I would suggest that your paradoxes are examples of the “tragedy of the commons”. I would also suggest that governments are not particularly good at solving these problems with their current tools. In fact it almost seems that everytime a government tries to act in the public interest they tend to end up stuffing it up.

What we need are mechanisms that enable us to both benefit as individuals and to share the benefits with others of community goods and in the removal of public bads. Once you put in place these mechanisms then the paradoxes go away.

The common way of thinking about things economic things seems to be based around the idea of each person trying to maximize their own benefit. In the real world that is not the way we operate. We are a lot more sophisticated than that and in particular we have the concept of “fairness” in our transactions.

If we can build fairness into our economic transactions then we can remove many of your paradoxes because we can solve the tragedy of the commons.

We would all be happy to switch to renewables as long as everyone else did. We would be happy to contribute to stopping pandemics as long as we weren’t the only ones. We are happy to share in open source software as long as others do the same and don’t take advantage of our actions (which by the way is why it works). We are happy to contribute to Wikipedia as long as others do too. We are happy to contribute to blogs as long as others do too.

Our society is full of examples of volunteers, people working for no benefit for the community good. We have this need to work with others and to do things for others. All religions have the belief of “Do unto others as you would have them do unto you” – or “you scratch my back and I will scratch you” (but if you don’t scratch my back then I will try to kick your back:)

I would suggest that governments have forgotten that they are there for the public and often seem to be interested in their own survival and to hell with the public. For example I will start to believe governments when they stop taking advantage of the system for their own ends and start to do things like – make freedom of information truly free. Make the voting system and the funding of elections so that it opens up diversity in candidates. Stop pandering to the large economic interests like the banks, energy and media companies and people who tend to give big donations. Stop giving what some people call plaque grants. That is you will get a government grant if some minister can put a plaque on it.

What we want are ways that we can cooperate as well as ways we can compete. The lessons of evolution are those that cooperate win over those that compete.

As for part two – well the problem is time

And the fact that I’m already up to part three in my own mind

as we were rolling back the state and expanding what private competition achieved, public goods were becoming more important

was a paradox in the sense of an argument that apparently derives self-contradictory conclusions by valid deduction from acceptable premises.

But looking at a dictionary apparently people also call ‘a tenet contrary to received opinion’ a paradox!! If that is what you meant then you are right and I apologise.

I do look forward to part II, btw.

All I said was that, as we were rolling back the state and expanding what private competition achieved, public goods were becoming more important. That’s a paradox. If you don’t think so, bully for you, but I can’t see why that’s hard to see.

Public goods are typically not provided well by private enterprise. But it turns out that the private sector seems better at providing content on the net and open source software, both of which are pretty much as close to public goods as things in the real world get.

So there you are, two paradoxes. They’re not monumental, amazing paradoxes. They don’t disclose any bad state of the world, just a couple of little garden variety paradoxes. Can’t see the problem in any of those observations.

Am I missing something?

You don’t bother reading or I suspect trying to understand what is said. No one said anything about bargains.

Price is used as one of the ways for a person to decide whether to take part in a transaction with another person or entity. I heard a good description that economics is about the science of choice and I think that is a pretty good one. People make choices for all sorts of reasons and one of those for some people some of the time happens to be price. So price is useful as one of the things you use when making a choice. In particular it enables you to choose between different alternatives of the same offering. It is however not the only thing to consider when making a choice.

If falls down when people think it is the best mechanism for all investment and for all allocation of funds where there is market failure of some form or other.

Emissions Permits Trading is a good example of this type of thinking and concentration on price. In simple terms the theory is that if we increase the price of polluting energy by inventing a product called Emissions Permits then we will get lots of investment in renewable energy infrastructure because the price of Emissions Permits will increase the price of polluting energy which in turn will make it attractive for people to invest in renewable energy infrastructure. What a long winded, complicated way of getting investment in renewable energy infrastructure.

Surely all we have to do is to say. We need to invest about $20Billion dollars a year in renewable energy. Now we ask the question what is the most efficient way of spending that amount on investment in renewable energy infrastructure. I can prove to you that increasing the price of all polluting energy is not the most efficient way. The most efficient way is directly through the existing market place in renewable energy infrastructure. One way is to give potential buyers of renewable energy infrastructure some money and let them purchase renewable energy infrastructure in the market place of renewable energy infrastructure. Note I am NOT talking about purchasing renewable energy but I am talking about the power stations etc to produce it or investing in ways to save energy. How people are given the money and who gets it are equity problems and as you know I think a good way is through Energy Rewards where you give the money to those who use little energy. That is “Reward the frugal and charge the profligate”.

