Library Services in Theory and Context

Chapter 12: Allocation II. Fees, Sponsors, and Stability: Notes on the Political Economy of Library Services

Introduction

The process of allocation of resources and priorities to and within libraries was seen in chapter 11 as being essentially a political process. This is because the resources for libraries do not come from users, at least not in their capacity as users. Resources come from other sources, usually funds assigned to the library from a higher level (e.g., mayor, university or corporation president, school superintendent) and, thus, the claims of other users of the resources are considered with respect to the values and goals of those who do the allocating.

This view is, however, a convenient simplification. Some funds come from private sources on a noncommercial basis, e.g., support from foundations and charitable donations. Other funds come through charging fees. This last is of limited importance at the present time in libraries, but is currently a major point of controversy and it could become a major source of income as it is in some other sorts of information services. Therefore, any theoretical framework which attempts to describe the structure and functioning of libraries—let alone other sorts of information services—would be seriously incomplete unless it included the fee-based provision of services as well as free provision. Before doing so, we need to review some of our assumptions.

We are not here concerned with the technical aspects of calculating actual costs and prices. These are treated elsewhere. ¹ We are primarily concerned with exploring how a transition from sponsors to fees would affect the structure and functioning of library services. Hence we note, but do not need to explore, many of the concepts associated with the public financing of public services. We simply note that private and public entities choose (or may be persuaded) to allocate resources to libraries. We do not here consider the specific rationales for doing so—"merit goods," "public goods," and so on. ²

Critical to our present discussion and different from most other discussions is our treatment of price. Ordinarily, only the monetary price is considered, for which, for clarity, we can use the term "fees." However, as discussed in chapter 9, the fee is only one element in the real price as defined by Adam Smith: "The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it." ³ We view the real price as having four sorts of elements: the monetary price (or fee), time, effort, and discomfort. The difference between the monetary price and the real price needs careful attention.

The impact of fees for service

To the extent that fees are charged for the use of services, the political process is supplanted by an economic one whereby the allocation of resources to the service comes at least in part from the user qua user. We now review some of the consequences of this: The two independent feedback loops in the double feedback loop characteristic of library services and, presumably, of noncommercial services generally begin to lose their independency. (See figure 10.2 and the discussion in chapter 10.) The allocation of resources begins to depend on demand, even though income from the use of a particular service is not necessarily used to defray the costs of providing that particular service. More use becomes more income, alias more resources. In fully commercial situations, the resources all come from use since the fees constitute the only allocation of resources to the service—its only income. This does not, in and of itself, prevent the manager from reallocating the resources internally in ways which do not entirely coincide with the distribution of demand: the grocer may subsidize a loss-leader; a transport company might subsidize an unprofitable route as a philanthropic gesture. However, such reallocation is conditional upon having a spare margin of resources which permits reallocations.

Pursuing this theoretical analysis further, we consider the point of pure competition. Each specific service would have to be priced at the very margin of profitability. If it were set higher, business would be lost to competitors; if lower, bankruptcy would follow. In this situation, no margin remains for reallocation and so the allocation of resources internally also becomes totally controlled, in detail, by the costs of each particular service for which there was a demand at a price marginally above cost. Being controlled by the pattern of demand in a commercial situation means, in effect, being controlled by the users who have economic power. Those without sufficient economic power to pay will cease to be users in such a situation.

The degree of autonomy of the provider of the service is indicated by the relationship between the fee (the price charged) and the cost (the monetary cost of providing it). In a state of pure competition, the fee can only be marginally above the cost: a move up or down will cause loss of business or bankruptcy respectively. In a cybernetic sense, the system has lost its autonomy by becoming controlled in detail by market forces.

Moving away from pure competition through scarcity in supply to monopoly leads, in a commercial context, to the ability to increase fees relative to costs. Users will eventually refuse to pay, preferring to forgo the service, but, up to that point, the provider has a degree of independence to raise prices above costs.

Moving away from dependence on users' fees as noncommercial sources of income are developed is reflected in the ability to reduce fees below costs. At the extreme are services provided at no monetary cost. Indeed, inducements to use a free service could be provided. This represents a very high degree of independence from users. Our use of the terms "autonomy" and "independence" should be viewed cautiously. Resources must come from somewhere: One cannot provide much service if one has neither fees nor sponsor. What we referred to was economic independence from the user. However, reducing the dependence on the user only increases the dependence on wherever else the resources do come from. The dependence remains, but its nature shifts from being economic (i.e., commercial) to being political (i.e., whoever is willing to allocate resources without commercial return). The library or other institution that provides service for free can, therefore, disregard demand and the level of use just so long as the political origin of its resources remains sufficiently supportive.

Political dependence

For the political source of resources to remain supportive two conditions are required: the source must continue to have resources to allocate; and the library (or other claimant) must remain competitively congruent with the social values of the source.

