More Nonsense and Less Happiness: The Uninteded Effects of Artificial Competitions

Abstract

Although modern economies are market economies, several important goods and services are provided outside the market system. This is especially the case in education, science or health care, where a free market does do not work or where its outcome is not considered to be socially beneficial. However, since only competition seems to guarantee efficiency, governments increasingly induce artificial competitions in order to "motivate" scientists, teachers, doctors or nurses to do a good job even if there is no market. But these artificial competitions do not enhance efficiency. Instead they lead to the production of nonsense. This can be explained as follows. On a functioning market, producers of goods and services have an incentive to meet the needs of consumers, as this maximizes their profits. But in artificial competitions without markets people's needs do not matter. Instead, these competitions induce providers to maximize some measurable outcome, which nobody ever demanded.