The private use of public interest

Abstract

Much of the recent debate over the growth of government--its size, its intrusiveness, its scope--is governed by an underlying distinction that is difficult to maintain: that between "public" and "private." This distinction is assumed to be conceptually meaningful in every reference to the public interest/private interests, public goods/private goods, and public sector/private sector. These black-and-white dichotomies are forced on an empirical reality colored mainly in shades of gray. It is precisely this growing indistinguishability of public and private that may well represent a condition of genuine importance in characterizing modem liberal democracies. The ambiguity of this distintion is a datum of importance politically, economically, and sociologically. In this article, I shall explore the import of the ambiguity in this distinction for arguments concerning the growth of the public sector, as well as its penetration into, and its penetration by, the private sector. Public Goods/Private Goods Mainstream welfare economics has explored the conditions under which the equilibria of a competitive market system are Pareto efficient. It is commonly known that public goods and externalities pose problems for the efficiency of market pricing mechanisms. Positive externalities and public "goods" are undersupplied, while negative externalities and public "bads" are oversupplied. The reasons for this supply imbalance derive from the properties of the goods in question, the processes of producing and consuming the goods, problems associated with appropriability and excludability, and, generally, the divergences between social cost and private cost or social benefit and private benefit. Much is made of polar cases--private goods which are appropriable and excludable, public goods that are not--and much of the debate over the proper role of government focuses on them. While considerations of the proper role of government in a world of externalities and public goods (sometimes referred to as an "interdependent world") are highly