This notion of being "competitively congruent" takes us straight back to questions concerning library goodness which we posed in chapter 2 and to which we shall return in our final chapter. Let us consider the dynamics of the loss of support by a library. (We use a library as our example. It could as well be a municipal art gallery, a museum, a research institute, a public kindergarten, or any entity that is dependent on appropriations.) Let us consider three sorts of perceptions on the part of those who allocate resources to the library.

1. They may perceive a lack of effectiveness. Do the actual or potential users complain that the service is unsatisfactory or irrelevant to their needs? Or that some other alternative would be more satisfactory? If so, the resources are likely to be reallocated elsewhere. In other words, the service may not be perceived as being satisfactory for the sorts of demands placed upon it.
2. They may perceive that the good being done by the service is no longer sufficiently valuable in terms of their (the allocators') social values to warrant support, especially if there is a reduction in the overall amount of resources to be allocated. How do the intellectual and practical consequences of the knowledge that people can be expected to derive from well-developed public libraries compare with expenditure for the restoration and preservation of historic buildings and clean lakes for the present and future residents and tourists? In other words, the service may be perceived as satisfactory but not very valuable.
3. They may perceive incompetence in performance. Do those who are currently running the service appear not to know what they are doing? If they do know, are they lazy? If either is perceived to be the case, then those supplying the resources may bring pressure to change or otherwise improve the management of the service or, if practicable, shift support to an alternative service. In other words, the library service could be suitable and valuable but not well run.

Later in this chapter we shall consider how these perceptions may be influenced and, in the final chapter, we shall return again to these three aspects of library goodness.

Is political support necessary?

This is a convenient point for a short digression in order to make an important qualification. All the conditions noted above may be met such that the library can be regarded as the most effective means for achieving the sponsor's social values and yet not be a sensible choice. This is when such support is unnecessary in the sense that commercially-based service would provide an acceptable means of achieving the same results. This would be the case if two conditions were both met. First, demand is inelastic. The addition of the monetary element in the price would not significantly change demand, otherwise the beneficial outcomes would cease to be achieved. Since both social values and economic power are differentially distributed across the population, we need to consider not only changes in the overall level of demand but also any change in its distribution. Second, the secondary consequences ("externalities") of the change should not be harmful. For this we need to consider indirect consequences such as the division of users' economic resources from other uses and the alternative uses of the sponsor's resources.

In practice, these two conditions are most unlikely to be met in any strict sense. It is much more likely that the conditions would be partially met insofar as anyone had enough knowledge to predict the consequences. A situation of this sort gives rise to a lot of interest on the part of sponsors in mixed strategies. The general approach is to let commercial processes operate to the extent that they achieve the social values of the sponsors and then allocate resources only for those aspects which would not be achieved through commercial processes alone. This is attractive because it is very economical. It offers the prospect of achieving the social values while conserving as much of the sponsor's resources as possible for other opportunities. There are, however, disadvantages. The dynamics involved may be too little understood to permit confidence in the outcomes, and the mechanics of implementation may prove excessively cumbersome.

In any discussion of means, great alertness is needed since disagreements concerning the means to achieve assumed social values may in fact reflect, consciously or otherwise, differences in preferred social values, i.e., ends.

This analysis merely clarifies the fact that autonomy with respect to the economic power of the user does not mean complete autonomy since economic dependence on the user is merely replaced by political dependence on the sponsor. It is a transition from one sort of dependence to another. The need, in a commercial situation, to promote one's services persuasively among actual and potential users becomes, instead, for the provider of service, a need in a political situation to promote one's services among sponsors. Both sorts of persuasion may be difficult in practice and the intensity of the need for it can be expected, with both sorts, to vary from one situation to another. However, shifting from fees to sponsors does nothing to remove the need—only the nature.

Marketing among sponsors

Having recognized the structure of the relationship with a sponsor, it is not difficult to see what, in theory, needs to be done. We can assert that those in a position to allocate resources to the library are more likely to continue doing so if:

1. They perceive the services to be good. That is, they perceive the services as being capable of satisfying a demand. Is evidence of such satisfaction passed on, directly or indirectly, to the sponsors? Are complaints satisfactorily dealt with? ⁴
2. It is perceived that the service is doing good, in the sense of achieving the social values of the sponsors. Is the librarian looking beyond the daily routines and the technology of the service in order to note the beneficial effects of the library service? Even more important, are these effects being made known, directly or indirectly, to the sponsors? The fact that assessing the beneficial effects may be very difficult is inconvenient but, in an important sense, irrelevant, since difficulty in assessment does nothing to reduce the need for assessment.
3. Is it perceived that the librarian is actively and effectively concerned to improve the competence with which the services are provided? Are the difficulties, opportunities, and achievements made known, directly or indirectly, to the sponsors?

Given the structure and functioning of these relationships, the librarian who fails to attend to the persuasion of those who allocate resources to the library cannot be regarded as having accepted the full range of responsibility inherent in the role.

