The NHS can learn a lot from Milton Friedman

The economist Milton Friedman made a telling observation: the care with which we spend money depends upon whether it is ours or someone else's.

When spending our own money on ourselves we take care to get exactly what we want, at exactly the right price. If we spend our cash on someone else (as a gift) we are less careful; and if we spend someone else's money on a third party then ... who cares?

This also applies to time, resources and targets. Naturally we focus on our own, for example, the quality framework, but few GPs bother about their primary care organisation's (PCO) targets.

Friedman's principle leads to much better management. The more that any individual has a vested interest in the outcome of their decisions, the better quality and more efficient those decisions will be. Conversely, when managers have no personal involvement in the consequences, their decisions may disregard the difficulties placed on those who have to carry them out.

To stop hospitals profiteering from unnecessary internal referrals, many PCOs now insist that all such referrals must go via the GP. This has turned GPs into glorified referral clerks, wasting our time and energy. It is clear that the managers introducing these edicts have no vested interest in the costs and consequences. They couldn't care less who has to do the extra work, because it doesn't come out of their budget.

At heart, this is why politicians and managers dump so much onto primary care. When your decisions have no impact on yourself or your own circumscribed budget, why bother about their effects on those carrying out the work?

The inefficiency of the NHS machine can be encapsulated in Milton Friedman's principle. Do we want the NHS to be efficient? Then give each manager a vested interest in all decisions they take. Link managers' salaries to the efficiency of the whole sector for which they are responsible. This mentality is very 'private sector' for the NHS, but efficient.

We spend resources most economically when we have a personal interest in the outcome. In industry, it's called 'ownership', and it's about time the hopelessly inefficient NHS learned this.

Dr Lancelot is a GP from Lancashire. Email him at

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