Market failure

I hate the term "neoliberal", but in this piece I am going to use it, simply for want of a better word.

Neoliberal economic dogma says that the public sector crowds out the private sector. So the public sector should only step in as a last resort to provide for those that the private sector cannot or will not serve. In recent years, we have interpreted this to mean that the public sector should only provide for the very poorest in our society. If people can afford to pay, the private sector will provide. 

Is this true? Well, true believers say it is. So, if an elderly man with a gold-plated defined benefit pension and substantial savings needs sheltered accommodation because he is no longer safe to live on his own, he should have no problem finding it, should he? 

I did an internet search for sheltered housing on the Isle of Sheppey, where the elderly man lives. This is what I found:

Only one of these enclaves is sheltered housing: the other is accommodation restricted to over-55s, but it does not have an on-site warden. So, for the whole of the Isle of Sheppey (about 38,000 people, of whom around 25% are over 60), there is one sheltered enclave with 38 units, all of which are currently occupied. It is run by Amicus Housing Association on behalf of Swale Borough Council. There is no private sector sheltered housing on Sheppey. 

Thinking I might have missed something, I checked with estate agents. They confirmed that there is no private sector sheltered housing on Sheppey. There isn't much in Sittingbourne, either. Better go to Faversham. Or Tunbridge Wells. Richer areas. There is lots there. 

The trouble with Sheppey is that it is not an attractive place for private sector providers. Compared not only with the national average but with the county of Kent, it appears to be poor:

Or - is it?

Umm, how does that work, then? Easy. Despite the fact that it is in the South East of England and only about an hour from London by fast commuter train from Sittingbourne, Sheppey's house prices are below the national average. The average house price in England & Wales is currently £216,674, but the average house price on Sheppey is £204,369. Population statistics show that the majority of people on Sheppey are in the 30-59 age bracket, so most of them will have bought their properties some time ago. So the slightly high home ownership rate does not indicate affluence, as the banner at the top of this chart says. Rather, it reflects the affordability of housing on Sheppey relative to the average for the South East - hence the high proportion of mortgages. 

And this also explains why there is no private sector sheltered housing, or indeed any private sector accommodation for the elderly other than a couple of care homes. The return on capital is not high enough to justify the property investment. What housebuilding there is on Sheppey is aimed at commuters moving into the area to take advantage of fast road and rail links to London. New housing developments are mostly two and three bedroom homes, plus some larger properties, built close to the roads that take the commuters off the island. I asked one property developer about flats in town centres, and she said "oh we don't do those". They aren't what the commuters want. 

So we have a total market failure. The private sector does not provide for the elderly on Sheppey. In fact it doesn't really provide for local people at all. It is entirely focused on attracting London commuters. 

Since I couldn't find private sector accommodation, I issued a preliminary enquiry to Amicus Housing Association about Davie Court. (I have redacted personal details, obviously, and added the red underline.) 

This was the response:

So, the need of a frail elderly man for sheltered accommodation is treated as a housing problem not a care problem. This is really going well, isn't it?

Swale Borough Council's criteria for housing say absolutely nothing about care needs or risk. But they do say a lot about money:

I knew he wouldn't qualify. He has too much money. But I emailed them anyway, reminding them of their duty of care:

The response was a slapdown:

Translation: ""F**k off. Rich bastards like your father are not our problem". 

So, the private sector won't provide, and neither will the public sector. And the third sector has sold out to the public sector. The really stupid thing is that my father is able and willing to pay. But no-one is willing to provide. I am unable to find the sheltered housing that my father needs in the area where he has lived fo 18 years. 

And so far, I am unable to find care support either. 

Swale Borough Council referred my enquiry to the Social Services department of Kent County Council. But I had already contacted them about care support - and they decided that because my father doesn't need help washing or dressing, he doesn't need any help at all. They interpreted their remit so narrowly that ensuring his safety simply didn't feature. 

So I have had to step up myself. I am currently spending several hours at my father's house nearly every day, a round trip of 60 miles, just to ensure that he is safe. And I am permanently on call: he has an assistive helpline, but the first person on the call list is me. I am trying to find support from private sector care agencies: there are a few, though their capacity is limited at present. Maybe, in the new year.....

Fortunately, my working hours are flexible, though my work is suffering: I didn't meet my Forbes mandate last month, I didn't write my Co-Op News column either, I have cancelled numerous singing lessons, and I finally completed my American Express assignments for this year yesterday, one month late. But nevertheless, I am fortunate. Most people do not have such flexible working lives. Many are forced to give up work to care for elderly relatives.  

Market failure like this has economic consequences. Government waxes lyrical about the need for affordable childcare so that women with young children can stay in the workforce, while simultaneously cutting back on the services needed to ensure that women with elderly relatives can stay in the workforce. I say women, because the burden of elderly care by families still falls principally on women, though of course some men are carers too. What is the cost to the economy of people leaving the workforce because neither the private nor the public sector will provide adequate care for their elderly relatives?

The next neoliberal cultist who tells me that the public sector should be slashed to the bone to make way for the private sector will receive a very dusty response. Get real, ideologues. The private sector only provides when it perceives that it is in its interests to do so. 

