The Importance of Considering Optimal Government Policy When Social Norms Matter for the Private Provision of Public Goods

Guy Meunier and Ingmar Schumacher

No 2020-007, Working Papers from Department of Research, Ipag Business School

Abstract: In the social norms literature concerned with the private provision of public goods there seems to be an implicit belief that it is best to have all agents adhere to the ?good? social norm. We challenge this view and study optimal government policy in a reference model (Rege, 2004) of public good provision and social approval in a dynamic setting. We show that even if complete adherence to the social norm maximizes social welfare it is by no means necessarily optimal to push society towards it. We stress the different roles of the social externality and the public good problem. We discuss the problem with the standard crowding in and out argument and analyze the relationship with Pigouvian taxes. We discuss the role of the cost of public funds and show how it can create path dependency, multiplicity of both optimal equilibria and optimal paths, and discuss the role of parameter instability.

Keywords: government policy; social norms; public goods; optimal policy (search for similar items in EconPapers)
JEL-codes: H23 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2020-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The importance of considering optimal government policy when social norms matter for the private provision of public goods (2020)
Working Paper: The importance of considering optimal government policy when social norms matter for the private provision of public goods (2017)
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