The Optimum Supply of Public Goods in a Mixed Economy

Agnar Sandmo

Chapter 5 in The Grants Economy and Collective Consumption, 1982, pp 85-107 from Palgrave Macmillan

Abstract: Abstract In any economic system decisions about the production and distribution of consumption goods are made partly through the mechanism of the market, partly by governmental bodies, possibly deriving their authority from some collective choice process. The balance between the market and the government in determining the use of resources for consumption varies a great deal from one economic system to another and depends of course to a high degree on historical and ideological differences which it would be presumptuous for an economist to try to explore at all adequately. My task in the following is fortunately a much simpler one. Starting from the point of view of welfare economics I wish to discuss the scope and limits of the market mechanism as a system for the allocation of resources and derive some guidelines for collective decisions in the field of public goods and taxation. A main concern of the paper is to show how the ‘ideal’ solution has to be modified to allow for the fact that a government in a mixed economy only controls the actions of private agents imperfectly; the best it can hope for, therefore, is a second-best solution.

Keywords: Public Good; Market Failure; Marginal Rate; Social Welfare Function; Competitive Equilibrium (search for similar items in EconPapers)
Date: 1982
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Persistent link: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-349-05377-3_5

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DOI: 10.1007/978-1-349-05377-3_5

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