Local Dilemma about Liberalisation or Intervention

Public sector economics describes algorithms of public authorities’ decisions about liberalization of their tasks or intervention in the private issues. Such theory mainly concerns national or supra-national level decisions. Aim is to propose algorithm of similar decisions locally, taking into account individual specific of local situation. Methods of policy analysis for this aim are applied. Local governments have dual nature – they are executors of national policy as well as autonomous policy-makers and executors of own policy. General principles, formally recognized by all members of the Council of Europe (this concerns 100% of the EU countries) are: 1) for dividing of competences among national and local authorities – the principle of subsidiarity; 2) for scope and content of intervention – principle of proportionality. The same principles could be applied for decisions about liberalization or intervention of local issues, which concerns obligatory or voluntary local governments’ competences. Factors, which have to be taken into account to decide about intervention, are presence or absence of several types of local market failure and several types of government failure. Proposed algorithm of decision includes testing of sustainability of private activities, testing of main types of market failures, EU failure, national government failure, local government failure. That first cycle of procedure is practical implementation of the principle of subsidiarity. If intervention is necessary, then there are several options, how to impact on situation. The choice could be done among 1) regulation of private activities with corresponding administration; 2) supplying of public services for free; 3) supplying services or goods for partial payments of beneficiaries; 4) direct entrepreneurship; 5) facilitating private entrepreneurs or organized civil society organizations; 6) outsourcing of corresponding local government activities. That second cycle of procedure is practical implementation of the principle of proportionality to ensure as minimal intervention, as possible.