Economy, Efficiency, And Effectiveness In Public Services

Understanding the Term Economy

Question:

Discuss about the Economy Efficiency and Effective.

The terms economy, efficiency and effectiveness are often used imprecisely especially referring to value for money. This is because the implications of these terms have transcended their technical meanings to apply to broader areas in the world. The same applies to the words efficiency and effectiveness. The paper would show how these three terms are used imprecisely especially while describing public contexts. The author would go on to introduce the three terms namely, economy, efficiency and effectiveness in their literal meaning and then go deeper into these terms to show the actual usage of them. The paper would show the vast usage of these terms and how they have transcended their literal meanings to serve broader public services perspectives. The researcher would discover that these three words are interrelated and cannot be studied with each other. The organisation considered to conduct the study is the Irish branch of HSE, HSE Ireland (hse.ie 2018).

The term economy refers to areas of production of goods and services. The term is used to mark areas of distribution or trading of goods and services. An economy is often defined as a system which enables manufacture, distribution and consumption of goods. The consumers in different economies enjoy services like public health and medical services for subsidised costs.   Thus, here economy acts a facility which enables circulation of financial capital between the producers (public sector health service providers) and consumers. As this definition points out that the term is not restricted within any specific country or geographical area (Veleva et al. 2015). Economies have no specific physical boundaries as they are systems which enable flow of money from, producers (health service providers) to patients (consumers) all over the world. Audretsch, Lehmann and Wright (2014) argue that the above discussion apparently points out that financial resources flow in the global economy freely which is not true and feasible. The flow of financial resources in the global economy is controlled by governments and international organisations to ensure that the resources flow into the areas of further public benefits (Arvis et al. 2016). The governments regulate the flow of money within their jurisdictions through various public service organisations like apex banks and stock exchanges. The governments regulate the flow of money within their jurisdiction to provide services to their people. For example HSE Ireland is a public sector health service which works according to the directives of the European Union on no gain or profit basis (hse.gov.uk 2018). This involvement of governments in the welfare of people through public services adds value to the money flowing in the global economy. These important roles of governments and international organisations have led to use of the word economy and countries interchangeably. The following are the new aspects of the word economy which is used in global scenario today:

Global Economy and Modern Economies

Traditional economies are economies in which customs, traditional perceptions and beliefs decide the production of goods and services in the economies. These factors even decide the terms and manners the producers and consumers exchange goods and services. The traditional economies are mostly restricted within rural areas where the medium of exchange is not standardised (Edwards 2017). People exchange products of certain values with products of equal values. This analysis shows that traditional economic systems are not developed to allow large scale flow of goods. This purpose is served by modern economies which are empowered with the infrastructure to allow and control flow of resources all round the world.

The term modern economy refers to economies which have the infrastructure to allow global flows of money. The following are the salient features of modern economies:

Stiglitz and Rosengard (2015) point out that, modern economies today are characterised by massive logistization of resources between countries. The governments, the suppliers, wholesalers and logistics companies today form strategies regarding movement of goods and services between countries. For example, the public services like HSE Ireland enable flow of medical services throughout Ireland to ensure access of Irish people to treatment and healthy lives. The logistics arms of HSE transports medicines to the most interior areas of Ireland to ensure that the patients can get access to these facilities easily. Thus, the term economy in the global context can be referred to as networks controlled by governments to enhance the value of money (Sini 2015).

Another salient feature of modern economies is use of information technology to integrate and manage movement of goods and services. For example, the government of Ireland can gain use its information network to gain information on the requirements for medical aids in different regions in the country. The government then collaborates through HSE, its health sector organisation working under public sector with other non-profit making organisations to provide medical services in those areas (Lei, Mol and Shuai 2017). This meeting demand and supply generates revenue in the global economy. Thus, it can be inferred from the discussion that without informatization flow of goods, services and financial resources are not possible.

Modern economies are characterised by influences from external market like other countries on the flows of goods, services and financial capital. The demand and supply of goods services in one economy today influences the other. The economies today share resources which allow economies to satisfy the shortage of supply of resources by acquiring it from other economies. Similarly, the excess supply of goods and services can be channelized into other economies (Schaltegger, Hansen and Lüdeke-Freund 2016).

Characteristics of Modern Economies

Thus this integration between markets enables the consumers to obtain goods and service even from foreign markets (Stiglitz and Rosengard 2015). For example, the public services like HSE Ireland enable the people to consume medicines which manufactured in other countries. Thus, it can be inferred that external market influences enable more efficient circulation of goods and services like medicines and medical facilities respectively within Ireland and ensuring of health development among the people (Lei, Mol and Shuai 2017).

