The Public Sector in the Market Economies of Developing Asia

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Discussions on the role of the public sector tend to be on what the public sector ought to do on the basis of assumptions about the existence of public goods, the existence of externalities in the economy, the need to create infrastructure and the need to redistribute income. These discussions are inevitably influenced by ideological considerations and by an implicit concept of the public sector as an all-knowing entity that makes few if any mistakes and that always aims at maximizing the “general” welfare. These “normative” discussions that fill the pages of public finance textbooks are useful for providing a framework for reference. However, more attention must be directed toward the “positive” role of the public sector, recognizing that it is run by individuals who have biases and who make their share of mistakes…