Market Forces, Privatisation and Prisons: A Polar Case for Government Policy

Abstract

It has, until recently, been usual to argue that the small group of pure public goods is made up of defence and “law and order” and that these are inviolably the true province of governments. These pure public goods are defined as being both non‐excludable in supply and non‐rival in consumption, that is, they must be equally available to everyone and one individual's consumption of them must not affect the benefit accruing to any other individual. Peston and others have, however, demonstrated a general definitional confusion in the literature and it is increasingly being argued that “law and order” is a mixed or quasi‐public good and that the fact that it has historically been publicly provided does not necessarily imply that it is, in principle, a public good. In the same vein Blaug, has also argued that education, health care as well as internal law and order are all examples of quasi‐public goods. In the case of pure public goods we may be able to establish the marginal cost schedule but it may be very difficult to determine the marginal benefit schedule, without which we cannot identify the optimal level of public goods provision.