Putting value creation back into “public value”: from market-fixing to market-shaping

Figures & data

Table 1. Approaches to public value: correcting failure vs. creating public value.

	Correcting failures	Creating public value
Justification for the role of government	Market or coordination failures: Public goods Negative externalities Imperfect competition/information “public value failure” (Bozeman)	All markets and institutions are co-created by public, private and third sectors. Role of government is to ensure markets support public purpose, also by involving users in co-creation of policy
Business case approach	Ex-ante cost-benefit analysis employing allocative efficiency, i.e. assuming all else remains equal (prices/relationships etc.) and incorporating possibility of government failure.	Focused on systemic change to achieve mission – dynamic efficiency (including innovation, spillover effects and systemic change).
Underlying assumptions	Possible to estimate reliable future value using discounting and backward-looking datasets. System is characterised by equilibrium behaviour	Future is uncertain because of potential for novelty and structural change; system is characterised by complex behaviour, non-linear feedback loops
Evaluation	Focus on whether specific policy solves market failure and whether government failure avoided (Pareto-efficient).	Ongoing and reflexive evaluation of whether system is moving in direction of mission via achievement of intermediate milestones and user engagement. Focus on portfolio of policies and interventions, and their interaction.
Approach to risk	Highly risk averse; optimism bias assumed	Failure is accepted and encouraged as a learning device