Provision of public goods

Following up on the last post, one of society's problems that must be revisited is the provision of public goods. Public goods are the goods we ostensibly need the state to provide because they are good for all of us, although government provision is not necessary, as they could be provided by the private sector. This brings up several problems -- the problem of free riders who don't contribute --  the question of whether the product or service is actually good for us all -- the question of whether the good must be provided by the state and not the private sector, or the state through voluntary arrangements for contributions, which raises questions of cost and efficiency. The negative externality of pollution is probably the most difficult problem to solve, although technology is the best potential long term solution. Industries which understand the social costs of their pollution would be wise to handle those costs in order to avoid state solutions -- this requires an expensive focus on reseach and development, but the costs may be worth the effort, seeing as how state solutions will likely be more costly, cumbersome and overly restrictive causing addition hidden costs.

The prevailing system whereby representatives decide on the provisions of public goods is inadequate because we don't have proper limits, and the process is vulnerable to rent-seeking and political philosophy which favors statist control. So we're faced with the choice between voluntary contribution to determine the provision of public goods or state provision of public goods.

A big part of the problem with the present stimulus plan promoted by Obama and company is how government will decide which public goods are needed, in what quantity and at what cost compared to the collective good. The state provision of the public goods will no doubt be fraught with inefficiencies brought about by lobbying and rent-seeking, government mismangement caused by political conflicts and inadequate quality control, along with issues of adherence to non-excludability as the scope of the projects expand. Can we trust representatives to properly determine the provision of public goods on this scale?

History shows us that the state has failed to provide public goods without waste, incompetence and corruption, for the most part. The waste, incompetence and corruption are great enough to demand a restructuring and limitation of state provision of public goods. Private provision of collective goods is a thorny, difficult issue, but it's worth the effort to reconsider how collective needs are met. As much as we can make the provision of public goods voluntary and private, the better off we are.

One public good that requires reconsideration and restructuring is education. The importance of education cannot be overstated -- investment in education in a highly specialized, technological society is vital, not  only for society as a whole but for individuals. The third party benefits are high enough that low quality provision is economic suicide. The solution is private investment. Monetizing education so the proper quanity and quality of the good is provided requires creative thinking, but first there has to be the public will to break the state's grip. This could be part of a Constitutional amendment to separate the economy and government. Once we've decided and contracted to privatize edcuation, solutions will be forthcoming and they will most likely be diverse solutions that transcend the one-size-fits-all offering of public edcuation. But because everything is connected, the aversion many in the public have towards capitalism will need to be overcome first.

I might be overstating the problem of statism, but I don't think so -- there's no way the world's nation-states can continue to support nannyism and wasteful, myopic central control-- it's crippling production and creating far too much dependence. You can only take so much from the producers before you've killed their drive or bled them dry.

Perhaps it's time to limit the state's provision of public goods to what's absolutely best for the state to handle -- like a handful. I'll try to give a few specifics in the next few days.