Reforms are urgent, but difficult. To achieve them, a four-pronged approach is required: restructuring, competition, evaluation and accountability.
This column by the 2014 Nobelist Jean Tirole
was originally posted on 16 July 2007. It gives his views on reforms that are
as necessary today as they were in 2007.
Meeting the expectations of its citizens
will require the French state to become more effective. A four-pronged approach
is required: restructuring, competition, evaluation and accountability.
quality public services, infrastructure that facilitates “economic dynamism”, a
reduction in the debt left to our children. These expectations of the French
people cannot be met unless the state becomes effective.
Reforms are urgent,
but difficult. To achieve them, a four-pronged approach is required:
restructuring, competition, evaluation and accountability.
countries have undertaken fundamental governmental reforms based on a consensus
between political parties and unions.
In the 1990s, the Swedish Social
Democrats government made large cuts in the civil service. Ministers, who
formulate overall strategy and make decisions on resource allocation, have to
rely on a small number of civil servants.
Operational details must therefore be
delegated to a large number of independent agencies, each of which can recruit
and remunerate their employees as they choose.
These independent agencies
operate under strict budgetary limits that ensure the sustained delivery of
same time, Canada cut government expenditure by 18.9% without social turmoil –
and without greatly reducing health, justice, or housing programmes.
this while maintaining tax levies, so the result was a reduced public deficit
and falling public debt. Spending that could not be clearly justified in terms
of the resulting service to the public was pruned.
entrepreneurial projects and privatisation facilitated the elimination of one
in six positions in the civil service.
Indeed the sort of government
reorganisation undertaken in Canada could only be dreamed of in France with its
often nightmarish collection of laws and fiscal regulations.
The Canadians have
a single service for the calculation and collection of taxes and a
one-stop-shop for government-business relations.
common beliefs in France, head-on competition can produce high quality public
services. In telecommunications, most countries, including France, have put a
universal service obligation fund in place, which is compatible with
competition between providers.
It protects the smallest firms while ensuring
that services are available in all regions of the country or to poor consumers. When it
comes to education, several countries (Belgium, the UK, Sweden) have tried
voucher systems that give everyone access to education but create competition
among schools for students.
Such a system must be accompanied by clear and
openly available information on schools so parents can make informed choices
and “insider-ism” can be avoided (something that arose from the competition
among the tracks in the French education system).Competition
can also be created via standardisation.
In the healthcare realm, using more
systematic comparisons between hospitals, or between the private and public
sectors could help control costs.
Sometimes the cost of treatment for a given
disease varies by a factor of 2.5 with the variation having nothing to do with
action of the State must be subject to a double independent evaluation. The
first should be before the action: Is public intervention necessary? What are
the costs and benefits? The second is after.
Did it work? Was it cost effective?
On this point, it would be necessary
to require that the audit recommendations (for example, those of the Audit Court)
be either followed according to a strict schedule, or rejected with a
Law (LOLF), adopted on the basis of a left-right consensus, is a small
revolution in a country accustomed to the logic of budgetary processes.
Embracing the logic of effectiveness, the law aims to transform public sector
managers into true owners where their obligation to produce results goes hand
in hand with the freedom to manage. Putting this principle into practice is
First of all, the objectives need to be clear and easily
verifiable. Then, “accountability” must be introduced. For that, the objectives
can’t be collective (as the failure of control of health expenses has shown),
but must be the subject of rewards or sanctions.
Lastly, one should be wary of
the pernicious effects of “multi-tasking”. Incentives that are related to an
easily measured objective (for example, the cost per student for a university,
which can be easily reduced by teaching large numbers of students in large
lecture halls) can cause one to ignore equally important objectives that one
has neglected to measure (such as the quality of teaching or research).
other words, to construct good incentives, one has to evaluate actions
comprehensively. That way, it’s clear that giving regulated enterprises more
responsibility should go hand in hand with stricter safety and quality
The need for such controls is clear from the experience of British
telecoms in 1984 and more recently, of British railways.
should be possible to have a state that serves the French better at lower cost,
allowing more jobs to be created and increasing the productivity of our
But the experiences of other countries suggest that lasting reform can
only be achieved on the basis of a political and social consensus.
*Author is Director of the Toulouse School of
Economics and of the Jean-Jacques Laffont Foundation. CEPR Research Fellow.
** Originally published in French in