Market failures need public sector intervention. Local authorities that only provide for the poorest and fail to ensure that the rest of their constituents have adequate provision are not doing their job. In fact they are breaking the law. The Care Act 2014 specifically assigns to local authorities the responsibility for ensuring that there is a functioning market in social care provision. 

The rich in Faversham and Tunbridge Wells are provided for by the private sector. And the poor on Sheppey are provided for by the public sector. But the people in the middle - the in-betweeners - are on their own. No-one is meeting their needs. 

Related reading:


  1. My sympathies for what you are having to do. My wife and I, and especially her brother, have had to spend much time over the last few years helping her parents in their old age. It's hugely difficult.

    And thank you for your thoughtful post. I'm still digesting it, but it's clear that the next few generations reaching old age have to plan their retirement very carefully. Not just the in-betweeners.

    1. «it's clear that the next few generations reaching old age have to plan their retirement very carefully»

      It is actually very easy for anyone to «plan their retirement»: save around 40-50% of your income for 40-50 years, job done. That's what it takes to have a retirement that is both comfortable and safe (but for extreme risks).

      The problems are that very few people are determined to do that, and even if they did, it would be in part wasteful because self-insurance against risk is mostly unnecessary. In particular low income people have enormous incentives to not save 40-50% of their incomes, because immediate needs overcome future needs. Of course if every low income person were determined to save 40-50% of their income then low end wages would have to rise, but there are enough low income people that are desperate for some income now that is not quite feasible.

      To get a comfortable and safe retirement that takes less than 40-50% of current income the only solution found so far are to have both:

      * Collective insurance against risk, so that people need only save against *average* risk, not nearly-worst-case risk. That lowers the needed savings rate to maybe 35-40%.
      * Transfer to previous workers of some of the wage growth of current workers, based on the assumption that robust wage growth will continue forever. That lowers the needed savings rate to maybe 30-35%.

      Indeed in most "first-world" countries in the post-WW2 "golden years" good defined-benefit (that is, risk-insured) pensions were funded with public or company or individual contributions amounting to around 20-30% (in a period of much shorter retirement duration expectancy) of worker income *in total*. See here for private pensions:

      The problem with 25-35% total contributions is the same as that with 40-50% ones: there is a giant global oversupply of cheap labourers who are desperate to earn something now, and therefore with a very high discount rate as to income during retirement, and therefore who are willing to forego that part of their income that would pay for a pension in order to get a wage now.

  2. not exactly news . people slipped through the net even in the happy clappy pre crisis days , when spin doctors said everyone was happy .
    channel four documentaries about low quality social housing ignored .
    but that's the left wing .
    you know what the social evils have been defined as , for the last 2 or more decades .
    I know of a generous post woman who works mornings , and looks after old folk after finishing her shift .
    lives with husband and two children .
    old lady she looked after , kept falling out of bed , ambulance people got fed up .
    little local choice . I think 1 private option .
    old lady had savings , so I think it got sorted .
    reality is limited budgets .
    another issue is housing for young , or middle aged .
    see shelter web site . full of political propaganda . I guess you support this . limited budgets . limited housing . someone must lose out .
    but important not to blame anyone . or any policy . so shelter propaganda .
    people would just like to know where they stand . but like your experience , it takes ages .
    well thanks to the shit shelter web site , it takes ages for others too .
    of course answer is more money . more tax perhaps .
    problem >>> last time a left wing govt won a general election , they promised no increase in taxes .
    still there is Jeremy corbyn

    1. The problem I discuss in this post isn't about money or taxation. As I said, my father is able and willing to pay. It is about lack of supply. Market failure.

      And I'm afraid it IS news. In the late 1970s, my father's mother was given local authority sheltered housing - even though she was by any reasonable standards well-off. I doubt if my father has any more money than she had. But he has too much to qualify for local authority sheltered housing.

      The public sector no longer provides for people who have middle incomes and savings. But neither does the private sector, unless it is in their interests to do so. And for well-off people in poor areas, there is a severe lack of provision. Their only recourse is to move somewhere richer - as the estate agents said. The ideological assumption that the private sector always provides for those who can pay is clearly wrong.

      The public sector has not taken on board its responsibility for ensuring that the market in care services functions properly and gaps are covered.

    2. Not about tax , yet situation different in 1970 s before a new ideology came into being . 1979 . Given money available , it seems an incentive exists for the private sector . When savings depleted , qualification for state help occurs . Neo liberals I think will be satisfied here , and walk away . There might be asymmetric information , and therefore the private sector may not know about your father , or his money . But it will cost money for the public sector to set up an information exchange of some sort , or manage a market place , regardless of what some law says . Budgets are limited , so if spending is to be maintained on wages , sure start , asylum seekers , something must not occur . Law , or no law . You will be aware of neo liberal logic here . Asylum seekers have no one to help them . You can help your father . Unions protect wages . Feminists sure start . So it is about money and taxation

    3. I really don't think you have understood this at all. It is a market failure. It is not about money or taxation - it is about distribution, and about the beliefs and expectations of private sector operators.

