US non-tariff barriers as privately provided public goods

Existence and Regularity of Equilibria in a General Equilibrium Model with Private Provision of a Public Good

It is well known that public goods are underprovided in a static setting with voluntary contributions. Public provision—in a median voter framework with proportional taxation—generally exceeds private provision. This paper compares private and public provision of public goods in a dynamic setting. In a dynamic setting, voluntary donations can result in efficient provision. Also, majority‐rule solutions exist even when taxes are not proportional to income. At low discount factors, public provision tends to exceed private provision. As patience increases, however, private provision may exceed public provision. This occurs because many outcomes with a low level of public good provision—and potentially large targeted transfer payments to particular individuals—become sustainable under public provision. Under private provision, however, large targeted transfers are unsustainable. To finance the public good, private provision tends to result in benefit taxation, and public provision tends to result in progressive taxation.

When people know that a public good is to be privately provided in the future, economic behaviour may change in periods before the one with the private provision game. Individuals have a distortionary incentive to reduce their disposable income so as to shift the burden of provision to others. The incentive is eliminated if the government provides a sufficient amount of the public good. In a second-best world, private provision of public goods has been claimed to be a reasonably good alternative to public provision. This claim needs to be reconsidered in the light of these results.

We compare the relative efficiency of second-best policies designed to promote the private provision of public goods. We use the provision of local public goods as our central example and discuss settings in which the model extends to choices over energy-consuming durables. We introduce preference heterogeneity by allowing a subset of agents to value the public good more than others, reflecting a form of prosocial preference. We further assume that agents face convex costs of provision, an assumption that accords well with individually provided public goods such as neighborhood amenities. We show that minimum standards are often more efficient than uniform price-based incentives in this setting. Extending our model to allow for both benefit and cost heterogeneity, we show how policy choice depends on the strength and correlation between the two forms of heterogeneity.

Democracy, Redistributive Taxation and the Private Provision of Public Goods

Focus on Authors

This paper analyses the effects of taxation and subsidies in an economy with private provision of a public good. It is shown that in a situation where all individuals contribute, taxation affects the equilibrium allocation if and only if at least one individual's voluntary contribution to the public good has an impact on the aggregate tax payments of the others. We then consider linear nonneutral tax-subsidy schemes and analyse efficiency and uniqueness of the resulting Nash equilibria. We show that an efficient Nash equilibrium, where all individuals contribute, will in general not be unique, and establish a non-uniformity property which a tax-subsidy scheme must fulfil in order to induce a unique interior equilibrium that is efficient. Throughout the paper it is assumed that individuals fully understand and take into account the government's budget constraint.

Social Network and Private Provision of Public Goods

References and Further Reading

Mancur Olson The Logic of Collective Action: Public Goods and the Theory of Group

As Mancur Olson pointed out in his 1965 book, The Logic of Collective Action: Public Goods and the Theory of Groups , one of the great puzzles of social dynamics is how people overcome collective action problems and organize to pursue common goals. What conditions facilitate and which hinder the emergence of social movements, what allows social movements to persist over time, and what accounts for their impact on social and political dynamics are some of the key questions that scholars have explored over the last few decades.

Uniqueness of Nash equilibrium in private provision of public goods : An improved proof

On the Private Provision of Public Goods on Networks

All prescriptions of behavior for individuals require enforcement. Usually the obligation to behave in a prescribed way is entered into voluntarily by explicit or implicit contract. For example, I promise to teach certain classes with designated frequency and to discuss matters which I, and possibly others, believe are relevant to the course titles. By negotiation, and in the event of its failure, by legal action, I and my employer seek to enforce the contract of employment against large departures from the promised behavior. Performance of some kinds of behavior is difficult or impossible to enforce-such as promises to be creative, noble, or steadfast in crisis-and as a result such contractual promises are either not made or enforced only when there is an uncontroversially flagrant violation. The influence upon contract, and upon economic organization generally, of the costs of enforcing various kinds of contracts has received virtually no study by economists, despite its immense potential explanatory power. When the prescribed behavior is fixed unilaterally rather than by individual agreement, we have the regulation or law, and enforcement of these unilateral rules is the subject of the present essay. Departures of actual from prescribed behavior are crimes or violations, although one could wish for a less formidable description than "criminal" to describe many of the trifling offenses or the offenses against unjust laws. My primary purpose is to construct a theory of rational enforcement, a theory which owes much to Gary Becker's major article on the subject (1968). In the conclusion the problem of explanation, as distinguished from prescription, will be commented upon.

Mancur Olson had the rare ability to explain clearly the subtle nature of how groups of human beings organize to educated readers who are not versed in economic theory and its arcane vocabulary. His first book The Logic of Collective Action: Public Goods and the Theory of Groups, first published by the Harvard University Press in 1965, presented the fundamental issues of group formation by self-interested individuals in a way that made sense to most readers. He made a serious and successful effort to connect his theory with the scholarly writings on groups by sociologists and other non-economists. This book influenced the thinking of many academics and non-academics.