Samuelson machines and the optimal public-private mix

The characteristics of private and public goods, and the conditions defining the Pareto optimal allocation of each are as opposite as are anarchy and dictatorship. Pareto optimality with private goods requires the horizontal summation of demand schedules, the equation of each individual's marginal rate of substitution to the price ratio. Pareto optimality with public goods requires vertical summation of demand schedules, the equation of the summation of marginal rates of substitution to the price ratio. Increasing the number of buyers and sellers improves the allocation of private goods, as does increasing their mobility. The orderly anarchy of the market achieves a Pareto optimal allocation of resources for pure private goods, if there is either a large number of buyers and sellers, or perfect mobility into and out of all markets.' In contrast, Pareto optimality in the anarchic provision of a pure public good can be assumed with certainty only in the trivial case of a community of one. Once Crusoe is joined by Friday, public goods provision becomes a prisoners' dilemma with non-Pareto outcomes likely. With small numbers, Pareto optimality may still emerge in an anarchic prisoners' dilemma game, if the same players repeat the game indefinitely, through the familiar logic of the prisoners' dilemma supergame [12, ch. 2; 1]. Thus, small numbers and immobility favor the anarchic achievement of Pareto optimality for public goods provision, just as large numbers and high mobility favor the anarchic achievement of Pareto optimality in private goods markets. This dichotomous view of the potential for a Pareto optimal allocation of resources under anarchy has the obvious twin implication, that the case for government intervention is strongest when the numbers of buyers and sellers of private goods are small and mobility absent, and for public goods when numbers are large and mobility high. Although this dichotomous depiction of the allocation problem is highly simplified, it does provide some insight into where we can (should) expect to find governments intervening, where we can (should) not. Now consider the further implication. The characteristics of a community in terms of the number of members and their mobility are usually the same with respect to both private goods allocation and public goods allocation. A medieval village consisted of a small number of families, most of whose members never traveled more than a few kilometers from the village throughout their lives. This same small group of people would confront each other in the many public good-prisoners' dilemma situations a community faces, as they would in whatever market transactions that took place. One expects from the discussion above that the provision of public goods in a medieval village, e.g., law and order, and the resolution of other prisoners'

Exposing an overlooked ambiguity in how philosophers use the term 'public good, ' this paper proposes to distinguish between inherently and contingently public goods, where inherently public goods are nonrivalrous and non-excludable in principle (e.g., national security) and contingently public goods are non-rivalrous and deliberately provided in a non-exclusionary way (e.g., parks). This distinction is conducive to philosophical debate in two ways. At the level of ideal theory, contingently public goods reveal the inadequacy of the various benefit principles that have been proposed to ensure justice in the provision of public goods (Claassen 2013; Miller and Taylor 2018; Murphy and Nagel 2001). Because these goods could be provided as club goods, benefit principles mandate unacceptable transfer payments to the privately wealthy and to people who disvalue their inclusive mode of provision. At the level of non-ideal theory, contingently public goods constitute a natural yet underappreciated focal point for effectively rectifying injustices. While all public goods promise to render access to private resources less relevant, contingently public goods hold special potential: their provision may be costless and involve no market interference, it can more powerfully express a commitment to status equality and it can be especially effective at addressing inequalities in opportunity.

The theory of public goods is largely irrelevant to their management and governance. It is highly normative but is unused in the policy area. It remains centred on highly idealized and dichotomized characteristics (non-rivalrousness and non-excludability) of public goods despite important theoretical progress in the last twenty years. It is suggested that public goods are as much social as technological constructions, but there is no explanation of how such goods come into existence. It is argued that they are often subject to evolution that changes the balance of their characteristics between being public or private goods. Present theory bears little relationship to the governmental budgetary processes assumed necessary to finance such goods, yet all management and maintenance costs, often high enough to deter such funding, are ignored. While there is recognition that the intensive use of a public good often imposes costs directly upon users, there is no corresponding recognition either that inappropriate and intensive usage can erode public goods as assets or that such usage is difficult to control. Free goods are described and mooted as specific and important types of public goods. Illustrative examples of public and free goods, mainly from Australia and the Pacific, are cited.

