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.