      And no, I can't help my father. I have a family of my own to support, and I cannot give up work to look after him, whatever other people (including you) may think.

    4. I suspect you don't want this exchange to go on much more . But if you want to ignore local govt spending restrictions , then fine . Presumably you accept the private sector is not going to build a bespoke residence for one old man . You could , and then pay someone to stay in spare room . So for private sector to act there must be significant demand , ie many old people in need of care in that specific area . If there is , and still no supply , then there should be a rational explanation . Not sure if you mentioned the rational reason , clearly , in your blog . You seemed to suggest there weren't many old well off men in that specific area . I doubt whether the neo liberal establishment is quaking in their boots if this is about one single person . After all , as the saying goes , free markets have elevated billions out of poverty . I think the neo liberal spin doctors can cope with such a small scale problem . Yes , the world will miss your views on banking , politics , economics and finance . But the left wing must be kept in the neo liberal loop . So no retreat on sure start , asylum etc . As for your bit about distribution + beliefs and expectations of the private sector , then no , I don't get it . Did you explain it in your blog ? Private sector wants a profit . Your father has a certain amount of money . If they have information , they can make an investment decision

    5. I did mention the rational reason in the post. Specifically, I pointed out that the return on capital is not high enough because of low house prices and a low-ish income level. Private sector agents would rather invest in places where house prices are higher and people have more money. This is an a problem of economic geography - a largely immobile customer population, unequal distribution of resources and a market in which demand is rising everywhere because of demographic shifts.

      I don't think you know what a "market failure" is. Please read the following link before commenting again.

      Please also read the 2014 Care Act (link is in the post). Local authorities are tasked with market making. They can commission services from the private sector to be paid for by the recipients. It is nothing to do with government spending restrictions, it is abdication of responsibility in direct contravention of the law.

  3. I sympathise with your plight, however there are numerous examples of market failure. Just look at the skewed rail franchises and prior to Railtrack where the Potters Bar crash was directly attributed to cost cutting by private 'enterprise'. The local authority won't spend as they are hamstrung by government cash restrictions, that is why they will make the rules so difficult to enable qualification for help. The roads round my way are already full of potholes, but I guess spending on care is higher priority. Also, I would bet that those councils are Tory (as is round here), so they will not criticise national policy. Anyone with the idea that 'the hidden hand of the market' will find the most efficient solution is delusional.

  4. I applaud the high standard of care you wish your father to receive. Even more, I applaud your sense of responsibility in providing, so far as you are able, that standard of care yourself.

    You should notice though, that your standards are not the standards of the community you live in. Rather than market failure, what you are experiencing is market creation. Said in another way, your standards are driving the creation of a market.

    The market you have defined is a locally provided monitoring service. Potentially, an enterprising individual (with a transportation resource) could check on several impaired individuals within a reasonable travel distance. Potentially, this individual could also provide simple house-cleaning or meal preparation services, presumably at some additional compensation.

    Congratulations on defining a market. The next challenge is for someone to provide the service in a stable, sustainable fashion. This someone would be running a small business, FWETM (for what ever that means).

    I wish you and your father the best. You both are not alone in your encounter with the challenges of elderly years.

    1. Dear Roger,

      Thank you so much for offering to create such a wonderful service. Do let me know when your new business is up and running. We will be among your first clients.

  5. as for that tutorial , I already mentioned lack of information as a possible cause of market failure . if you believe another one of those 7 reasons is more important , then its up to you to specify .
    but why use economic tutorials here at all ? this is bog standard stuff .
    private sector might like to invest in an area where house prices are expected to rise . but actual level is not relevant . in fact lower price , if don't build but convert , then better .
    it is relevant how much surplus money over govt cut off point the old people have . private sector would like long term residents .
    if old people in that area don't have sufficient surplus money then there is no profit for the private sector .
    is this market failure ?
    the system , neo liberal or otherwise , is simply forcing individuals to spend excess savings on a temporary solution . not perfect , but it saves tax payer money . reduces the tax burden . this is a political decision .
    justified by the argument , correct or otherwise [ bull shit ] , that resources are being freed up for those most in need [ poorer individuals or asylum seekers ]
    you are making a poor attempt to use economics [ only one of us has an economics degree ] to create some anti neo liberal protest ideology .
    I think I will pass on reading the 127 pages of the social care link . I would , if I were you , make sure it does not refer to an internal market , for those who receive care , but get bills paid by the state .
    if there is a section which is specifically for those who pay their own bills , then you could point this out to me

    1. This is my site, and if I choose to post economic tutorials here, that is my decision.

      Re your comment "you are making a poor attempt to use economics [ only one of us has an economics degree ] to create some anti neo liberal protest ideology". I don't have an economics degree. Do you? And yes, I am protesting about continual blind application of what, for want of a better word, I termed "neoliberal" ideology despite substantial evidence that it does not deliver the outcomes needed in social care.

      The Care Act is not about government spending. It is about market making. The public sector is tasked with ensuring that there is market provision for those who pay their own bills. It is failing to meet its obligations. I have now pointed this out SEVERAL times.