In economics, public or collective goods are contrasted with private goods. The enjoyment of a private good can be restricted to those who pay for it, and the consumption of a private good by one person makes it unavailable to anyone else. Markets “work” for private goods, where individuals make clear decisions about cost/benefit tradeoffs and prices are the consequences of the forces of supply and demand. By contrast, public (collective) goods are nonexcludable—shared by everybody, whether they helped pay for the good or not—and nonrival—in that one person's “enjoyment” of the good does not affect another's. People who share in a public good without paying for it are often called “free riders.” Because people can share in a public good if it is paid for by others, the usual assumptions of the market fail, and economists and social scientists generally argue that public goods need to be provided through taxation or other collective means. Public goods are an instance of the more general matter of externalities, in which one person's actions or choices affect the costs or benefits to other people who did not make the choice. Within economics, there has been a great deal of elaboration of these ideas. Some goods are nonrival but excludable (e.g., satellite television), others are nonexcludable but rival (e.g., environmental resources); both excludability and rival‐ness are continua rather than dichotomies. Public or collective goods vary greatly in important ways that affect the social dynamics of their provision, including their lumpiness and the linearity or nonlinearity of their production functions. Moreover, the same “good” (like clean air or a bridge) can be provided in different ways that have different production functions relating contributions to benefits. Introductory overviews of these issues may be found in the cited references.

In economics, public or collective goods are contrasted with private goods. The enjoyment of a private good can be restricted to those who pay for it, and the consumption of a private good by one person makes it unavailable to anyone else. Markets “work” for private goods, where individuals make clear decisions about cost/benefit tradeoffs and prices are the consequences of the forces of supply and demand. By contrast, public (collective) goods are nonexcludable – shared by everybody, whether they helped pay for the good or not – and nonrival – in that one person's “enjoyment” of the good does not affect another's. People who share in a public good without paying for it are often called “free riders.” Because people can share in a public good if it is paid for by others, the usual assumptions of the market fail, and economists and social scientists generally argue that public goods need to be provided through taxation or other collective means. Public goods are an instance of the more general matter of externalities, in which one person's actions or choices affect the costs or benefits to other people who did not make the choice. Within economics, there has been a great deal of elaboration of these ideas. Some goods are nonrival but excludable (e.g. satellite television), others are nonexcludable but rival (e.g. environmental resources); both excludability and rival‐ness are continua rather than dichotomies. Public or collective goods vary greatly in important ways that affect the social dynamics of their provision, including their lumpiness and the linearity or nonlinearity of their production functions. Moreover, the same “good” (like clean air or a bridge) can be provided in different ways that have different production functions relating contributions to benefits. Introductory overviews of these issues may be found in the cited references.

This paper examines the incentives of private actors to invest in cybersecurity. Prior analyses have examined investments in security goods, such as locks or safes, that have the characteristics of private goods. The analysis in this paper extends this analysis to examine expenditures on security goods, such as information, that have the characteristics of public goods. In contrast to the private goods case, where individual uncoordinated security expenditures can lead to an overproduction of security, the public goods case can result in the under-production of security expenditures, and incentives to free ride. Thus, the formation of collective organizations may be necessary to facilitate the production of public security goods, and the protection of information produced by the collective organization should be a central feature of such organizations.

Flood Risk Management as a public or a private good, and the implications for stakeholder engagement

