Public cioods amd public allocation policy

Abstract

In the Musgravean tradition the concept of public goods has become a central element of the theory of public allocation policy. The basic argument for this prominent role ofpublic goods is thatjointness in consumption - and possibly also nonexcludability of consumers who are unwilling to pay - renders market provision inefficient ('market failure'). Hence public intervention was called for to enhance allocative efficiency. In recent years, however, quite a different research program, namely the economic theory of policy (or public choice), provided explanations for the working of public allocation procedures for public goods. The thrust of this theory is that it is not at all clear whether the public provision of public goods, per se, is apt to improve upon the market allocation. Public choice economists rather identified various inefficiencies in public allocation procedures which are sometimes paraphrased as 'policy failure'. Most contributions to the modern theory of public goods are somewhere located in the wide ranges of 'market failures' and/or 'policy failures'. ll This wide spectrum is also characteristic for the eight contributions of the present volume: The first two papers, i.e. that of M.E. Burns and C. Walsh and that of B.-A. Wickström, study 'market' allocation procedures in the absence of public intervention - for either costlessly excludable or nonexcludable public goods. The next two investigations of R. Pethig and 0. von dem Hagen focus attention not only on 'exit' but also on 'voice' (Hirschman), that is, on voluntary or market activities broadly conceived as well as on participation in political allocation procedures. Political allocation procedures (voice) are studied in the subsequent contributions by H. Hanusch and P. Biene and by F. Dudenhöffer who focus attention on elections. A. Endres assesses the impact and efficiency of alternative policy tools· for environmental protection. Giving policy advice presupposes a ~ormative, comparative analysis of policy instruments and allocation procedtires. Scope and limits of such an analysis are discussed by W. Blümel in the last paper of this volume.