Over the very time we were clearing away the detritus of the various collectivist institutions we cobbled together under the name of the Australian Settlement, or ‘protection all round’, while we proceeded with economic reform by deregulating markets to try to optimise the contribution of competitive forces, a whole range of things turned up in the in tray which were in effect new and very important public goods (or bads) – which markets might be expected to deal with badly.They includeBads
- the threat of global pandemics
- the threat of global warming
- post cold war nuclear proliferation
- software and other ‘content’ or intellectual products (e=mc2) that in principle can be distributed at negligible marginal cost
- the internet – a means of doing this and much else such as
- goods produced using ‘open source’ methods of production
And an old public good that we’d come to take for granted is pressing itself on our imagination as I write this – that public good is the liquidity and solvency of the financial system.
At least with regard to the new public (knowledge) goods, although much of the basic technology, and the IT architecture that made the new world of public intellectual goods possible had heavy public sector involvement, much of the rest of it is provided by private agents operating in a (reasonably) competitive market. That’s a paradox because, at least in principle, public goods are supposed to be the metier of government, and a problem for private providers who can’t fund public good provision adequately because the good to be provided will be available to all, so there is no practical way of measuring how much people want the good, and so getting them to participate in its funding. Of course Microsoft was an early generator of a public good which was a software standard which captured network externalities – you can send me your MS Word document and I can edit it and send it back. But that’s been fairly unsatisfactory because Microsoft has a distinctly ‘old school’ philosophy of trying to maximise profit by monopolising and manipulating the public goods it produces. Having created the standard Microsoft now charges us all pure economic rent for access to it.
Wikipedia is a classic public good and it is provided via philanthropy and social networking not by government. Again, the textbook would say that this is all very nice, but that Wikipedia would be inadequately resourced, in the same way that World Vision is inadequately resourced to ameliorate poverty and suffering around the world.
Open source software operates a little via philanthropic motives, but mostly as a kind of ‘solutions exchange’ where people or firms that have coded to solve some practical problem donate that code back to a ‘master project’ – Linux, Firefox or Apache, whatever – in order to try to ensure that that code finds its way into new distributions of the project – because if it doesn’t they have to spend time recoding for each new distribution.
And Google is a voracious profit driven organisation with at least as much megalomania as Microsoft and yet, true to its slogan, it does a lot less evil. It creates massive amounts of value, (think Google search, maps, docs and various bits of software) it then gives almost all of this value it’s created away and makes money in the margins of the value it’s created.In theory the public sector should be well placed to lead the creation of value through public goods on the net and elsewhere. But alas that’s only in theory. But government is very bad at pretty much all the kinds of things that are providing public goods to us over the internet (other than the original research and development and institutional networking that created it in the first place).It is encrusted with a vast panoply of institutions which make it inefficient at a wide range of things.
Some of this is inevitable and in that (limited) sense welcome. Governments can’t improvise willy nilly like a small business can. But that’s because they have to demonstrate probity and integrity in what they do. And governments are big organisations so that slows them down, as it does private firms.Governments are also bastions of unionism – in many ways the last place where unions are strong. And that brings with it lots of inefficiencies, rigidities and conspiracies against outsiders.
Governments have problems with sticking to things for the long term – and that’s not necessarily such a bad thing given another of their characteristics – they’re often more unresponsive to feedback than markets.
Still, I think governments could help with this new explosion of public goods more than they have, though the driving force will continue to be individuals, firms and civil society. I’ll expand on that in . . . Part Two.