Abstract
James M. Buchanan advocated constitutional constraints on tax-funded activity in order to limit it to cases where government could provide Pareto improvements, namely “genuinely public goods of the pure Samuelsonian type.” However, even the most benevolent government agents cannot improve on imperfect market outcomes in the presence of free-rider or demand-revelation problems because—being human and not omniscient—they cannot know the public’s true but necessarily unobserved willingness to pay for unpriced services. The claim that project x’s expense to each individual will be exceeded by the value the individual places on its services can never be falsified given the free-rider or demand-revelation problem built into the Samuelsonian concept of a public good. It follows that to give a human bureaucracy the constitutional mandate to provide public goods would provide no firm barrier to the scope of government.
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- 1.
No party to the discussion made the point that the FCC could not make the public worse off by allowing subscription television services to enter a market that already had advertiser-financed television, thus giving the public an additional option but foreclosing no existing option.
- 2.
Contrast Samuelson (1967, p. 200), where he observed: “For ideal private goods, people are motivated to ‘reveal’ their tastes,” whereas (p. 202) “God-like powers” would be necessary for an official body “to determine the … utilities of different users” for a public good provided monopolistically.
- 3.
Questionnaires won’t reveal demand curves for a public good if one’s tax bill depends on one’s answers. Samuelson (1958, p. 336) noted the “game- theory reasons that compel rational men to hide their desires for public goods.”
- 4.
Exclusion costs are zero for truly private goods? This would seem to suggest that shops can costlessly prevent shoplifting, and theme parks need no costly fences.
- 5.
For criticism of the argument see Lawrence H. White (2017, pp. 353–355).
References
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White, L.H. (2018). The Conflict Between Constitutionally Constraining the State and Empowering the State to Provide Public Goods. In: Wagner, R. (eds) James M. Buchanan. Remaking Economics: Eminent Post-War Economists. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-03080-3_7
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