    2. Yes , I have an economics degree .
      I asked for proof .
      Tories are pro choice . Therefore easy to understand they would want a market for those the state pays for .
      Less obvious councils would be asked to create a market for those with savings .
      So I asked for proof .
      Its your site .
      You chose not to provide it .
      Fair enough

  6. When you mentioned the council's legal obligations under the Care Act, my first thought was the obstacles that this government placed in the way of judicial review.

    What depresses me the most about our current situation is the thought that we're not being governed by neo-liberals but (as Chris Dillow would say) by class warriors. Honest neo-liberals would surely recognise the possibility of market failure and strengthen the structures of legal and regulatory accountability, rather than blindly denying one and dismantling the other.

    1. You could well be right there. I may be being unfair to genuine neoliberals. Perhaps "laissez faire" is more what is going on.

  7. «So we have a total market failure. The private sector does not provide for the elderly on Sheppey. In fact it doesn't really provide for local people at all. It is entirely focused on attracting London commuters.»

    It is easy to have sympathy for the situation of your father and yours, especially as I don't look forward to my own old age where I have neither of your father's advantages.

    When you write «my father is able and willing to pay» that should be qualified by "able and willing to pay the market price for care in Tunbridge Wells". He seems unable or unwilling to pay the market price in Sheppey. I would guess that he would get the sheltered housing and care he wants in Sheppey if he were willing or able to pay a lot more than in Tunbridge Wells.

    That does not describe a market failure, but simply that the aggregate demand in the Sheppey area does not support a profitable supply at the same price as in Tunbridge Wells, and it is your father's choice to remain in Sheppey.

    The neoliberal answer to the situation of people who cannot find jobs in the area in which they live is "take personal responsibility" and therefore "on yer bike". It is hard to imagine for me why a neoliberal would consider the apparent unwillingness of your father to move where there is supply at the price which he is willing and able to pay to be a "market failure" rather than his failure to "take personal responsibility".

    The government intervention that you ask for is for a neoliberal not a remedy to a market failure, but to subsidize care in Sheppey so that it can be provided at the same price as in Tunbridge Wells, and the standard neoliberal comment on that would be why ever should the residents of Tunbridge Wells be forced to pay extra taxes to fund lower priced care in Sheppey than the market price there is, just because people in Sheppey are unwilling to "take personal responsibility" and get "on yet bike", as for a neoliberal the choice of being resident in a specific place is also a market choice.

    The argument you are making seems to be similar to the one made in the book "No One Makes You Shop at Wal-Mart"; it is not an argument about market failure, but about local maxima and returns to scale.

    1. For a similar situation, imagine someone from the affluent middle classes who wants to live in Cumbria because it is cheaper than Tunbridge Wells and likes the area, but also want to shop at Waitrose, because it has nice stuff at price affordable to affluent middle class people.
      Unfortunately there is no Waitrose in Cumbria, presumably because there are not enough affluent middle class people to allow Waitrose to operate a shop there profitably at the same prices as in Tunbridge Wells.

      There would be two solutions to the lack of Waitrose in Cumbria:

      * Affluent middle class people in Cumbria willing and able to pay much higher retail prices in Cumbria for Waitrose products than in Maidstone, to make a Waitrose in Cumbria profitable despite much lower sales volumes.
      * Government intervention so subsidize Waitrose shops in Cumbria so that Waitrose could make a profit there even on a much smaller sales volume, because "obviously" the lack of a Waitrose in Cumbria that sells products at the same price as in Tunbridge Wells is a market failure :-).

      BTW an amusing detail is that there is no Waitrose yet in Tunbridge Wells, much to the dismay of local affluent middle class ladies:
      «Dismayed shoppers in the spa town of Royal Tunbridge Wells have watched as upmarket superstore Waitrose opened new branches across Kent.» «Even 'downmarket' Tonbridge has their own Waitrose, say angry campaigners. »
      «Tunbridge Wells has become the butt of jokes in the national press which remind readers that without a Waitrose, the town is not as middle class as it likes to think.»


  8. «The rich in Faversham and Tunbridge Wells are provided for by the private sector.»

    That's tendentious: the private sector suppliers in Faversham and Tunbridge Wells don't reject non-rich people: they supply sheltered housing and care to anybody willing and able to pay the market price. Being unable or unwilling to pay the market price is not "market failure" for neoliberals. It is just tough luck.

    «But the people in the middle - the in-betweeners -»

    Those with «gold-plated defined benefit pension and substantial savings» probably belong with the "rich" to most people in the UK.

    «are on their own. No-one is meeting their needs.»

    For a neoliberal those affluent upper-middle class people who want to live in Cumbria and shop at Waitrose at the same prices as in Tunbridge Wells also «are on their own»: no-one is meeting their wants either. Being unable to afford something you want is not a market failure for a neoliberal.

    The wider question here is also whether having affordable sheltered housing and care *specifically on Sheppey* is a want or a "need". It depends also on whether the relevant "market" is just Sheppey or the south-east (and then there is supply in Tunbridge Wells), but for the sake of argument let's assume it is just Sheppey (a neoliberal would strongly object).

