The Political Economy of Public Goods: Why Economists Should Care

Abstract

The intent of this article is to encourage economists to analyze questions of public involvement in the array of public and private activities where public participation is an issue. The scope encompasses goods and services where there is the most universal acceptance of public involvement and extends into less clear distinctions of quasi-public goods and merit goods. The concern here is not so much with the definition and bounding of different categories of goods and services as with the need for considered analysis and assessment of such goods. It is increasingly important to understand public and related goods as public perception changes and public and private resources are being shifted between them. What we have is a continuum with pure public goods at one end of the continuum and pure private goods at the other end. The public and policy makers regularly make judgments about the public and private provision of goods and services on the basis of perceptions about the nature, cost, and efficacy of such goods. In recent years public perceptions have shifted and redefined public goods more as private goods. If economists can clarify, rationalize, and determine the cost effectiveness of different approaches to providing such goods, then they need to engage in the analysis of these public and quasi-public goods and assess whether they are appropriate for public expenditure, privatization, or some combined support between the two extremes. Wassily Leontief's presidential address Theoretical Assumptions and Nonobserved Facts (p. 1) delivered in 1970 to the American Economics Association is a good starting point