The article emphasizes that there is currently in general a consensus on the fact that there is a wide variety of goods, but there is no consensus on the choice of the only acceptable approach to their classification for all. Among the approaches, we can note those based on a dichotomy (either private or public goods) and a continuum (there are no clear boundaries between private and public goods and all their intermediate variants). The article focuses on the first approach in order to make the visual representation of goods more simplified and intuitive. With this in mind, theoretical approaches to the classification of goods with an emphasis on public interest in some of them, which causes the need for guardianship (patronization) over them, are studied. The starting point is a simple contractual scheme of Williamson, adapted to solve the problem of specificity, however not of assets, but of goods, meaning primarily private and public goods. The traditional expression of this problem is the «freerider» problem, when the need for a public good is not supported by the desire to pay for it. Public goods, whether merit (positive externalities, for example) or demerit (negative externalities), need protective mechanisms, such as patronization – from the state and/or society. Some features of patronized goods and safeguards, or mechanisms for their protection are discussed. It is particularly emphasized that public goods and goods that are likened to them in some sense exist in a certain dynamic institutional environment, the quality of which largely depends on the adequate choice of institutions that can reinforce each other or weaken them if they are not adequately chosen. The mentioned goods are analyzed on the example of water resources, whose specificity, in particular, is manifested in the fact that decision-makers and local authorities can use automatic irrigation systems to produce social (collective, locally public) goods, for example, urban green landscape. In this sense, such systems, being private goods, can act as factors of production of social goods.

In this chapter I expand on Adam Smith’s observation that roads and education cannot be conceptualized satisfactorily by the concept of private goods. The concepts of public and merit goods need to be added. I reduce the eighteen different characteristics of public goods, found in the economic literature, to the two crucial ones of non-rivalness in consumption and non-exclusion possibility of non-payers. I build upon the partial insight of Samuelson to claim that the three concepts of private, public and merit goods are ideal concepts which can be present jointly and in varying degrees in every economic event. Given that both Samuelson and Olson show the need for the government to make, in some cases, a decision without sufficient scientific evidence (Samuelson) or on ethical considerations (Olson), I argue that the concept of public goods demands the ethical concept of merit goods as introduced by Musgrave. I provide the different definitions and justification given by Musgrave. A discussion of the secondary literature allows me to strengthen Musgrave’s own confession that he has only been able to give a partial justification of the concept of merit goods. I announce that in the next chapter I will provide a Kantian inspired justification for merit goods.KeywordsPublic goodsMerit goodsNon-rivalness in consumptionNon-exclusion possibilityIdeal conceptsSamuelsonOlsonMusgraveLeadership/learningInterdependence of utilitiesRedistribution

THE CORE, an n person game solution concept, has proved to be very useful in analyzing economic allocations in a private goods economy (see, e.g., [1]). Viewed as an n person game, such an economy requires the specification of production and distribution activities open to an arbitrary coalition of economic agents. We say a coalition can improve upon a proposed vector of utility levels which stems from an allocation which is collectively feasible for all of the economic agents if it can achieve levels of utility for all of its members which are higher than the corresponding levels in the proposed vector. The core consists of all utility vectors feasible for the whole economy which cannot be improved upon by any coalition. The crucial issue is how to formulate what a coalition can achieve for itself. In a private goods economy there is a natural formulation-we simply allow a coalition to produce its own outputs from its own inputs, and look at the utility levels resulting from a distribution of these outputs among the group. In public goods economies, or more generally in economies involving externalities, the formulation of what a coalition can achieve for itself is not so transparent. The problem is that agents not in a given coalition can modify the distribution of utilities within the coalition. Unlike the situation in a private goods economy, we cannot specify a set of utility levels attainable by a coalition independently of the activities of the complementary coalition, i.e., agents not in the coalition. Consider anl economy with pure public goods. By the definition of pure public goods, the mlembers of a coalitiotn would be able to consume the public goods produced by the complementary coalition. Thus it is natural to say that a coalition can achieve for itself utility levels associated with the distribution of both public anid private goods which it produces using its own resources, together with the consumption of the public goods produced by the complementary coalition. In order to determine the quantity of public goods produced by the complementary coalition we must define a set of permissible activities for it. Suppose we allow it to produce any amount of public and private goods consistent with its endowment of resources. Then, in order to deter the given coalition from forming and objecting to the status quo, it would threaten to produce no public goods, since this would nullify any free consumption of its public goods by the

