“The three main forms of non-market
provision have been government, charities, and self help groups. Although government
provision is universal, in some societies charities are very substantial providers, and there have been major examples of self-help.
These non-market processes all need to solve two distinct types of problem. One is the
overarching issue of the total resources to be devoted to the activity and the allocation of those resources across service-providing units. The other is the production issue of how to maximize the output from given inputs within each unit. Each of these issues
necessarily involve problems of agency. Since the predominant source of finance is not
the clients or the service, there is an almost inevitable separation between the people who are the beneficiaries and the people who meet the costs. The agency problem is by no means the only determinant of basic service provision. Provision might be inadequate because workers lack the skills to perform adequately, because the society is too poor to provide the needed level of complementary inputs, or because users and potential users lack the knowledge or motivation to use the services properly. These are all real and substantial obstacles to satisfactory levels of health care and educational attainment, but they are beyond the scope of the present paper which is confined to how these agency problems can be addressed.”
