What is public choice theory
Social Good. 1. Term: a) I.e.S .: Term used to delimit individual goods or private goods with the help of certain characteristics.
b) I.w.S. the theory of public goods is identified with the theory of public spending and market failure.
2. Characteristic features (Musgrave): a) Inapplicability of the Exclusion principle: The use of the public good cannot be made dependent on the payment of a fee, as the exclusion of use cannot be enforced, e.g. for technical reasons, or is undesirable for social reasons.
b) non-rival consumption (Axiom of non-rivalry): The benefit accruing to individuals from the use of the public good is independent of the number of users (no overcrowding problem).
c) context of the two reasons and external effects: While the decision on the type, scope and distribution of private goods is made through the decentralized coordination of individual preferences via the market mechanism, the decision on the creation of public goods is the result of a collective decision-making process (collective decision through the electoral mechanism). The features mentioned prevent an efficient allocation of these goods via the market mechanism (market failure). In the context of the New Political Economy, however, attempts are made to trace back decisions about public goods to individual preferences.
d) Additional reasons for the market failure and thus for the justification of the public production of goods: long maturity periods for investments and high investment risk (research and development); long-term falling average costs; intergenerational effects of the management of natural resources.
See also merit goods.
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