Home > The Economics Profession > Why aren’t we talking about “public goods”? A proposed research agenda

Why aren’t we talking about “public goods”? A proposed research agenda

guest post from June Sekera

Public goods pervade the lives of citizens in all advanced democracies.  Yet virtually no one talks about public goods: we rarely hear the term outside of economics classrooms.

In Samuelson’s sixty-year-old formulation, public goods are “non-rivalrous” and “non-excludable and are born of market failure.  In this market-fundamentalist world, public goods are inherently a “problem.”

In the real world, public goods are what governments produce on behalf of their citizens. “The history of civilization,” writes Martin Wolf of the Financial Times, “is a history of public goods”. In the real world, public goods include clean air, clean water, street lights, emergency call service, disaster relief, food and drug safety, public parks and beaches, education, and dozens more, all of which citizens make use of every day and enjoy unthinkingly. Over 90 percent of U S citizens who deny ever receiving benefits from a  government program actually participated in one or more government programs (Social Security, college loans, the child care tax credit and the like), as admirably documented by Suzanne Mettler of Cornell in her research on “the submerged state”.

Awareness of public goods, and their utility and value, is sorely lacking in public discourse.  Instead, we hear about “free markets”, “free enterprise” and “free trade” and  are told that “government is the problem, not the solution,” or that “government should be run like a business”.  Such neoliberal vocabulary, derived from neoclassical economics, dominates public dialog and policy-making, suppresses the recognition of the ubiquity and value of public goods, undermines effective governance and ultimately reduces the supply of public goods.

Public goods are produced in a non-market environment, an environment inadequately addressed by mainstream economics. In the neoclassical model there is essentially no vocabulary for talking about the production of public goods, no theory of effective or efficient non-market production.

We need to revive and reframe the concept of public goods.  This issue is not merely rhetorical. A concept of public goods is immensely important.  

  • The absence of a widely-held, constructive idea of public goods in public discourse denies citizens the ability to have an informed conversation, or to make informed decisions, about things that matter mightily to the quality of their lives and their communities.
  • Its absence robs public policy makers, leaders and managers of the concept that is most central to their reason for being.          

In the real world, public goods derive from collective choice. Yet we lack a coherent theory of collective demand (consider Stewart Ranson and John Stewart, “Citizenship and Government: The Challenge for Management in the Public Domain”, 1989).  We lack as well a theory of the management of rationing, although in the real world of non-market production, services are “rationed according to criteria of need rather than supplied according to demand.”

Pluralist and progressive economists are beginning to shed light on the damage that has been done by neoclassical economics and neoliberal dogmas.  But I have yet to discover anyone who is specifically and directly challenging the Samuelson definition of public goods (except libertarians who contend that it opens the door for too much government). The usual approach is to invent another category, such as “collective goods”, “club goods”, and so forth.

I have initiated a project to develop a progressive and “instrumental” definition of public goods because the prevailing neoclassical definition is at once dismissive of non-market production and of public governance.

This project has grown out of my 25+ years of work in leadership and management positions in agencies at all levels of U.S. government (federal, state, and local) as well as my training in economics and public management at Harvard and MIT.  Over the years, I gradually developed an understanding and practice of “non-market production” in the public domain.  But the lack of a theoretical grounding is a major hindrance to establishing and promoting a more effective and efficient practice of governance.

A constructive, instrumental definition of public goods can ground an improved theory and practice of governance, particularly with regard to measuring outcomes and messaging results.  Ultimately, the goals are greater citizen awareness, a better-functioning democracy and improved governance.

Toward these ends I propose the following research agenda.

Develop:

  • a better understanding, and an instrumental definition, of public goods;
  • an understanding of collective demand; and
  • ultimately, a theory of non-market production in the public domain, including the principles or standards by which the effective and efficient production of public goods may be judged.

Why is it that these challenges have not yet been taken up?

How can we develop this agenda in a way that it becomes relevant to public discourse and public policy-making?

If you would be interested in participating in this research agenda, please contact me. (junesekera@gmail.com)  I will send you a background paper, which includes a provisional instrumental definition of public goods for discussion and further development, and a fuller description of the proposed research agenda.

  1. Bob Williams
    May 9, 2013 at 12:17 pm

    In my understanding, what you call public goods is actually “public wealth” and is part of the wealth of a society shared by all. In the wider concern of the distribution of the stock (private and public) and flow(income) public wealth provides a stabilizing foundation for both society and the economy. Of course the notion of a market is not present in this view of this area of activity of the economy but is there at various points of interaction especially in the political movements of transferring public wealth into private hands and vise versa.
    In my understanding, the distribution of wealth in a society/economy is the most relevant influence in the functioning of an economy and can be understood through a method that analyses the structure of the economy and the effects produced by various distributions of the wealth in an economy.
    It is my contention that the present malaise in economies is due to an unbalanced distribution of wealth which can be measured in a scientific way that is the same distributions always produce the same effects and this can be shown historically and can be projected into the future.
    I’d like to continue this discussion but need to leave. Thank You.
    Bob Williams.