Traditional analysis takes the public or private nature of goods as given. However, technological advances, particularly related to digital goods such as non-fungible tokens, increasingly make rivalry a choice variable of the designer. This paper addresses the question of when a profit-maximizing seller prefers to provide an asset as a private good or as a public good. While the public good is subject to a free-rider problem, a profit-maximizing seller or designer faces a nontrivial quantity-exclusivity tradeoff, and so profits from collecting small payments from multiple agents can exceed the large payment from a single agent. We provide conditions under which the profit from the public good exceeds that from a private good. If the cost of production is sufficiently, but not excessively, large, then production is profitable only for the public good. Moreover, if the lower bound of the support of the buyers’ value distribution is positive, then the profit from the public good is unbounded in the number of buyers, whereas the profit from selling the private good is never more than the upper bound of the support minus the cost. As the variance of the agents’ distribution becomes smaller, public goods eventually outperform private goods, reflecting intuition based on complete information models, in which public goods always outperform private goods in terms of revenue.

In this paper we challenge the traditional distinction between public goods and private goods. Economists use a definition of public goods that rests on the inherent properties of the good itself. Referring to criteria such as non-rivalness and non-excludability, they assert that the distinction is fixed in nature and cannot be altered by human observes. We argue that the boundary between public and private goods is socially constructed. That is, what is a public good and what is a private good is not determined by fixed criteria; rather it is decided by society. Thus, what is a public good in one community might be a private good in another. It is this moveable boundary between public and private that makes it essential to analyźe public policy with values up front, not hidden behind the seemingly technical concept of public goods.

I derive values of marginal changes in a public good for two-person households, measured alternatively by household member i’s willingness to pay (WTP) for the good on behalf of the household, WTP i (H), or by the sum of individual WTP values across family members, WTP(C). Households are assumed to allocate their resources in efficient Nash bargains over private and common household goods. WTP i (H) is then defined by trade-offs between the public good and the household good, and WTP(C) by trade-offs of between the public good and private goods. WTP i (H) is found to be higher (lower) than WTP(C) when member i has a relatively high (low) marginal valuation of the public good, but tends on average to equal WTP(C). As a consequence, individuals tend to represent households correctly on average when questioned about the household’s WTP for a public good, even when they are purely selfish and answer truthfully. Adding all members’ WTP answers on behalf of the household then leads to double counting. Pure and paternalistic altruism (the latter attached to consumption of the public good) move each member’s WTP on behalf of the household closer to the true sum of individual WTP, but only paternalistic altruism raises this sum.

We develop a theory of primary elections and the provision of public and private goods. In our model, candidates from two parties compete for the support of “core” party voters in their respective primary elections and “swing” voters in a general election. Candidates within a party share a fixed ideology and offer platforms that distribute a unit of public spending across group-specific private goods and public goods. Without primaries, candidates offer only public goods when they are very valuable, and only private goods to the swing group otherwise. Because public goods appeal to both types of voters, primary elections increase their provision under a broad set of conditions. The level of public good provision is nonmonotonic in ideological polarization. The prediction of increased public goods spending following the adoption of primaries matches patterns in capital expenditures across US states.

The non-excludable and non-rivalrous characteristics of public goods distinguish them from private goods. The existence of these two characteristics leads to the “free rider problem” and the variation problem, making the market supply less than the actual demand, thus causing market failure. The government should therefore intervene against this impact. At the beginning of 2020, the global outbreak of the novel COVID-19 brought significant harm to various countries, races, and groups of people. In the second half of 2020, several companies developed vaccines, which are able to fundamentally block the transmission of the virus. However, as vaccines have been reducing the severity of the epidemic in certain regions, the situation somewhat reflects non-excludability and non-rivalry, in which before officially being listed in vaccination programs, the society may have the thought of “vaccination would reduce the risk of transmission; thus, I can enjoy the reduced risk of everyone being vaccinated without paying for it.” For this reason, most countries have been purchasing vaccines for the public through government appropriations to solve the free-rider problem. It can be said that in the face of market failure caused by public goods, the government should carry out timely intervention measures, including taxation and government appropriation, to avoid negative impacts from the characteristics of public goods.