"Does choice and competition in public services improve the performance of non-altruistic providers, but worsen the performance of altruistic providers?"

In an influential application of David Hume’s famous proposition that “in contriving any system of government, every man ought to be supposed a knave”, Julian Le Grand argues that providing public services using markets, choice and competition can help to align the behaviour of ‘knavish’ (e.g. self-interested, lazy, avaricious, time-serving) providers with that of ‘knightly’ (e.g. altruistic, public-service-motivated) ones. Studying the English National Health Service (NHS) during the 2000s, we provide evidence that, while competition can indeed improve the behaviour of ‘knaves’, it may worsen the behaviour of ‘knights’. We obtain this evidence by estimating the effect of a major competition-promoting reform in which patients were allowed to choose which hospital they attended for elective surgery, on clinical quality as captured by mortality from acute myocardial infarction, using measures of hospital-level altruism drawn from the NHS Staff Survey. Our estimates indicate that non-altruistic hospitals responded to competition by improving care quality, but that the response of altruistic hospitals was attenuated and – more tentatively – perhaps even negative. These findings are consistent with predictions from economic theory that, when prices are fixed, hospital competition will lead to care quality improvements when hospitals are not altruistic, but will have more ambiguous effects – including possibly negative effects – on altruistic hospitals. We conclude by discussing implications for future public service reform efforts.