Assessment on municipality funding crisis

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Assessment on municipality funding crisis assesses the claim that respect theory can be used to solve the funding crisis in Finnish municipalities. The claim is based on an idea that a large part of the costs in municipalities come from sectors that are falsely thought to be inefficient, or work where productivity improves slower than in industry or private sector. Respect theory offers a better way to look at municipality funding than the current narrow economic view.



What is the difference in two assessments of elderly care, where the one is a narrow economic assessment, and the other is an assessment with respect theory?



Intended users

  • Municipality decision-makers.


This is an open assessment. Anyone can participate.


Decision variables

Should economic or respect theory approach be used for effective allocation of resources?


Costs and benefits of elderly care system.

Value variables

  • Cost of labour in elderly care work.
  • Respect of labour in elderly care work.

Other variables

In the narrow economic view, the work to take care of the elderly is seen as a cost that equals the salary of the workers. Attempts to increase the productivity of the work are difficult, because it is very labour-intensive, and the work really cannot be done much quicker without clearly reducing the quality of the service. This causes a discrepancy between the elderly-care sector and most other economic sectors in favour of other sectors.

However, the cost of work is actually only an opportunity cost, and it should be compared with an alternative that the worker would like to do instead of taking care of the elderly. If we assume that a worker is doing what he wants the most, there is no opportunity cost, and there is no social cost. The narrow economics says that if this is the case, the worker should be willing to take care of the elderly for free. We know from practice that this is not the case, and the conclusion is that there is actually an opportunity cost.

It is likely that the truth is somewhere in between. The elderly care cannot be organised solely on the basis of volunteers who are not paid, but it should be able arrange it in a way that is not dependent on professional nurses alone. If the number of volunteers in the system can be added, the productivity of the sector improves.

Can respect theory be used to this aim? Taking care of the elderly is well-respected activity[1], so it can be assumed that explicit respect could motivate many people to participate. Some will want to exchange their respect to money, but as the respect theory shows, this is socially beneficial transaction and should not be prevented. The benefit of respect theory is that this money would be correctly seen as an investment to something that has intrinsic value and is therefore outside the scope of any productivity assessments. At the same time, the direct cost in the form of salaries would reduce, and this truthfully would show an improvement in the productivity.

Respect theory also makes it possible to explicitly evaluate changes in the quality of life of the elderly. It is likely that people who do elderly care for its intrinsic value are better able to arrange help and activities that the elderly value more than people whose job is to fulfil certain defined tasks such as taking care of the medication. With respect theory, this improvement of the quality of life of the elderly can be directly assessed.

As a result this triple benefit (reduced cost, increased intrinsic activity, increased quality of the life of the elderly), the application of respect theory would motivate to develop systems where the elderly care can be organised with maximum respect and minimum cost. This would be a better world for everyone.






Respect theory gives a more efficient allocation of resources to the work that matters most in elderly care.

See also


  1. Based on an educated guess, but there should be data about this.