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The Public Commodities Problem

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  • Karl Widerquist

    (Jerome Levy Economics Institute)

Abstract

One person's public good is another's public bad and so, perhaps, the public goods problem could be more generally described as the public commodities problem, in which disagreement about the basic goal of a spending program complicates the decision of how much to spend to achieve that goal. Although public goods spending is a continuous variable, it often has a binary goal such as win a war, deter crime, provide transportation, or reduce poverty. To decide how much spending is necessary to achieve that goal, society must answer both a normative question—Should the government adopt the goal of this spending program?—and a positive question—Given this spending program's goal, what is the optimal level of spending? If the answer to the first question is yes, it may be desirable that the level of spending be set at the optimal level of spending given the stated goal; spending, however, may not be set at that level. This paper uses the median voter theorem to demonstrate that those who do not believe the government should pursue the stated goal of a spending program, and those who believe that the government can achieve the goal with relatively less spending, can form a coalition to keep spending at a level that most supporters (and possibly most citizens) believe objectively is the optimal amount. Thus, even if voters have rational expectations about the amount necessary to achieve a goal, disagreement about whether or not to pursue the goal can cause an underfunding bias.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0004046.

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Length: 22 pages
Date of creation: 24 Oct 2000
Date of revision:
Handle: RePEc:wpa:wuwpma:0004046

Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 22; figures: included
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Web page: http://128.118.178.162

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  1. Congleton, Roger D & Bennett, Randall W, 1995. " On the Political Economy of State Highway Expenditures: Some Evidence of the Relative Performance of Alternative Public Choice Models," Public Choice, Springer, vol. 84(1-2), pages 1-24, July.
  2. Cahan, Steven F & Kaempfer, William H, 1992. "Industry Income and Congressional Regulatory Legislation: Interest Groups vs. Median Voter," Economic Inquiry, Western Economic Association International, vol. 30(1), pages 47-56, January.
  3. Brennan, G. & Hamlin, A., 1996. "Two theories of rational voting," Discussion Paper Series In Economics And Econometrics 9632, Economics Division, School of Social Sciences, University of Southampton.
  4. Turnbull, Geoffrey K & Djoundourian, Salpie S, 1994. " The Median Voter Hypothesis: Evidence from General Purpose Local Governments," Public Choice, Springer, vol. 81(3-4), pages 223-40, December.
  5. Poole, Keith T. & Rosenthal, Howard, 1996. "Are legislators ideologues or the agents of constituents?," European Economic Review, Elsevier, vol. 40(3-5), pages 707-717, April.
  6. Levitt, Steven D, 1996. "How Do Senators Vote? Disentangling the Role of Voter Preferences, Party Affiliation, and Senate Ideology," American Economic Review, American Economic Association, vol. 86(3), pages 425-41, June.
  7. Randall Holcombe, 1989. "The median voter model in public choice theory," Public Choice, Springer, vol. 61(2), pages 115-125, May.
  8. Comanor, William S., 1976. "The median voter rule and the theory of political choice," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 169-177.
  9. Jung, Gi-Ryong & Kenny, Lawrence W. & Lott, John Jr., 1994. "An explanation for why senators from the same state vote differently so frequently," Journal of Public Economics, Elsevier, vol. 54(1), pages 65-96, May.
  10. Slutsky, Steven, 1977. "A voting model for the allocation of public goods: Existence of an equilibrium," Journal of Economic Theory, Elsevier, vol. 14(2), pages 299-325, April.
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