Samuelson Machines and the Optimal Public-Private Mix

Standard economic analysis assumes the sets of public and private goods to be exogenously given. Yet societies very often choose the public-private mix, using resources to convert seemingly private goods into ones with public goods characteristics and vice versa. And, in practice, we see a bewilderingly large variety of public-private mixes across societies. This papers advances an analysis of the choice of the public-private mix in the framework of voluntary contributions to public goods provision, by envisaging that, starting from a situation where all goods have private characteristics, some goods can be changed to have public goods characteristics at a cost (by purchasing a “Samuelson machine”). It characterizes the jointly optimal choice of the public-private mix and the efficient supply or not of the public goods in the mix. This characterization generates a number of testable predictions on the public-private mix, and on the prevalence of free riding.


Subject(s):
Issue Date:
2002-10
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/127321
Total Pages:
25
JEL Codes:
D11; D61; H41.
Series Statement:
WP
2002-31




 Record created 2017-04-01, last modified 2017-08-26

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