Please think it through. Of course prices are important but the price is covered by the market place where the expenditure is on the public good. The amount of money distributed is the same as we currently distribute through government budgeting. There is NOT an infinite supply. You make assumptions from your current mindset.

What happens now.

Governments collect fees and taxes and someone somewhere decides that a certain amount of money will be spent on say health. The money is then distributed to suppliers of services like hospitals, doctors, etc.

What I am suggesting is that the first sentence remains but instead of the money going down the chain the money is given to the population and moves up the chain. That is, we give the money to the population and they have to spend the money given on health.

The different approach will result in massive savings because we know that markets are better at allocating resources than our current command and control.

This is nothing to do with socialism or any other label. It is all about efficient allocation of funds. The best way is to give choice at the lowest level possible in terms of spending. That is why I say it is the spending that is important not the prices which will take care of themselves if there is a free market.

The trap economists have fallen into is in believing that prices reflect value. As a person who sets prices I can tell you now that price has little relation to value except in a free and unconstrained market with the buyers with perfect knowledge.

What you will have is some people consuming more than they need, and their welfare decreasing as a result (ie effectively a pay-cut to them) and (I believe) other people consuming less than they need just because a) there is a socially constructed expectation of the correct expenditure, and b) after all their dollars have been ‘tagged’ they don’t have enough discretionary expenditure.

I know you are not a socialist but the heart of most socialists is a deep unhappiness with the fact that very few people share their priorities and no-one thinks that the socialist in question knows better than they do.

Mandatory solutions are not the answer.

It is all about spending not about prices.

This, regrettably, would very quickly be true under your system. In case you are wondering, it would be a very bad outcome since it should be all about the prices. Prices are one of the most valuable pieces of information available to us. For example, a lot of externalities (such as the pollution so dear to Caroline’s heart) are a question of incomplete pricing.

SJ:
I also don’t understand why there is a paradox involved. Other than that, though, I thought NG’s post was reasonably clear. If I have understood is point is that we have spent the last decades focusing on private goods but public goods have actually emerged as arguably more important, without our focusing on them or on the systems we should have in place to foster/protect them.

Nick:
The BBC, most countries’ weather and travel information services and online laws and cases are examples of public goods that the public sector does a good job of providing, imho.

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).

Isn’t this kinda the point? Government should do b well, and indeed has done. Private sector should do a well, and indeed has done?

The closest thing I can see to a paradox is that public goods are increasingly provided by private firms – but what is paradoxical about that??

As I have been arguing for a long time there is a way that governments can provide a framework for spending on public goods. At the moment governments collect taxes, budget for schools or whatever, then allocate the money to those services and give (or sell) the services.

The other way is for the government to collect the taxes, budget the amount to spend, but give it back to the citizens who have to spend the money they receive (tagged money) on the services as budgeted. Sellers of services in most cases already exist but if not they will soon appear if there are buyers.

That is we have a market place for the services and we have buyers with tagged money to buy. As we know market places are an efficient way to allocate services.

The details will vary for different services but the principle remains the same.

It is all about spending not about prices.

Were not in Hayekland yet, as Im sure the Soons and Jcs of the blogosphere will tell you likewise.

No we’re not unfortunately.

Hayek wouldn’t have a problem with unions or any association as long as there weren’t any laws protecting such guilds.

Nope – unions are strong elsewhere. And they will continue to be. We’re not in Hayekland yet, as I’m sure the Soons and Jc’s of the blogosphere will tell you likewise.

I probably shouldn’t bite, but Jeez. What’s the story.

I simply expounded two somewhat paradoxical developments. There are a bunch of new public goods and bads around – or public goods and bads that have become more important. And this has occured while the emphasis on reform has been on intensifying private competition, and less on the provision of public goods. I haven’t suggested that this was bad, just that it’s a bit ironic, or paradoxical.

And the public sector isn’t much good at helping in the provision of the burgeoning new public good of the internet.

What’s random about any of that? They’re just simple observations. I would have thought they’re pretty unarguable in the broad – unless you go out of your way to imagine I’m doing something that I’m not trying to do.

And if you think ‘all will be explained’ in part two, you should read the post again. A much more modest claim was made – basically that I’ll continue with a few suggestions. They’ll be pretty low key I assure you.