The findings from the above discussion points out that unlike traditional economy, the term economy in modern sense is more global in nature. The three characteristics of the modern economy are presence of logistics as an important element of flow of goods and services, the use of information technology in management of the global logistics systems and global influences on the domestic markets (Gabaix and Maggiori 2015). These attributes have become more relevant because they enable the governments to shift goods like medical from one part of the country to another. For example, HSE Ireland undertakes rescue operations and evacuation operations of the people during accidents like fire and natural calamities. Thus the public service is heavily dependent on logistics and availability of information during rescuing the victims (Lei, Mol and Shuai 2017). The most notable characteristic of modern economies are that the manufacturing sector and service sector obtain their human resources from the educational institutes. For example, HSE acquires trained medical and paramedical staffs to treat patients from reputed medical colleges. The modern economies can again be divided into the following types:

A command economic system is a system where the resources are completely under the control of centralised authorities like the governments. The governments in command economies make strategies to control the logistization of goods and services within the economy. These governments as a result have full control over the financial capital which is generated by the flow of goods and services from producers to consumers (Dudin et al. 2014). The governments of command economies take the responsibilities of generating employment and provide services to their people. The command economies do not experience development of private sector industries and do not encourage entry of multinational companies.

For example, in the below graph, there are two arbitrary countries, Country A and Country B, both assumed to be command economies. Country A has 200 HSE nurses compared to 100 HSE nurses in demand which means 100 nurses remain unutilised or unemployed. Again, country B produces only 100 HSE nurses compared to 150 HSE nurses demanded which means there exists of a deficit of 50 HSE nurses. This means in case of country A 100 HSE nurses remain unemployed and in case of country B, the supply falls short by 50 HSE nurses.

Types of Modern Economies

The free market economies or open economies are characterised by participation of household sector and the industrial sector to control flow of goods, services and financial capital. The household sector creates demand for the goods while the industrial sector produces goods and services to fulfil the demand. It is apparent that governments have no role to play in free market economies but in reality free market economies do not exist (Frerichs 2017). The governments in these systems form the policies which the industries have to follow while operating in the market. As far as public sector is concerned, bodies like HSE Ireland regulate the other organisations to ensure that they enforce safety measures for their employees. Thus market economies organisations like HSE ensure benefit of people working in different organisations (Lei, Mol and Shuai 2017).

Mixed economies are characterised by presence of both public and private sector industries. The governments in these economies control important sectors like defence and railways. The governments in mixed economic systems like Ireland; besides private sector organisations provide their residents with basic services like health services. For example, the Health Services Executive (HSE) is a health service providing body in the United Kingdom and Ireland. The body provides health care services to people, especially the ones who cannot afford expensive treatments in private hospitals (hse.ie 2018). The health sectors in mixed economies experience heavy growth of private sector companies including multinational companies both of indigenous and foreign origin. The governments in the mixed economies form policies and laws to regulate the private sectors (Chueva et al. 2016). Moreover, HSE is a government body which makes policies which all other sectors are supposed to follow in ensuring health and safety of their employees.

For example, according to the previous example, let it be assumed that both country A and B have changed to open economies. Now country A can relocate 50 HSE nurses to country B as shown in the graph below. Country B can meet its supply deficit in public sector health service while country A can earn extra revenue.

Thus, in mixed economic systems governments facilitate exports and imports of goods between countries. These sharing of resources allow countries producing excess commodities export to other countries which experience shortage of those commodities. The governments and companies involved in exporting commodities are able to earn huge revenues. This discussion proves clearly that term modern economy experiences flow of products and money between countries or economies under strict control of governments (Dudin et al. 2014).

Free Market Economies

The discussion above reveals several facts about the term economy and its usage in the global context. The term economy refers to the system which facilitates flow of goods, services and financial capital. The definition apparently points out that the term economy is autonomous. However, in reality these flows of goods, services and money between countries are not uncontrolled. The governments and international organisations manage the flow of resources within their jurisdiction (Lei, Mol and Shuai 2017). For example, the health sector cannot function efficiently in the Irish economy without the intervention of public sector bodies like HSE. This role of governments in controlling the flow of resources within their jurisdictions has resulted in diversity in the flow of resources and capital generated (Maclean, Jagannathan and Panth 2018). Thus, prominent roles of governments of countries have led to the use of terms economies and countries interchangeably.

The discussion points out that the term economy is actually vast and embraces factors like extent of government interventions in the operations of different countries or economies. The traditional economies were restricted within rural areas and were characterised by exchange of goods of equal values. The modern economies are characterised by logistization, use of IT to manage logistics and countries influencing each other’s markets. The discussion points out that modern economies are characterised by participation of public services like government run public health services like HSE Ireland and their private counterparts (hse.ie 2018). The modern economies are mostly mixed economies which experience presence of private sector companies in manufacturing goods and services. The main role of the governments today is to provide the economies with security from external aggression and form laws to facilitate the functioning of the industrial sector.