The role of the user in a sponsored service

It is necessary to consider the role of the user in these matters since they share in the political process of allocation directly or indirectly. Particular users may have a formal role in the decisions concerning the allocation of resources to the library. All can be assumed to have at least an indirect role in that their expression of opinions will carry more or less weight with the sponsors in at least three ways:

• Do the users describe the services as being good or bad? How well do the services meet their demands?
• Are they "voting with their feet?" Do they, in fact, use the library? in a noncommercial situation, a reduction in demand can be advantageous in operational terms. The service can cope better with the users who remain. However, reduction of demand is dangerous politically for two reasons: First, reduction is likely to be associated with dissatisfaction among the users; and, second, a service can hardly be regarded as being valuable in the sense of having beneficial effects if it is little used. This dilemma helps explain the ambivalence in attitude found among those who provide service in situations which are not perceived as being commercial and competitive. Emphasis on the social values indicates an increase in use as being desirable; operational considerations provide a motivation to reduce usage.
• It is in the user's best interests to seek to influence the political process. ⁵ The greater the success that a user has in advocating her or his particular priorities in the political process of allocation, the better the service will be for that user. The techniques of political advocacy are outside the scope of this book, but the importance of such influence can hardly be exaggerated.

Back to price and stability

Discussion of the level of usage brings us back to our earlier concern for the mechanisms that permit the service to maintain an acceptable degree of stability and, indeed, to survive. More specifically, how do free services survive if they lack the responsiveness associated with the market place? We have discussed in some detail the dynamics of the dependence on sponsors as opposed to fees. The relationship is seen as being sufficiently similar to permit the phrase "'marketing' among sponsors." Yet this is only one side of the coin. To achieve stability, the service must not only acquire a viable level of resources, it must also protect itself from excessive demands. The strains imposed by demand must also somehow be kept within bounds that are viable in relation to the resources. How is this to be done in the absence of the traditional control device-fees? The answer lies in the ambiguity of the use of the word "price" which we discussed at the beginning of this chapter. Since the real price includes all the disadvantages and since there are nonmonetary aspects of the real price, there is no obstacle in theory to manipulating the nontmonetary aspects of price and letting the price mechanism continue to do its work. Consider the symptoms of strain on a library's resources and the librarians' responses to such strain: e.g., shorter opening hours, longer delays in processing, fewer new titles and duplicates, lower availability, longer waits at the circulation desk, closure of branch libraries, harassed staff. Each of these sorts of changes represents a degradation of service in the sense that either a service ceases to be available or, more commonly, the service remains available but the price has been raised in its nonmonetary aspects—even occasionally fees are introduced. More time, more effort, and more discomfort are involved in using that library. The user, when pondering the perceived probable costs and perceived probable benefits of using the library will sense that the relative price has gone up. Other sources of information will have become relatively more attractive and fewer inquiries are now worth the "price" of seeking the answer from this particular library service.

We are back to the double feedback loop of figure 10.2. The library service's ability to control the use made of it is largely separate from its dealing with the sponsor. The elasticity of demand on the part of the population of users and potential users means that demand can be effectively regulated. This regulation is only indirectly achieved, aside from attempts to forbid some sorts of use or some sorts of users. There is probably more scope than is usually recognized for the librarian to tune the level and pattern of demand since the librarian can influence the internal allocation of resources and priorities and the effect of this is the determination of where, when, and how severely degradations of service (and, therefore, of price and, therefore, of demand) will be distributed over different aspects of service and, therefore, for different groups of users. For this, however, a detailed understanding of the internal dynamics of the system defined as the services, the users, and the interactions between them is needed.

The seven chapters of Part II: Analysis, have examined separately, five basic processes in the provision and use of library services: inquiry, retrieval, becoming informed, demand, and provision. Part III: Connections and Extensions, will seek to complement Part 11 by examining how the parts fit together and some characteristics of the whole.

Go to Chapter 13

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¹ S. A. Roberts, Cost Management of Library and Information Services (London: Butterworths, 1985). See also chapter 10, footnotes 7 and 8.

² Background reading on financing and fees for libraries can be found in and through W. Schwuchow, "Fundamental Aspects of the Financing of Information Centres," Information Storage and Retrieval 9 (1973): 569-75; M. Cooper, "Charging Users for Library Service," Information Processing and Management 14 (1978): 419-27; T. J. Waldhart and T. Bellardo, "User Fees in Publicly Funded Libraries," Advances in Librarianship 9 (1979): 31-61; D. King, "Pricing Policies in Academic Libraries," Library Trends 28, no. I (Summer 1979): 47-62; and also see footnote 6 of chapter 9.

³ A. Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (Oxford: Clarendon Press, 1976), Book 1, chapter 5, para. 2.

⁴ Public relations pay off. See P. Berger, "An Investigation of the Relationship Between Public Relations Activities and Budget Allocation in Public Libraries," Information Processing and Management 15, no. 4 (1979): 179-93.

⁵ Recommended reading on ceasing to use a service ("exit") and seeking to influence it ("voice") is A. O. Hirshman, Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations, and States (Cambridge, Mass.: Harvard University Press, 1970).

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