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A quasi-market is a public sector institutional structure that is designed to reap the supposed efficiency gains of free markets without losing the equity benefits of traditional systems of public administration and financing.


A notable example would be the NHS Internal Market introduced by the National Health Service and Community Care Act 1990: under this system, the purchase and provision of healthcare in the UK was split up, with government-funded GP fundholders "purchasing" healthcare from NHS trusts and district health authorities, who competed against one another for the fundholding GPs' custom. There was a marginal rise in the rate of increase in NHS productivity, to set against higher transaction costs, but healthcare remained free at the point of service and financed through taxation.[1] Kenneth Arrow's famous essay "Uncertainty and the Welfare Economics of Medical Care" outlines the difficulties of applying principles of competition in the medical care industry.[2] The system was regarded by some as a success: the 1997 Labour government did not entirely abolish it on taking office. GP Fundholding was abolished, but replaced by primary care trusts as purchasers of healthcare. As Klein says this was "universalising fundholding while repudiating the concept".

In October 2014 a row broke out over whether University Hospitals Birmingham NHS Foundation Trust should be allowed to turn away patients from outside its immediate catchment area. Chief Executive Dame Julie Moore said the NHS is neither an effective market nor a managed system. She argued that her hospital was suffering financially because of its success in attracting patients from outside the City.


Critics of quasi-markets argue that they can lead to problems of what's called cream skimming.

For example, the introduction of open enrollment in UK secondary schools after 1988 (whereby parents could choose which secondary school to send their child to, rather than being limited to the nearest) led to popular schools being oversubscribed. This allowed these schools to select which pupils they would accept, leading some to discriminate against children from low-income backgrounds or non-traditional family structures (e.g. inviting "both" of a child's parents to an informal meeting with the headteacher so as to determine by stealth whether the child comes from an "appropriate" family). Open enrollment also led popular schools to expand their intake, leading to the growth of very large schools with resulting discipline problems, at the expense of smaller schools and rural schools.

See also


  1. Klein, Rudolf (27 November 1999). "Markets, politicians, and the NHS". British Medical Journal 319 (7222): 1383–4. doi:10.1136/bmj.319.7222.1383. PMID 10574834. 
  2. Arrow, Kenneth (December 1963). "Uncertainty and the Welfare Economics of Medical Care". American Economic Review LIII (5). 
  • Bartlett, W. and Le Grand, J. (1993) Quasi-markets and Social Policy. Palgrave Macmillan. ISBN:0-333-56519-3
  • Le Grand, J. (2002) The Labour Government and the National Health Service. Oxford Review of Economic Policy