(BTW, in checking out the post, I finally understand what Gummo was talking about with carriage returns. I put paragraph returns in – but I guess Wordpress took them out again. Will fix.)

Two words – paragraph breaks!

Three words: Wordpress hates Safari.

The article on public goods in Wikipedia is no great shakes – just the quickest thing I could find. The last sentence you have quoted seems to have disappeared – and a good thing too. I’m not sure I understand what it’s getting at. The classic public good – used in textbooks is defence. If defence forces defend a country everyone benefits (other than those who want to be invaded I guess). It’s non-excludable – because if you defend a country you defend everyone in it. It’s also non-rival in the sense that the defence of person A doesn’t hinder the defence of person B if they’re in the same country or city being defended. The defence of one is defence of the other. Defence is hard to provide privately.

But as I said in the post, a lot of public goods – or very near public goods – are provided privately. Thus for instance broadcast TV is a public good – your picking up the signal does not diminish it and (at least before scrambling technologies were introduced) it was difficult to exclude non-payers. But it was provided privately through subjecting us to advertising. A lot of activity on the net is public good in nature – like this blog – and it’s not provided by govt.

Open source software is a near public good privately provided.

Brad Delong tried this approach recently with his Cuba series, and his reputation was not enhanced thereby.

Note that I’m saying this as (generally) a fan of both Nick and Brad.

Patrick is referring to a complex and unresolved issue. Hardin argued that commons had to be managed, and discussed various methods of management. Privatisation is one method, regulation is another, transfer to government ownership another, etc. There is no single “best” solution that applies in all situations. Thatcherites and Friedmanites argue that privatisation is the solution when it suits them, which usually means a situation of private profit at public expense.

But there are readily understood examples where privatisation is arguably the best solution. The sale of existing public housing to the existing tennants can be a good idea. But there are important provisos to that, and in some cases it might not be a good idea. It’s not possible to make the generalisation that because the sale of public housing to existing tenants is a good idea in some cases, that selling all existing public housing to all comers (i.e. to people other than the existing tennants) is a good idea in all cases. That generalisation involves a reneging on pre-existing express or implied promises, which the existing tennants could arguably regard as a theft.

if one individual eats a cake, there is no cake left for anyone else,

Obviously demand for cake will always be with us, but supply may not always be able to meet it. There goes the coin argument TerjeP. Nevertheless, I can almost see where you’re coming from. Demand may take a sharp dive when it is realised there’s none left, but for a while it will remain unsatiated.

This was interesting, and cleared up the air ‘good’.

Conversely, breathing air neither significantly reduces the amount of air available to others, nor can people be effectively excluded from using the air. This makes it a public good. These are highly theoretical definitions: (no kidding) in the real world,(please point me in the direction of the real world, on second thoughts no don’t there may be no such thing as an absolutely non-rival or non-excludable good; (No such thing eh?)

Please note that seemingly public goods are often best protected by private ownership

Can you give me a few examples?

It’s not to do with ownership – it’s to do with the characteristics of the good or service. Here’s an explanation.

Ill hold you personally responsible if petrol proves to be beyond my ability to purchase the stuff (somewhere around the $5.00 p/l mark), before that time.

Well, that could be for a lot of reasons. If ‘demand’ genuinely outstripped ’supply’ (in light of Terje’s point – defined as if people genuinely needed and thus were willing to bid increasing amounts for greater quantities of oil than could be produced), oil would probably cost some orders of magnitude more than your price.

But it could easily reach your price just because taxes were raised, for example. It could also reach that price because everyone drives electric cars on a nuclear-powered grid.

Oh and presumably the sun will still be rising in 34 years time. . . .

This appears a safe assumption. Btw, sunlight is a public good.

Air is still public

?
As I understand it yes, air is a public good.

I now understand, silly me, that they dont belong to the public, they belong to companies

Please note that seemingly public goods are often best protected by private ownership – a result of ‘the tragedy of the commons’ – this may upset you.

The following paragraph from Wikipedia may assist you:

The economic concept of public goods should not be confused with the expression “the public good”, which is usually an application of a collective ethical notion of “the good” in political decision-making. Another common confusion is that public goods are goods provided by the public sector. Although it is often the case that Government is involved in producing public goods, this is not necessarily the case. Public goods may be naturally available. They may be produced by private individuals and firms, by non-state collective action, or they may not be produced at all.