当前位置：首页> 哈维罗森财政学笔记全英Chapter4-

哈维罗森财政学笔记全英Chapter4-

时间：下载该word文档

Chapter Four
Public Goods
In this chapter, we discuss the conditions under which public provision of commodities is appropriate. We should understand why markets may fail to provide particular goods at Pareto efficient levels.
Public Goods Defined National defense is an example of pure public good, defined as follows: (1 Consumption of the good is nonrival-once it is provided, the additional resource cost of another person consuming the good is zero. (2 Consumption of the good is nonexcludable-to prevent anyone from consuming the good is either very expensive or impossible.
In contrast, a private good is rival and excludable.
Several aspects of our definition of public good are worth noting. (1 Even though everyone consumes the same quantity of the good, it need not be valued equally by all. People might differ over whether the value of certain public goods is positive or negative. (2 Classification as a public good is not an absolute; it depends on market conditions and the state of technology. It makes sense to think of "publicness" as a matter of degree. Consumption of an impure public good is to some extent rival or excludable. (3 A commodity can satisfy one part of the definition of a public good and not the other. That is, nonexcludability and nonrivalness do not have to go together. (4 Some things that are not conventionally thought of as commodities have public good characteristics. Consumption of honesty, fair income distribution and certain types of information is nonrival and nonexcludable, and therefore they are public goods. (5 Private goods are not necessarily provided exclusively by the private sector. There are many publicly provided private goods-rival and excludable commodities that are provided by governments. Medical services and housing are two examples. Similarly, public goods can be provided privately. In short, the label private or public
does not by itself tell us anything about which sector provides the item. (6 Public provision of a good does not necessarily mean that it is also produced by the public sector. The local government may hire a private firm for the job and not organize production itself.
Efficient Provision of Public Goods Private goods: The process of creating a market demand curve by summing the quantities demanded by each individual at every price is called horizontal summation.
The equilibrium in private goods market has a significant property: The allocation of commodities is Pareto efficient. As long as the market is competitive and functions properly, the First Welfare Theorem guarantees Pareto efficient (MRTaf=MRSAdam =MRSEve afaf.
1. Deriving the Efficiency Condition If the sum of individuals' willingness to pay for an additional unit of a public good exceeds its marginal cost, efficiency requires that the unit be purchased; otherwise, it should not. Efficiency requires that provision of a public good be expanded until the point at which the sum of each person's marginal benefit for the last unit just equals the marginal cost.
A public good must be consumed in equal amounts. Public goods: The process of creating an aggregate demand curve for a public good by adding the prices each individual is willing to pay for a given quantity of the good is called vertical summation.
Note the symmetry between private and public goods. With a private good, everyone has the same MRS, but people can consume different quantities. Therefore, demands are summed horizontally over the differing quantities. For public goods, everyone consumes the same quantity, but people can have different MRSs. Vertical summation is required to find the group willingness to pay. Put another way, for standard private goods, everyone sees the same price and then people decide what quantity they want. For public goods, everyone sees the same quantity and people decide what price they are willing to pay. Prices can be interpreted in terms of marginal rates of substitution(MRS. Adam's marginal willingness to pay for rockets is his marginal rate of substitution(MRSAdam , and Eve's marginal willingness to pay for rockets is her ramarginal rate of substitution(MRSEve ra. Therefore, the sum of the prices they are willing to pay equals MRSAdam + MRSEve rara. From the production standpoint, price still represents the marginal rate of transformation, MRTra. Hence, the equilibrium is characterized by the condition MRSAdam + MRSEve rara= MRTra

For a private good, efficiency requires that each individual have the same marginal rate of substitution, and that this equal the marginal rate of transformation. For a pure public good, the sum of the marginal rates of substitution must equal the marginal rate of transformation. 2. Problems in Achieving Efficiency When a private good is exchanged in a competitive market, an individual has no incentive to lie about how much he or she values it. However, people may have incentives to hide their true preferences for a public good. Someone who lets other people pay while enjoying the benefits himself is known as a free rider. Hence, the market may fall short of providing the efficient amount of the public good. No automatic tendency exists for markets to attain the efficient allocation. Suppose the following two conditions hold: (1 the entrepreneur knows each person's demand curve for the public good; and (2 it is difficult or impossible to transfer the good from one person to another. Under these two conditions, the entrepreneur could charge each person an individual price based on his or her willingness to pay, a procedure known as perfect price discrimination.
Perfect price discrimination may seem to be the solution but everybody's
preferences were unable to be known. If individual's demand curves were known, there would be no problem in determining the optimum provision in the first place. We conclude that even if a nonrival commodity is excludable, private provision is unlikely to be efficient. 3. The Free Rider Problem
The Privatization Debate Privatization is the process of turning services that are supplied by the government over to the private sector for provision and/or production. 1. Public versus Private Provision
Over time, the mix between public and private provision has changed substantially. What is the right mix of public and private provision? To approach this question, think of publicly and privately provided goods as inputs into the production of some output that people desire. Assume that what ultimately matters to people is the level of output, not the particular inputs used to produce it. What criteria should be used to select the amount of each input? There are several considerations. Relative wage and materials costs The less expensive sector is to be preferred on efficiency grounds. Administrative costs Under public provision, any fixed administrative costs can be spread over a large group of people. The larger the community, the greater the advantage to being able to spread these costs. Diversity of tastes To the extent such diversity is present, private provision is more efficient because people can tailor their consumption to their own tastes. The benefits of diversity must be weighed against any possible increases in administrative costs. Distributional issues The idea that some commodities ought to be made available to everybody is called commodity egalitarianism. 2. Public versus Private Production People can agree that certain items should be provided by the public sector, but still disagree over whether they should be produced publicly or privately. Part of the controversy stems from fundamental differences regarding the extent to which government should intervene in the economy. Part is due to differences of opinions about the relative costs of public and private production. Some argue that public sector managers do not have to worry about making profits or becoming the victims of takeovers or bankruptcy. Hence, public sector managers have little incentive to monitor the activities of their enterprises carefully. The central argument of opponents of private production is that private contractors produce inferior products. Incomplete Contracts A possible response to this criticism is that the government can simply write a contract with the private provider, completely specifying the quality of the service that the government wants. It is sometimes impossible to write a contract that is anywhere near being complete because one cannot specify in advance every possible contingency. In short, when the private sector cost is lower than in the public sector and relatively complete contracts can be written, a strong
case can be made for private production.
Advocates of privatization believe that, even if it is impossible to write a complete contract, there are other mechanisms for getting private firms to refrain from engaging in inefficient cost reductions. Consumers can choose good suppliers. Reputation building may be important. Market Environment Public versus private ownership is less important than whether competition is present.
Public Goods and Public Choice Private markets are unlikely to generate pure public goods in Pareto efficient quantities. Some collective decision must be made regarding the quantity to be supplied. Sometimes there may be private substitutes for an impure publicly provided good, but community decision making is also needed in these cases, this time can choose the extent to which public provision will be used. The subjects of public goods and public choice(chapter 6 are closely linked.

阅读全文