Public admin explainer: What is public value?

  • Published Date: 10 April 2017

At ANZSOG, we talk a lot about public value. But what does it mean? How does it differ from private value? Like many academic concepts, the meaning of public value is contested – but we think the main difference is really about how the value is consumed.

Private value: consumed individually

The purpose of businesses is to provide private value – products and services that directly benefit private individuals and are consumed by those individuals. People typically access these products and services as paying customers in direct, voluntary, economic exchanges.

The value created by public sector organisations is more complex. They too produce things that offer private value, such as water, transit rides, mail deliveries or public housing. Some of their consumers are paying customers, as in the private sector, whereas others receive the service but do not pay any money directly for it (although they pay through taxes).

Public value: consumed collectively

But public sector organisations are also responsible for producing public value, to a greater extent than private value. Of course, what constitutes public value is the stuff of policy deliberation and is much debated in a democratic society (more on that later), so any attempt to list or categorise it is a hazardous enterprise. For a start, value is not public just because it’s delivered by the public sector. In fact, it can be produced by government organisations, private firms, and non-profit or voluntary organisations. It is not who produces it that makes value public (but it is the main job of government).

Instead, it is a matter of who consumes it, and how. Public value is consumed collectively by the citizenry rather than individually by clients or customers. It includes things that economists call ‘public goods’ which are ‘jointly consumed’, ‘non-rivalrous’, and ‘non-excludable’. This means that one person can consume them without reducing their availability to another person, and also that nobody is excluded from consuming them – like public parks, clean air, and national defence.

But it also includes remedies to market failure – that is, to situations where market mechanisms don’t maximise citizens’ individual welfare, such as negative externalities, natural monopolies, or imperfect information. At the same time, the institutional arrangements that enable markets to operate and society to function in an orderly way can also be seen as publicly valuable. Most basic is the rule of law, which not only provides security to citizens but also underpins the market, by enforcing property rights and contracts through the police, courts and prisons.

Beyond individual needs

One reason citizens value these things is because they personally benefit from them. But in many cases, they also value things for reasons that go beyond their individual self-interest. They have goals or aspirations for the society as a whole, founded in social or moral commitments or purposes such as fairness, national pride, care for the environment, or concern for the weak and vulnerable. Arguably, there is public value in facilitating the conditions for deliberation about these collective purposes. This adds governments, parliaments, elections and constitutional arrangements to our list of things that can be publicly valuable.

It’s not about outcomes at any cost

Although the term ‘public value’ draws our attention to results or outcomes, it does not ignore inputs and processes. Government resources are not infinite, and nor should governments use their legal or coercive powers without restraint. In any given situation, or for any given program, creating public value will mean maximising within constraints: that is, seeking the greatest possible benefit to the public within the available monetary or legal resources. Organizations that achieve the delivery of value at minimal financial cost or with only sparing use of legal authority are seen as efficient. It is this focus on results that is distinctive to the public value construct.

Who gets to decide, and how?

Deciding what’s privately valuable can be a tricky task, but not impossible – it’s decided by consumers at an individual level, and can be measured by how much of a particular product people buy. But deciding what’s publicly valuable is more difficult, for a few reasons. First, because it often involves things that are difficult to measure, it can be challenging to determine how much of a particular value is required. Also, prioritising value-propositions frequently involves comparing 'apples' with 'oranges', not the simple standard of value represented by money.

Most importantly, public value is not just the sum of individual preferences. To encourage the sorting out of individuals’ wants or needs into a coherent set of understandings requires a process where people mutually adjust their priorities in the light of others’ priorities: deliberation, through the democratic political process. So the primary channel through which citizens convey what they value (and managers find it out) is government, structured as some form of democracy. The challenge for the public manager is in fashioning and securing a mandate that represents a publicly valuable purpose and is sufficiently coherent to guide their actions. This usually calls on them to engage with political processes to some degree or another.

The strategic triangle

Of course, public value is only one of the things that politicians and public managers need to consider when planning a course of action. Public value is one corner of Prof Mark Moore’s famous ‘strategic triangle’; the other two comprise legitimacy and support (that is, the support for their initiatives out there in the ‘authorising environment’) and productive capabilities (whether the initiative is operationally feasible).

In short, the manager needs to ask:

  • Should I do it? (public value)
  • May I do it? (legitimacy and support)
  • Can I do it? (productive capabilities)

When the three corners are aligned, a public manager’s job is much easier – but of course, they often aren’t. ANZSOG offers training in how to discern what might be publicly valuable, and analyse each corner of the triangle to help bring them more into alignment.

Figure 1. The Strategic Triangle (derived from Moore 1995)

strategic triangle

Want to learn more about public value and the strategic triangle?

Recognising Public Value: Led by Prof Mark Moore, this two day workshop is useful for senior and middle public sector executives keen to identify and measure the public value in the work they and their departments do.
Participants will improve your capacity to set up robust empirical measures of the public good, and to use performance measurement strategically to align resources with priorities, as well as build knowledge management systems around public value.

Executive Fellows Program: ANZSOG’s flagship three week program for senior executives, this program has public value as one of its foundational concepts, taught in conjunction with other key topics such as leading change, personal authenticity, the political context, and public behaviour and engagement.


References

Alford, J., & Hughes, O. (2008). Public value pragmatism as the next phase of public management. The American Review of Public Administration, 38(2), 130-148.

Alford, J. (2016). Co-Production, Interdependence and Publicness: Extending public service-dominant logic. Public Management Review18(5), 673-691.

Donahue, J. & Moore, M. (2012). Ports in a storm: Public management in a turbulent world. Brookings Institution Press.

Moore, M. (1995). Creating public value: Strategic management in government. Harvard University Press.


Suggested citation: ANZSOG (2017). What is public value? Public admin explainer, Melbourne: ANZSOG.