    If having sheltered housing and care *on Sheppey* is a "need", then it is easy to prove that the "need" to live on Sheppey is being met: «the poor on Sheppey are provided for by the public sector». All that a retiree with «gold-plated defined benefit pension and substantial savings» needs to do is to spend all his current wealth on sheltered housing and care at the market price on Sheppey (I am sure that £10,000 a month would be enough), and when that runs out then he becomes poor enough that his "need" to be on Sheppey in sheltered housing is «provided for by the public sector». Again for a neoliberal there is no market failure. The failure is for the (alleged) "in-betweener" to leave an estate, but for a neoliberal that is tough luck for the heirs.

    My impression is that our blogger's argument is very tory (affluent upper-middle class «elderly man with a gold-plated defined benefit pension», the implicit goal of leaving «substantial savings» to the heirs, the assumed entitlement to «the area where he has lived fo 18 years»), while neoliberalism is whiggish.

    1. Excellent analysis . Under the social care act , the council may be obliged to determine whether a need exists or not . But if savings exist , the person in need does not qualify for state assistance .
      The only point of contention can then be if £ 10 , 000 a month could actually secure sheltered accommodation . Would state regulations prohibit such a market price . Or as you suggest , is it the case that no one is willing to pay the market price .
      The left wing might use the concept of the post code lottery .
      This seems to be a political question , not an economic one .
      Should price differentials be allowed to exist in social care .
      As you say , the alternatives to move or run down savings exist .
      Not pleasant ones though .
      Author says this is not about money .
      But solutions are , as you say , subsidy or state provision [ ignoring savings ] .
      Neither seems neo liberal

    2. Both of you have entirely missed the point.

      Blissex, you have chosen to define "market" to mean the entire country. But "market" can just as easily be defined as Sheppey. And if it is defined in that way, this is a "missing market" - i.e a market failure. There is no particular reason why your definition of "market" should be preferred to mine.

      My father chooses to live on Sheppey because he likes it there, not because it is cheap. It is where his friends are, his church, his community. I deeply resent your insinuation that he is trying to get public sector support so he can leave money to his heirs. Nothing could be further from the truth. He is able and willing to pay. The MARKET is missing.

      He is an "in-betweener" not because of his income level but because he lives in a poor area. You completely missed this, too.

      Please explain why it is desirable for the rich to segregate themselves in private sector ghettos and the poor similarly to be segregated in public sector ghettos?

      Jerred, it seems to be a complete waste of time trying to explain to you that the problem is lack of private sector supply, not cutbacks in government spending.

    3. Going round in circles a bit .
      As I said , bone of contention is definition of missing market .
      Markets arrive at price on the basis of supply and demand .
      If you don't like the price , that doesn't mean there is no market .
      Poor area means lack of demand . Sheltered housing units will need minimum numbers and long term residents . This has been mentioned before . Blissex suggests if you were willing to pay enough , £ 10 , 000 a month , there would be supply .
      This is debatable , or irrelevant , as you are not going to pay this [ presumably ] .
      You do want to pay the market price in an area where demand and supply conditions are different .
      You then argue rich people live there , I think , therefore it is somehow unfair that your father is rich in a poor area .
      Tbh its a bit difficult to get to the point of your argument .
      Reminds me of gold arbitrage argument .
      Move gold to market with higher price .
      However here the solution is to move your father to location where rich people like him live .
      There has always been a human cost to neo liberalism .
      Only the 1 % seem to avoid it . Squeezed middle argument .
      Sorry about your difficulty .
      Alternative I m afraid is credible alternative . And that means looking at bigger picture , and criticizing left wing .
      Trying to understand your lack of private sector supply argument .
      In a level economics you are taught about how a supply curve is created . Then a demand curve . Then price is where they intersect .
      While you made a point about supply and low house prices , demand is low because poor area .
      In economics you must always consider both .

    4. Maybe just consider my last point .
      Essentially insufficient demand means no supply .
      In technical terms , the market is correct .
      No supply at a profit , so no supply .
      That is not market failure .
      Unless your tutorial says it is .

    5. Still missing the point, Jerred. And since you won't read the link I provided, you still don't understand what market failure is.

      People are not commodities. In economics, we talk about "welfare". The welfare cost of moving an elderly person to a completely new area where they know absolutely no-one is extremely high. So, too, is the welfare cost of turning certain areas into poverty ghettoes.

    6. Not relevant . You have ruled out money being an issue .
      As blissex pointed out , a subsidy would have to be forthcoming .
      And a subsidy is money .
      The market will only supply at a profit .
      No subsidy , no profit .
      I have read the tutorial , if that's what your referring to .
      And I asked you to specify .
      Negative externality , public good etc .
      Whatever , it doesn't matter .
      You rectify this kind of market failure by state money .
      I assumed you were suggesting that the state organizes a market .
      But pointless . No profit , no supply .
      So back to politics .
      More tax . Less sure start . Less asylum seekers .
      Make your choice

    7. It is not about public spending, it is about market making. The public sector can create a market. It can commission services from private and/or third sector providers, for which the recipients will be charged. That is how we organise the provision of essential utilities by the private sector. We do not tolerate gaps in provision: we expect the private sector to provide services to ALL areas. We do not require people in poorer areas to move to areas where the private sector thinks it can make a better profit.