The discussion stresses on the flow of goods and services and generation of revenue. It must be pointed out that the aim of economic functions is to maximise the flow of products in order to generate maximisation of revenue or gaining efficiency.  Economic activities aim to generate maximise output from minimum inputs. It can also be interpreted in monetary terms that efficiency is the capability of earning the maximum possible financial returns from investments in the markets (Serrador and Turner 2015). This aim of economic activities of gaining efficiencies often leads to imprecise use of the two terms interchangeably.

The term efficiency generally means the ability to produce target output by wasting minimum amount of resources. The implications of the term ‘target output’ vary with industry and contexts (Johnson, Leenders and McCue 2017). Efficiency in public sector refers to providing important services to the people either at very low cost or almost free of cost. For example, HSE Ireland is one such public sector health organisation which provides services to people of Ireland on non-profit basis. Thus efficiency here means adding value to money by channelizing it towards public welfare (hse.ie 2018).

Mixed Economies

Efficiency in manufacturing industries refers to ability of producing finished goods by generating minimum wastage. The term from economic perspective can mean optimum allocation of resources to satisfy market demands and reducing their wastage. The public health service providing organisations refer to efficiency as their ability to serve maximum number of patients by allocating minimum resources (Gottfredson et al. 2015).

The term efficiency today embraces several areas like bringing about economic development of local population, environmental benefits, energy efficiency and stakeholder benefits. For example, the health sector in Ireland is consists of two tiers namely, public sector health care systems and private sector health care facilities. Ireland has one of the advanced healthcare systems in the world where more than fifty percent of the spending comes from the government alone as shown in the graph below (Bukhari and Kazi 2016). The public sector health care systems like HSE Ireland provide employment to a large number of people, thus creating employment opportunities in the countrry. The body collaborates with the voluntary organisations to provide better services, thus bringimg about social welfare.

It is evident from the collaboration of HSE Ireland with pathological laboratories and insurance companies to bring about more innovative treatment packages in the public health care system in terms of both product and pricing. It must also be noted that foreign multinational health care and insurance companies are also contributing to the efficiency of the health care facility in Ireland. Thus, it can once be pointed out that collaboration between countries lead to efficiency in different industries as shown in the example (Ranchhod et al. 2014). Thus, this discussion reveals that the close connectedness of efficiency of industries and collaboration between countries (which are often termed as economies) have led to the imprecise use of the terms economies and efficiency.

The term effectiveness refers to the capacity of producing desired outcome. Apparently, it looks as if effectiveness is same as efficiency. A closer look at the effectiveness and its use shows that the term is associated with quality while the term efficiency is more associated with quantity (Serrador and Turner 2015).

The term efficiency is used by economists to refer to the level at which an economy can no longer produce a particular without lowering production of another commodity. Here, the term efficiency can be interpreted as the stage where an economy has allocated its maximum available resources towards producing a commodity and requires allocating more resources from other production systems to continue production of the commodity (Lei, Mol and Shuai 2017). Here again it can be pointed out that countries or economies instead of deducting resources from other economies to increase production of certain commodities, imports resources or finished goods from other economies. For example, public health service bodies like HSE imports medicines from foreign markets to meet the increasing medical demands. This has made more medical facilities available to the people of Ireland, thus making the health sector more efficient (Cao, Duan and Li 2015). This shows that economies play crucial role in ensuring effectiveness in their production of goods.

Command Economies

Conclusion:

The above discussion clearly points out the grounds responsible for imprecise use of the terms economy, efficiency and effectiveness. These terms are interrelated and are often used interchangeably. The three terms are today used as value for money especially in terms of public services provided by governments all round the world. However, this system though apparently automatic, calls for intervention of governments and international organisations to control these flows of products and money. These pivotal roles of governments in control economic systems have led countries being referred to as economies. The 2^nd term, efficiency refers to the capability of governments of countries or their public services arms to produce services by incurring minimum wastage of resources and bearing minimum expenditure. As pointed out, governments play pivotal roles in providing infrastructure for industries to work efficiently and boost their productivities. Thus, economies or countries (governments) play important roles in ensuring efficiency in production of goods (medicines) and services (medical treatments). This important role of economies in gaining efficiency has led to the two being used interchangeably. The third term effectiveness refers to the quality aspect of the services rather than efficiency, which stresses on the quality aspect of the products. The discussion clearly shows that achievement of effectiveness and production of high quality products requires allocation of capital resources which in turn requires companies to be efficient. This means that the companies are required to produce products in large amounts to sell them to maximum consumers and generate high revenue which it can channelize towards gaining effectiveness. Thus, effectiveness is dependent on efficiency and organisations need to achieve both to sustain in the competitive market. It can also be construed from the discussion, that when organisations gain effectiveness and efficiency and earn huge revenue, it ultimately leads the revenue generation of the government of the country. The government can then channelize this revenue towards development of the economy. Thus one can conclude by stating the words economy, efficiency and effectiveness are used imprecisely because they are closely related and one cannot be achieved without fulfilment of the other.

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