Reforming Government: Do We Need a Human Investment Super-Ministry?

From time to time, I like to ruminate on what could be done to better develop or improve the delivery of government services especially given the tendency of government ministries to overlap when providing services. This gets a further push when I am teaching public finance - as I am this term. There is of course not only overlap between federal and provincial governments but within the respective tiers. This is especially the case within provincial governments when it comes to spending on what could broadly be termed the human investment function.

I am applying the term “human investment” to the spending that can be seen as facilitating the acquisition, development and maintenance of human capital. Take the case of Ontario –the province that I am most familiar with – where spending on people occurs within the ministries of health, education and social services. In 2015-16, spending on health was 50.8 billion dollars (38.5 percent of the total 131.9 billion in spending), spending on education (primary and secondary) was 25.2 billion dollars (19.1 percent of the total) while the children’s and social services sector was $15.4 billion dollars or (11.7 percent of the total).

Now of course, this might be seen as creating a behemoth accounting for 80 percent of spending that given the size of the entity will be even less efficient given the inevitable coordination and transactions costs. On the other, if we want to think of these functions as human investment and as inputs into general human welfare, then there might be a case. After all, think of all the energy expended over the last 30 years regarding broader determinants of health production as medical intervention, environment, socio-economic status and lifestyle. Think of the literature on how better educated people are more efficient producers of health status?

Inputs into health status are not just medical intervention (as delivered by the ministry of health) but also income and education. And, inputs into your income status and personal welfare ultimately include health and education as well as welfare services. And of course, there is the inevitable overlap in health education and health provision that crosses the ministries of health, education and social services in the case of assorted health and welfare programs.

A ministry of human investment that coordinates health, education and social service spending by looking at it in terms of providing a common outcome – an improvement in human welfare – seems to make some sense. However, I am also aware that the degree of bureaucratic centralization that might result could be an administrative nightmare. As well, in most provinces, the existing division of these functions has established and entrenched interests.

What might be a better way of trying to better coordinate these three diverse functions? Should provincial finance departments set up a human investment coordination branch or directorate with more direct oversight of the operations of these separate ministries? Should there be a special human investment coordination ministry? I don’t have an answer and I’m sure many will regard these ideas as simply ivory tower policy fantasy and out of step with the real world. Nevertheless, when I look at these expenditure functions, I see a fundamental unity in what they are expected to achieve in terms of improvements in human welfare. Should there not be a better way of coordinating some aspects of what they are doing?

Comments

[Tom Brown]

"I’m sure many will regard these ideas as simply ivory tower policy fantasy and out of step with the real world."

It sounds pretty prosaic and incrementalist to me. To make people appreciate that we can send Ted Cruz back up there to propose a solution. How does "close all these ministries down, because that's what Jesus would want" sound in comparison?

[Avon Barksdale]

But what if post-secondary education is more about signalling than about human investment? I find it bothersome that a lot of what we call "education" really looks an awful lot like signalling. If that's so, on the post-secondary education front, a more "efficient" government ministry would only exacerbate sheepskin rents and externalities. Perhaps we should figure out the signs of things before we start inventing policy.