    8. O k . So no public spending >>> no subsidy . How does the private sector make its profit ? If a national or regional sheltered housing org is involved , it can charge other customers more , if forced by regulation to supply against its will in your area .
      If it doesn't do this , you will certainly not get the price that exists in those rich areas .
      Yes , at cost , the public sector could organize a market . Wages etc .
      But it probably cannot dictate price .
      Which presumably is relevant to you .
      Price , without subsidy , is determined by supply and demand .
      And there is insufficient demand in your area .

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  11. I have a disabled veteran brother who gets government benefits in the form of a pension, subsidized housing, veteran's health care, Medicaid benefits, Medicare benefits, and private health care that fills in for veteran's administration gaps. He also receives free transportation to and from two veteran's hospitals in Texas which deliver different kinds of care for his many conditions. He goes to at least one of the hospitals at least four times a week and they both are about 70 miles away from his home. I am able to help him with money and other attention such as other transportation, dealing with utility companies, dental care and the like. This has been going on for forty years and has changed dramatically over those decades--for the better. But there has been much suffering and change has been slow with many reversals. The problems have primarily been enough government money to fund the services that are needed and that only a government can deliver.

    It has gotten much better under the Obama regime, but the talk is that Trump will cut back. In my home state of Texas the state government has just cut 375 million out of the Medicaid program which will drop therapy aid to 60,000 dependent children. Texas, one of the most brutal states in the nation can be regarded as a leading indicator of what Trump will do. So, again, the problem has been that the government has not had enough money to do what it should and will soon do less. This is reflected in two ways: the government institutions already in place cannot continue or start important services, and people who sign up to deliver important services enthusiastically start work and soon find that they cannot make a living at the wages offered.

    It is all about money and hard hearts. All governments have an unlimited supply of money that does not create debt, so the problem is hard hearts. Our system of government in the US is designed to make it easy for hard hearts to win power and Trump is a prime example, but there are many other "Trumps" who have long held power in state governments. So, at bottom, the problem is our system of government. It claims to be a democracy but it is not--it is a plutocracy. Things are about to get really, really nasty over here. We are adrift and a storm is about to break.

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  13. This is no more market failure than the very wealthy man living in a poor town saying 'I want to buy a Ferrari, but there's no Ferrari dealership close to where I live', or indeed a person living in a remote location who cannot drive wanting a bus service by their door.

    I have exactly the same position in my family - my 80 yo father is blind, bed bound and type one diabetic, and has had a heart bypass op. Ideally he needs a combination of a nursing home and a private hospital, for which he could easily pay, being very wealthy. However such a thing does not exist in his area, nursing homes not having the right medical expertise, and private hospitals not wanting geriatric patients. The fact he has the money to pay for his needs is irrelevant if there are not enough other people able to do the same for a business to function in any given area. I'm sure that the services ideal for him would be available in London, where monied people are far commoner, and the mass of population probably means there would be enough customers to merit such a business. But the fact that every persons needs cannot be met in any given area is not market failure, its just reality. A business needs multiple customers, not just one.

    1. Sheltered housing is not the equivalent of a Ferrari, and my father is not one of the super-rich. The point is that the private sector is failing to serve ANYONE in that area. Did you bother to read the Swale Borough Council housing criteria? Sheltered housing in Sheppey is only available to those with under £30k income and less than £50k savings. Everyone else has to move to a richer area to find sheltered housing, because the public sector is failing in its LEGAL DUTY to create a market. The effect is to create a poverty ghetto where everyone is dependent on the public sector.

    2. So the area is saturated with people with the wherewithal to pay for private care but those evil capitalists are denying them service just because they can?

      Or maybe your relation's situation is not exactly common in the area and thus there is no market to be made? What do you expect the council to do? Compel someone (how exactly?) to open a sheltered accommodation home to run at a loss because there's only a handful of potential customers? If its such a potential gold mine why don't you start one yourself? Its a licence to print money apparently!

    3. The fact that people need assistive housing as they become more frail is well documented. As about 25% of people on Sheppey are over 60, there will be others in similar circumstances. Indeed there is clearly a need, since the public sector DOES provide assistive housing for the poorest elderly. Need for care support is not negatively correlated with wealth, so it is reasonable to assume that better-off people need assistive housing too. Your argument that there isn't any demand simply doesn't stand up, I'm afraid. This is a failure of supply, not demand.

      The reason for the failure of supply is evident. There is more money to be made in richer places, so that is where the private sector providers go. It is not that profits cannot be made in poorer places, it is simply that in richer areas the fruit hang lower.

      You don't seem to know what sheltered accommodation is. It is not a "home". It is individual property units which have warden control - a block of flats, for example. Providers of sheltered accommodation would therefore be property developers and managers. That is why, as I said in the post, the problem is the property price.

      The public sector DOES have a responsibility to act as enabler. It is clearly spelled out in the Care Act 2014, which is linked in the post. I suggest you read it, since you don't seem to know the difference between market making and providing.

