Essential Community Services Aren’t Markets in Any Meaningful Sense
Discussion
Excerpted from a critique of private equity, by Carlos E. Perez:
"Private equity’s defenders often point to genuine operational improvements: consolidated purchasing, shared administrative systems, standardized procedures, elimination of redundancies. These efficiencies are real, measurable, and would satisfy any economics textbook definition of value creation. Yet communities consistently experience these “improvements” as devastating losses.
This paradox reveals the first dimension of misalignment: private equity optimizes for the wrong things. Financial metrics capture only a narrow slice of what makes community services valuable, systematically rendering invisible the very qualities that make these services worth having.
Consider a dental practice acquisition. PE optimization might reduce chair time per patient, standardize treatment protocols, and implement dynamic pricing based on insurance coverage. The result: higher throughput, better profit margins, and measurable efficiency gains. But these improvements come at the cost of doctor-patient relationships built over decades, personalized care adapted to individual circumstances, and pricing that reflects community economic realities rather than insurance algorithms.
The efficiency is real. So is the destruction of value. The paradox emerges because we’re measuring one type of value (financial returns) while destroying another type of value (relationship goods) that doesn’t appear in the accounting.
This isn’t a market failure in the traditional sense — markets are working exactly as designed. The problem is that essential community services aren’t markets in any meaningful sense. They’re social infrastructure that happens to involve monetary exchange."