    • Bob Williams
      May 10, 2013 at 1:27 pm

      To continue, rather than using the “Market Mechanism” supply and demand in the context of scarcity, one would benefit more from starting the study of economics by seeing the market mechanism as one of many Transaction Modes (as Karl Polanyi named them). These are means by which wealth is transferred from one economic entity to another. The market is one of the three that Polanyi listed. Redistribution and Gift Giving were the other two. However, there are more and some dominate economies.
      The way these Transaction Modes distribute wealth in an economy is the central function and defines the economy.
      Although each Transaction Mode or TM may not be easily measured but the combined effect of the mix of transaction modes can be measured in the distribution of wealth.
      It is within the wider scope of the distribution of wealth that the market mechanism fits.
      Even interest rates conform to the distribution of wealth in that the structure of the economy allows for a precise interest rate, the Ambient Rate of Interest, which is determined by the distribution of wealth. If the market rate and the ambient rate are the same there will be no problem. This changes as the distribution of wealth changes. If the market rate is at variance then there will be problems. Consider the state of interest rates today.
      The market rate will eventually conform to the ambient rate in time and that rate will change as the wealth distribution changes.. Each economy such as a national economy or collective such as the U.S. or European and each sub economy, States in the U.S. and nations in Europe will have their own Ambient rate and if the market rate is at variance you get the mess that exists.
      The only policy tool that will right the situations is a Structural Policy of realigning the wealth of the particular unit.
      Structural advantages exist where a more efficient distribution of wealth exists hence the pigs and Cyprus.
      I hope this will help in reassessing just what economics needs to be and provide a different Paradigm for addressing economic disorder.
      Thank You
      Bob Williams

  2. Garrett Connelly
    May 9, 2013 at 12:57 pm

    “Why is it that these challenges have not yet been taken up?”

    My small North Eastern US town just hosted it’s first democracy school, twenty-five attended and we plan another for the fall. In that school we learned the nuts and bolts of how the counter revolutionary, George Washington, first cheated the troops out of their land chit payments and acquired sixty seven thousand acres and then proceeded to engineer the illegal re-write of the original articles of confederation to create the existing pro-corporate, anti-social and totally illegal US constitution we have to this day.

    Education has a very large propaganda component which, in the US and Europe, denies actual history and sets up the basic fog that obscures highly profitable social investments in such things as health care for all and universal free education at all levels and ages.

    The great president, Hugo Chavez, saw this shortcoming and shepherded a fourth and fifth branch of government into being. Only time will tell if this evolution toward a more perfect form of government will survive the continuing anti democracy efforts of the US government.

    I have given this some thought and conclude that seven branches would be even better than five; four and five are, 4) information via news and education are devoid of lies and distortion with no government secrecy, 5) a small board that reviews legislation for justice content before it is sent on to president or back to the legislature.

    I won’t describe my 5th and 6th branches to this group of great thinkers but will hint that they include the economy and the environment in a auto evolving democracy being used as a necessary tool to avoid specie suicide.

  3. belle
    May 9, 2013 at 5:29 pm

    Well, I teach microeconomics at a small Iowa private university. I teach the usual until I get to perfect competition. then I tell them that this model is a benchmark that can never be reached and list all the assumptions behind that model. Then I spend the rest of the term on ‘market failures, government intervention, and include monopolistic competition and oligopoly along with monopoly as forms of market failures………..I had to write my own chapters on some of this stuff but Colander and Krugman do a good job of covering alot of it. FlatWorldKnowledge lets me pick and choose chapters and insert my own material for the low, to the student price of 39.95.

    I have asked repeatedly for all you highbrow research types to get me a textbook I can use……..have at.

  4. rddulin
    May 9, 2013 at 9:26 pm

    “Why is it that these challenges have not yet been taken up?”
    You sure know how to ask the right questions. A lack of proper definition and understanding of the concept of public goods verses private goods is the problem with economics today. Maybe not the most important if one was to make a list of the basic public goods such as right to live, right to breath air, right to eat, right to the fruits of ones production and so on is the right to exchange property with others. To do this efficiently, a unit of account is required commonly known as money. Money, like a uniform system of weights and measures, laws and rules regulating the interactions between persons, a grading system to evaluate effectiveness of education and many other examples should be a public good. The actual cost of any of these systems is negligible compared to the benefits they provide to society. In fact the costs are so low on many public goods that the “free rider problem” is negligible. Especially money.
    Money is not operated as a public good. It currently is run as a market product with a monopoly pricing scheme. This means that there are members of society that in in place of any productive contribution to society, make their living renting others money. To keep the rent price up there has to be a perpetual shortage of the product “money”. This causes some people to not be able to participate in the commerce of society. Then another expensive “public good” “basic decency” has to take over and supply the minimum food, housing. medicine and so on that they require.
    The same exact out come would occur if the road system were to be run as a market product to maximize profit. The roads would only have perhaps 20% of the capacity necessary for everyone to travel so many could not go to work and so on.
    It is quite easy to convert money back to being a “public good” with great benefit to all of society.
    These challenges have not been taken up because there are too many people making too much money off of a messed up system. They even have others paying for the negative externalities their business creates.