      I do not have the time, the money or the expertise to develop sheltered housing. Or indeed any other property development, either.

  14. Good analysis . But the blog author is desperate to believe the lack of customers in the particular area is not a problem . The private sector , she believes , can still make a profit .
    She believes they don't supply through lack of information . This is on the list of market failures in her tutorial post .
    If she is wrong of course , and there is no profit opportunity , then provision for her father becomes a merit good [ also on the list of market failures ] .
    From the tutorial >>> competitive markets sometimes produce outcomes that are not satisfactory to society . What is satisfactory , or not , is a value judgement .
    Problem here , is that profit maximizing entrepreneurs do not care , normally , about the views of society .
    Once again , no profit , no supply .
    So merit good provision relies on public spending .
    The author is obviously desperate to avoid defining her father s need as a merit good .
    This would put her in Corbynista money tree territory , or force her to chose cuts somewhere .
    Libraries , civic amenity sites , sure start etc .

    1. Oh goiod, you read the turotoial. But you unfortunately then made wrong assumptions about what I think, and you made unsupported assumptions about the situation I describe, and you used those wrong and unsupported assumptions to justify your belief that this is about public spending. This argument is circular. And it is therefore ended.

  15. As I have an economics degree I didn't need to read the tutorial .
    I read it for other reasons .
    You are attempting to learn economics in a dumbed down environment , and imo the results are not too great .
    It is not clear that in your area there are sufficient oap s with over £ 30 k income or over £ 50 k in savings to create a market [ with no merit good subsidies ] .
    It is not clear what the social care act 2014 says . Imo , there are a few interpretations .
    But as you are not going to budge on these points , then fine , discussion over .

    1. I'm not "attempting to learn economics". I did not do an economics degree, but that doesn't mean I know nothing. I regard an economics degree as something of an impediment to common sense.

      You are trying to argue that the problem is lack of demand.There is zero evidence that the problem is lack of demand. To the contrary, the fact that the public sector deems it necessary to provide for the poorest - and that those units are always fully occupied - suggests that there IS demand. There is no reason whatsoever to assume that only the poorest need sheltered housing.

      This is a failure of supply, not demand. The question is, why is there a failure of supply? It helps to understand what sheltered housing IS. Fundamentally, this is a property development problem - and anyone can tell you that the biggest impediment to property development in England is the planning system. So this is a private sector supply failure (because property developers can get better returns on investment in richer areas), with an underlying public sector policy failure.

  16. Coming from there, North Kent has long been a Mecca for house builders targeting London commuters, carpeting the town suburbs with boxes, with no regard for local services. Was it the 80s when Rochester was advertising the lowest council tax in the country?

    And from personal experience with my mother - a search in Medway for sheltered housing was similar to yours, we eventually found something closer to me in Bristol, but by then she was too frail to move. She too had the money, but there as no provision.

    And the story mirrors the report by Tom Crewe of the destruction of municipal England, where councils are no longer in a position to offer effective services, and so people's requirements are, of necessity, just brushed aside.

    1. «And from personal experience with my mother - a search in Medway for sheltered housing was similar to yours, we eventually found something closer to me in Bristol, but by then she was too frail to move. She too had the money, but there as no provision.»

      The story here is the same, there are only two cases:

      * If you assume that the market price in Medway is the same as near Bristol, then you are assuming that there is a single market covering both locations, and then there is provision in that market.
      * If you assume that Medway is a different market from near Bristol, then you cannot assume that the price is the same, and certainly it would be possible to get care in Medway, but maybe at the individual level for a much higher price than in a shared shelter as near Bristol.

      In neither case there is a market failure. Unless being entitled to relatively cheap shared sheltered care wherever one wants is a "merit good", which seems to be our blogger's argument. As to that:

      «Was it the 80s when Rochester was advertising the lowest council tax in the country?»
      «but there as no provision.»

      The two are of course related. Let's look at both our blogger's story and yours from a distance, and not from a neoliberal point of view:

      * The tatcherite/blairite social contract was low taxes, low labour costs. booming property prices for the benefit of the rich and the affluent middle class, in exchange for "you are on your own" for both categories as to unemployment and retirement, as welfare was targeted only at the poor at low/sparse levels of provision.

      * When affluent middle class people are confronted with "you are on your own" as to the costs of retirement in their favourite place, because they are not content with the low/sparse level of provision targeted at the poor, they come out and say "we should not be on our own because we want to leave to our heirs the property capital gains and savings that we made thanks to low taxes, low labour costs, booming property prices".

      Boris Johnson winningly summarises this as "having your cake and eating it" :-).

    2. «The tatcherite/blairite social contract was low taxes, low labour costs. booming property prices for the benefit of the rich and the affluent middle class»
      «possible to get care in Medway, but maybe at the individual level for a much higher price than in a shared shelter»

      To be explicit, without even a much higher price: the "standard" and very popular thatcherite/blairite solution to the lack of cheaper shared care in Medway/Sheppey for the retired affluent middle classs is to offer an illegal immigrant, often a nigerian or a ghanaian, a bunk in the garden shed or garage and "tax-free" cash-in-hand pocket money for 24/7 assistance.

