I haven’t read the book, could you provide such examples?
I think there are obvious cases of where public goods version of something is under-provided (lower-quality) compared to the club good version of that thing. e.g. Proprietary software being more polished than open source software, HBO higher quality than YouTube.
Where I live the police are useless so neighborhood watches have sprung up in the wealthy areas. However, my impression is that the neighborhood watches appear much later and only in richer areas than you’d expect in an efficient market. Particular many people got private security years before neighborhood watches, and lower-income areas don’t have neighborhood watches even though they would probably be willing to spend 1/1000 of their income (just pay 1 guy in the community of 1000 people) for more safety.
It’s been decades for me but the two best known examples are probably Coase’s (IIRC) “The lighthouse in economics” and (forget the author) “The fable of the bees”.
The first covers the reality that lighthouses in Britain were getting built, largely via private funding and initiatives. These were very clearly of great value for the local community that relied on boats for many activities but it also served to provide protection/warning for all shipping that was merely passing through as it were.
The second covered how bee hives were privately owned and negotiation with local farms or orchards that needed bee pollination services for harvest success—or improved output—even though the bees can and apparently do, service farms that are not paying for the service.
Both studies argued that no only was government type forced production/cost support needed but that there did not seem to be any meaningfully measured under production from some optimal level.
I think these examples are consistent with my views: Sometimes public goods are provided because the demand for them is so great they people overcome the co-ordination problem or just allow people to free-ride (lighthouses) or sometimes public goods are not that public (bee pollination) and so private enterprises pay for them for very little free-riding.
The problem is not the public-goods are never provided, but that the are under-provided: either they are not provided or are of low-quality relative to what is economically efficient.
but that the are under-provided: either they are not provided or are of low-quality relative to what is economically efficient.
I find that bit something of a problematic claim.
If economic efficiency is the criteria one has to show that marginal costs and marginal values are misaligned. I’m not sure that is the general case. The claimed misalignment seems to be based on one of 2 general propositions: 1) that people will choose a persistently worse position over a better one or 2) Increasing the output of any good will be beneficial. In the first case I don’t think such situations last very long. In the latter, it seems based on some partial equilibrium analysis that is ignoring the opportunity costs of the resources shifted to increase the output of the public good.
I do agree that coordination costs can be a factor in production of public goods but considering what institutional setting can best reduce the coordination costs—thereby making the production possible/increased—is the question. I think both mentioned articles, and others present in the book, point out that largely private settings have found ways to accomplish the coordination side.
I haven’t read the book, could you provide such examples?
I think there are obvious cases of where public goods version of something is under-provided (lower-quality) compared to the club good version of that thing. e.g. Proprietary software being more polished than open source software, HBO higher quality than YouTube.
Where I live the police are useless so neighborhood watches have sprung up in the wealthy areas. However, my impression is that the neighborhood watches appear much later and only in richer areas than you’d expect in an efficient market. Particular many people got private security years before neighborhood watches, and lower-income areas don’t have neighborhood watches even though they would probably be willing to spend 1/1000 of their income (just pay 1 guy in the community of 1000 people) for more safety.
It’s been decades for me but the two best known examples are probably Coase’s (IIRC) “The lighthouse in economics” and (forget the author) “The fable of the bees”.
The first covers the reality that lighthouses in Britain were getting built, largely via private funding and initiatives. These were very clearly of great value for the local community that relied on boats for many activities but it also served to provide protection/warning for all shipping that was merely passing through as it were.
The second covered how bee hives were privately owned and negotiation with local farms or orchards that needed bee pollination services for harvest success—or improved output—even though the bees can and apparently do, service farms that are not paying for the service.
Both studies argued that no only was government type forced production/cost support needed but that there did not seem to be any meaningfully measured under production from some optimal level.
I think these examples are consistent with my views: Sometimes public goods are provided because the demand for them is so great they people overcome the co-ordination problem or just allow people to free-ride (lighthouses) or sometimes public goods are not that public (bee pollination) and so private enterprises pay for them for very little free-riding.
The problem is not the public-goods are never provided, but that the are under-provided: either they are not provided or are of low-quality relative to what is economically efficient.
I find that bit something of a problematic claim.
If economic efficiency is the criteria one has to show that marginal costs and marginal values are misaligned. I’m not sure that is the general case. The claimed misalignment seems to be based on one of 2 general propositions: 1) that people will choose a persistently worse position over a better one or 2) Increasing the output of any good will be beneficial. In the first case I don’t think such situations last very long. In the latter, it seems based on some partial equilibrium analysis that is ignoring the opportunity costs of the resources shifted to increase the output of the public good.
I do agree that coordination costs can be a factor in production of public goods but considering what institutional setting can best reduce the coordination costs—thereby making the production possible/increased—is the question. I think both mentioned articles, and others present in the book, point out that largely private settings have found ways to accomplish the coordination side.