CONDUCTED IN TERMS OF - WITH RESPECT TO THE QUESTION OF - WHETHER OR NOT A PROPOSED GOVERNMENT SERVICE ENCROACHES ON AN AREA OF CHOICE. PUBLIC DEBATE SHOULD BE OVER THE CLARIFICATION OF AREAS OF CHOICE AND NO-CHOICE, OR ALTERNATIVELY, ABOUT SHAPING PUBLIC OPINION ON THE QUESTION.

The principle that it is appropriate for government to provide preventive/restorative services, has the implication that insurance is properly a government-provided service. This means ALL kinds of insurance - be it for vehicles, homes, factories, art collections or farms. However there are nuances, to be discussed in coming posts.

At the same time, ordinary prudence on the part of citizens is not discounted; if government provides preventive/restorative services, government will promote or enforce prudence and ordinary caution to prevent loss of state in all areas, such as driving safely on the roads and conforming to fire codes in buildings.

6. BUSINESS

It is proposed that the kind of services that it is appropriate for for-profit business to provide are services in areas of choice.

That is, the proper kind of services for business to provide are services that provide gain of state.

All the familiar things that businesses do can be seen as efforts to provide gain of state: making cars, producing movies, publishing books and music, running restaurants, staging sporting events and fashion shows, building and managing vacation resorts.

Businesses promote gain of state by CREATING CHOICES, and thus fit services in areas of choice like a glove.

It is proposed that business (that is, commercial, for-profit enterprise) should not DIRECTLY provide to the community or to individuals, services for preventing loss of state or restoring lost state. Just as it makes no sense for government to provide commercial gain-of-state services to the public, it makes no sense for business to provide commercial fire-fighting services to the public.

The use of the profit motive to service conditions of loss and duress seldom works and distorts the service. When we see businesses engaged in such services, we are reminded of what Brand Hauser (John Cusack) cynically says in the movie 'War, Inc': "Business is the uniquely human response to moral or cosmic crises."

Given that business is suited to providing services in areas of choice, the corollary is that there is no genuine business that 'cannot be allowed to fail'. If at any point it is discovered that there is a business that cannot be allowed to fail, something that should not happen has happened. It signals a failure of regulation or the need for new regulation. A business that cannot be allowed to fail represents a business that is in a position of bringing loss of state, which violates the principles proposed here. Hence government in its role of preventing loss of state must regulate business such that none becomes one that cannot fail; as there is continuous progress in society this regulation is a continuous activity.


When a business fails, it means the customers will be unable to gain state from it; but inability to gain state is not a condition that is of concern here. The employees and the owners/promoters of the business will either be unable to gain state, or will lose state. If they lose state government action is called for, not to prop up the business, which is clumsy and beside the point, but in the form of unemployment benefits, which are simple, efficient and to the point.


7. GOVERNMENT AND BUSINESS

The separation between government and business in providing services to the public need not be watertight.

Government may provide its services directly to the public, or by engaging business (public works function on the second model).

Fire-fighting is properly a government service, but the government may engage a private contractor for the purpose. The contractor however will have no commercial dealings with the public, and particularly with the people he or she rescues. (The immediate problem is that contractors and corrupt officials can scam the system; but it cannot be said of any proposal that it is unacceptable simply because it can be scammed; the question rather is how to prevent scamming.)

This means that business can prevent or restore loss of state on behalf of government or under government contract. That is, there is a layer of commercial insulation (of real government) between business and the public in these areas.

Government may even own corporations through which to provide services to the public. And these corporations can even be profit making, or managed and given incentives to be profit-making, but they are not FOR profit, that is they do not exist for the PURPOSE of making profits. (To be precise, these corporations have to be efficient, and profit can be an indicator of efficiency - though it is only one indicator out of many possible).

For its part, business may sell to the public for-profit, or to the government for-profit (defense industries function on the second model).



The summary of the proposals here is to get (and let) business do what good businesses do best - providing services to individuals and communities for gain of state; the classical capitalist model based on the profit motive, competition and growth of demand makes eminent sense when capitalistic enterprise caters to areas of choice; it makes no sense and is a disaster when applied to areas of no-choice.


And let (and get) government do what good governments do best - providing services to individuals and communities for preventing loss of state and restoring lost state.


UP NEXT: Services, Proportion and Price