  5. Susan Pizzo
    May 10, 2013 at 1:46 am

    THANK YOU! This is a topic that has troubled me greatly. I think the ruling class project of the last 40 years has been to eradicate the very idea of general welfare and public goods. Thatcherism set out to ensure that ‘There is no such thing as society,’ and when the old girl died it seemed that she had pretty well succeeded.

    What is the legal framework for public goods at various levels, btw? In 2011, Bolivia passed a ‘Law of Mother Earth,’ which enshrined protections for essential resources (public goods) in national law. Here in the US we seem driven to privatize everything and the laws increasingly seem to support the neoliberal world view that promotes that. Even what little we know of the secretive Trans-Pacific Partnership treaty seems designed to eliminate any jurisdiction (space) for public goods, social provisions, and common wealth.

    Over at TripleCrisis yesterday, there was an article on ‘natural’ and ‘ecological’ capital you might find interesting. I find the phrase disquieting, as though we are accepting the terminology of neoliberalism and commodifying everything (ditto ‘human’ capital). Possibly philosophy has a better vocabulary that might be adapted for this use.

    http://www.guardian.co.uk/environment/2011/apr/10/bolivia-enshrines-natural-worlds-rights

    http://triplecrisis.com/accounting-for-ecological-capital/#more-8140

    • Susan Pizzo
      May 10, 2013 at 3:56 pm

      Forgive me for returning to the well, but I did want to introduce the name of Nobel economist Elinor Ostrom into the conversation. It was Ostrom who, as neoliberalism trashed the idea of public goods and invoked the myth of ‘the tragedy of the commons’ as a rationale for privatization, did the hard research to prove that another world is possible:

      “While Ostrom recognizes that human communities can and do over-exploit limited natural resources, she is adamant that the commons is a viable schema for managing them sustainably. Over the past generation, scholars at the Workshop have produced hundreds of studies about the socio-ecological models that successfully manage forests, fisheries, irrigation water, urban parks, and much else.”

      So another vein of research waiting to be tapped…

      http://onthecommons.org/putting-people-back-economics

  6. May 10, 2013 at 1:54 pm

    This is a very important idea. In the U.S. It is ironic, I think, that when people evaluate the quality of life in an area they first say things like school quality, environment, museums, cultural opportunities, nearby parks and greenery, libraries, good transit, clean air, etc. Yet when they vote they more often than not vote to keep taxes low. Why the paradox? As Ms. Sekera points out there is a huge disconnect between what people value and their perception of how it is paid for. People might say, for instance, that all these things they like should be supported but government should just stop wasting money on things they don;t like. A serious dialogue about commonly shared community goods and what they cost (and provide) in benefits is desperately needed.

    A less obvious problem, but even more insidious in some ways, is that as the wealthy create their own enclaves of gated communities, their own schools, their own security systems, and more while everyone else lives in increasingly more depressing public environments, people feel their lives are even worse than they really are because of the increasingly visible disparity.

    I hope this project has great success.

  7. May 10, 2013 at 5:23 pm

    I like everything you say sbout “public goods” and the limited and specific neoclassical perspective. I think that the project you are indicating is extremely important to make elements of neoclassical theory and neo-liberalism visible.

    Economics has to move from neoclassical monopoly to pluralism. We need more than one model of human beings, of organizations, of markets and so on. We should try to clarify the neoclassical idea of public goods but we should also try to approach the same field from other angles. Toward the end of your argument you point to the goals of “greater citizen awareness, a better functioning democracy and improved governance”. This is where I would like to start.

    Did you know that “democracy” is not part of Gregory Mankiw’s introductory textbook Principles of Economics (2007). It is clear that we need to “democratize economics” among other things. Economic Man can be replaced by a Political Economic Person as actor guided by her ideological orientation. A person’s ideological orientation may be narrow or broad and can include some of the things that you mention and even avoidance of global warming. (I know that ‘ideology’ is often used negatively in the USA where some authors even assure their readers that they try to be “pragmatic and non-ideological”. In Europé the situation is a bit better.)

    Elinor Ostrom did something to make cooperation and the commons part of the dialogue. There is a “public domaine” as you say. There is even a public aspect to private goods. Private goods can and should sometimes be questioned from a public perspective. Then we need to refer to concepts such as ideological orientation and realize that there is more views than one. (see my book Understanding Sustainability Economics, Earthscan 2008). We can discuss this.

    Peter Söderbaum

  8. Howard Fox
    May 12, 2013 at 12:23 am

    There is no question that the policy discourse on so many issues has been distorted by the failure to fully incorporate the concept of public goods. The fact is that virtually all human activity, including all economic activity requires the presence of public goods as a vital component and a constant presence. Our national policy discussions cries out for the kind of definition of the “public good” proposed in the writer’s piece. Witness the campaign controversy when President Obama made his comment that “they didn’t build that, when referring to the roads, bridges and other public good necessary for commerce. The entire tea party philosophy of limited government is compromised by the failure to fully account for the value of the public goods. I hope the work on this definition is undertaken as soon as possible and gets all the attention it deserves.

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