Abstract
In this chapter I expand on Adam Smith’s observation that roads and education cannot be conceptualized satisfactorily by the concept of private goods. The concepts of public and merit goods need to be added. I reduce the eighteen different characteristics of public goods, found in the economic literature, to the two crucial ones of non-rivalness in consumption and non-exclusion possibility of non-payers. I build upon the partial insight of Samuelson to claim that the three concepts of private, public and merit goods are ideal concepts which can be present jointly and in varying degrees in every economic event. Given that both Samuelson and Olson show the need for the government to make, in some cases, a decision without sufficient scientific evidence (Samuelson) or on ethical considerations (Olson), I argue that the concept of public goods demands the ethical concept of merit goods as introduced by Musgrave. I provide the different definitions and justification given by Musgrave. A discussion of the secondary literature allows me to strengthen Musgrave’s own confession that he has only been able to give a partial justification of the concept of merit goods. I announce that in the next chapter I will provide a Kantian inspired justification for merit goods.
In this chapter, particularly Sect. 3.3 on “The need for the concept of ‘public goods’”, I borrow, with some changes, from: Ver Eecke 1999. Available at SSRN: http://ssrn.com/abstract=350220 or http://dx.doi.org/10.2139/ssrn.350220.
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Notes
- 1.
“The suggested distinction between private and social want [public goods] is not of an absolute sort. Inefficiencies arise in the satisfaction of private wants through the market process, and wherever such is the case, one could say that an element of social want is involved’ (Musgrave 1959a, 8; Ver Eecke 2007, 23). “Note that consumption choices which are supported [merit goods] or penalized [demerit goods] may involve goods which are private (rival in consumption) as well as goods which are social (non-rival) [i.e., public goods]” (Musgrave and Musgrave 1984, 78; Ver Eecke 2007, 51).
- 2.
“Common pool resources” could be considered a necessary fourth concept (Barkin and Shaumbaugh). But Samuelson’s ideal concept of public goods defines public goods as quantitatively having “a condition of equality rather than of summation” for all consumers (Samuelson 1955, 350). Hence, Samuelson’s concept of public good explicitly captures “common pool resources.”
- 3.
Later Musgrave added additional examples such as free education (Musgrave 1957, 111, 1959a, 13; Ver Eecke 2007, 21, 24), publicly furnished school luncheons (Musgrave 1959a, 13; Ver Eecke 2007, 23), free milk (Musgrave 1969b, 12, 1971, 313; Ver Eecke 2007, 33 and 37) or milk for babies (Musgrave 1969a,143; Ver Eecke 2007, 31), “food, shelter, health and so forth. … earmarked (specific) subsidies which assure equality in consumption of necessities (Musgrave1969a, 143-44; Ver Eecke 2007, 32), free dental clinics (Musgrave 1971, 313; Ver Eecke 2007, 37) “a specified basket of goods, e.g., essential items of food, clothing, and shelter [linking it to “categorical equity”] (Musgrave and Musgrave 1984, 99, 1996,187; Ver Eecke 2007, 53 and 70), “programs in support of child care” (Musgrave and Musgrave 1984, 512; Ver Eecke 2007, 55), “future consumption” (Musgrave 1987, 452; 1990, 207–208; Ver Eecke 2007, 57 and 62), “Concern for maintenance of historical sites, respect for national holidays, regard for environment or for learning and the arts” (Musgrave 1987, 452; 1990, 208; Ver Eecke 2007, 57 and 62), “The role of merit goods […] bears some relation to the philosophers concept of “primary goods” (Musgrave 1987, 453; Ver Eecke 2007, 58). He also gives examples of demerit goods like “penalty taxation, as in the case of liquor (Musgrave 1959a, 13; Ver Eecke 2007, 24); “prohibition of sale of dangerous drugs or sumptuary taxes (Musgrave 1969b, 11; Ver Eecke 2007, 33); “Penalty taxes … imposed on liquor or tobacco (Musgrave 1971, 313; Ver Eecke 2007, 37; see also Musgrave and Musgrave 1976, 328; Ver Eecke 2007, 46); “pornography” (Musgrave and Musgrave 1976, 66; Ver Eecke 2007, 46); “taxes, including those on narcotics, adulterated butter, and wagers, are imposed” (Musgrave and Musgrave 1976, 328; Ver Eecke 2007, 47; also Musgrave and Musgrave 1984, 438; Ver Eecke 2007, 54); “Restriction of drug use or prostitution as offenses to human dignity” (Musgrave 1987, 452, 1990, 208–209; Ver Eecke 2007, 58 and 62).
- 4.
Musgrave uses the word “interference” explicitly in definitions 1, 5, 6, 7, 8, 12 and 14. Musgrave uses the word “impose” in definition 8, 9, 11 and 14.
- 5.
Musgrave uses the word “to correct” only once in the above enumerated definitions: i.e., in definition 4. However, when Musgrave looks for reasons to justify merit good interventions by the state he uses the idea that consumers do not have enough information, are mislead by advertisements and thus he uses the idea of correction of consumer preferences as a justification for merit good policies.
- 6.
See footnote 4.
- 7.
John Head, the author who has most extensively written about the problem of merit goods, agrees with me when he writes in his review of my Anthology Regarding Merit Goods: “From his introduction to the volume, it is clear that Ver Eecke regards the merit goods concept as having much wider application than Musgrave himself has ever suggested. He argues this very persuasively on a case-by-case basis in summarizing the contributions from a wider literature in Part III of the volume. With this view, I would emphatically concur” (Head 2008). For a good summary of my views expressed in the same anthology, see Henningsen 2007. I wish to report that Musgrave himself in a telephone conversation agreed with my expansion of the applicability of the concept of merit goods.
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Eecke, W.V. (2013). The Concepts of Private, Public and Merit Goods. In: Ethical Reflections on the Financial Crisis 2007/2008. SpringerBriefs in Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-35091-7_3
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