    3. "When affluent middle class people are confronted with "you are on your own" as to the costs of retirement in their favourite place, because they are not content with the low/sparse level of provision targeted at the poor, they come out and say "we should not be on our own because we want to leave to our heirs the property capital gains and savings that we made thanks to low taxes, low labour costs, booming property prices". "

      NONONONONO. The problem is lack of provision. My father wants to sell his house and buy a sheltered retirement flat. He is not trying to avoid the cost. He just wants to stay in the community where he has lived for 18 years, not (at 83) have to move to a completely new area where he knows no-one.

      Nor is this about me & my brothers trying to pass the cost on to the state so we can inherit. On the contrary, we want our father to use his money to support himself. We do not expect to inherit. I get very angry about selfish greedy people who demand that the state bear the costs of elderly care so that the elderly can pass their houses on to their kids. I regard it as morally wrong of the elderly to try to avoid using their savings and property to fund their care in old age. So you are accusing me of doing something that I regard as morally wrong.

      Offering an illegal immigrant a bunk in the garden shed is in NO WAY equivalent to sheltered housing. You haven't got the faintest idea what you are talking about.

      I'm not prepared to tolerate any more of your unwarranted accusations that my father is trying to avoid paying for his care. It is NOT TRUE. He wants to pay. There simply is NO PROVISION.

    4. If your father has capital, and income, why does he not spend it on paying for either a live-in carer in his existing house, or a service that provides similar checking up/assistance throughout the day? Then when the capital is exhausted he would qualify for the State accommodation? A capital withdrawal mortgage would be simple to arrange. Why does the solution have to be a purchase of sheltered accommodation?
      It seems to me that your preferred solution involves no loss of capital right now - one capital asset (the current house) is replaced with another (the sheltered accommodation, plus maybe some extra cash). Whereas its perfectly possible to purchase the cover needed without moving house, using the existing capital to fund assistance.

    5. To clarify my comment, the place on offer in Bristol is a nice set-up, leasehold flats, at about the same price as my mother's house, with a menu of support, and quite a community feeling. But it's not offered by public or private suppliers, but a charity.

      As she was too frail to move, my mother did end up paying directly for on-call and care services, which was the best local solution that could be found. But this is by no means the same as proper sheltered housing. It's quite isolating, inflexible and lacks integration.

    6. Sobers, did you not read what I said about the lack of care services? This is not simply a housing problem.

      I am trying to find someone to act as a "flying warden", visiting my dad once a day, dealing with anything he can't cope with and being first on the call list for the assistive helpline. So far, I have not found anyone. Care agencies locally mainly provide physical care services, which he does not need. They are also very overstretched. The best solution Kent Social Services could offer was a referral to AgeUK for volunteer support, but not until after Christmas.

      My father does not want or need a live-in carer. Live-in care is far more intrusive than having a warden on-site in a sheltered enclave. It is the equivalent of a care home.

    7. How about these people:

  17. As call to authority arguments go "I have an economics degree" is among the weakest. I have one too as it happens or FWIW which would be not much. I would refrain from rhetorical devices such as call to authority arguments. It's like people who use anecdote or personal experience as evidence of wider trends.
    I find to argue back it helps to understand the point someone else is making and not redefine the debate with logical fallacies and absurd parallels involving Waitrose.

    Frances has indulged some of you horribly with actual wasting time replying IMO.

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  18. I note that much of the recent housing on Sheppey - on the old Howland manor of the Russells and Lovelaces in Eastchurch - is for quite affluent commuters who will drive down to Sittingbourne to take the train. Many impecunious retirees have moved into Minster in Sheppey and, to a lesser extent, Queenborough and Sheerness. Leysdown and Warden remain settlements for the desparate: they are some of the saddest places in the county (and I have visited every parish in Kent, and many thousands beyond).

    I am dismayed by the dialogue of the deaf that has appeared in response to this piece. It has been useful only insofar as it illustrates well the difference between an appeal to reason and the tendency of many of those schooled in economics to think in terms of rigid categories: that which does not fit the a prioristic model must be wrong. There is also the insidious belief that human relationships can be marketised; the notion that the care of the elderly should function as a market is something I find odious, if not evil.

    I wish that people would stop referring to housing of any kind as a 'market'. The housing 'market' is riddled with so many imperfections that to characterise it as such is to make respectable what is basically a sequence of power relationships and state/judge-sanctified theft.

    Essentially local authorities are desperate. Why? It is because rates have been capped for a generation. Why? Because political parties are terrified of the owner occupier interest. In the land of sharp elbows the entitlement of owner occupiers to their unearned (undeserved?) capital gains accrued since 1963 cannot be impaired. As a result everyone else must suffer.

    1. Sorry - Shurland, not Howland (Streatham) (and it was the Herberts and the Liveseys; the Lovelaces were at Bethersden and Woolwich).

      One other thing: I was struck by Ms Coppola's description of what she has to do as part of her routine. That this blog is maintained to such a high standard when its author has such a plethora of commitments, both personal and professional, is extraordinary.


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