Research On Private Provision Of Public Goods

The supply efficiency of public goods plays a very great role in the efficiency of social resource allocation and the level of social welfare. The level of efficiency of public goods supply has become an important measure of civilization degree in modern social. Classical theory thinks that the goods which own both the character of non-exclusive and non-competitive are the public goods. The non-exclusive character of public goods leads to the insufficient of private supply incentive, and so the government become the only provider. However, this statement is not accurate, the characters of non-competitive and non-exclusive aren’t necessarily characteristics of public goods:Considering the scarcity of resources, any goods is competitive when beyond a certain limit; Considering the economic efficiency, even if the technology can be exclusive, goods may also be public goods because of low economic efficiency. In fact, public goods is the right that generally be abandoned by people because that transaction costs are too high in the nature, in this case, the transaction costs are mainly the costs of defining property rights, they are not fixed. With the improvement and development of technique or institution, transaction costs will decline, the boundary of public goods will shrink. The boundary between public goods and private goods is not sure, just depends on the the transaction costs they face. If the transaction cost is zero or low, right can be clearly defined, there would be no public goods exiting.Public goods are not necessarily provided only by the government.As long as the uncertainty of property rights was be in effective control, making it sure, property rights and the ownership isn’t important. That is, the efficiency of providing public goods does not depend on the nature of the property but relies on if uncertain property rights was under control and its cost. When there were technology or effective property rights system for security, private person would be naturally willing to provide public goods. Whether the system design is reasonable or not is the most key factor that affect the supply efficiency of public goods, because that transaction costs is different under different institutional arrangements. So we should adopt the most efficient way, rather than be narrowly confined to who’s the provider. For example, what the FED executes is public function, however it’s property right belong to private organizations. Though decentralizing power and balancing, this kind of organization form provides a stable economy environment for the entire country efficiently. Reasonable system arrangements control the future uncertainty of property in low cost, so make all this be possible. For a long time, the classical theory of public goods occupies the mainstream status, which misleads people. So, further understanding the essential attributes and characteristics of public goods is very necessary, which help to extend thinking about providing public goods and design a more reasonable system arrangement to improve the efficiency of resource allocation and the social welfare level.This thesis takes the "economic man" hypothesis as the premise, individual actions take benefit maximization as the goal, does not include altruistic behavior. This thesis dissects the essential attribute of public goods from the perspective of new institutional economics, pointing out the errors which in the definition of the public goods nature of traditional theory. The thesis analyses the problem of public goods supply, pointing out the possibilities that public goods provided by the private under different conditions, putting forward new ideas for effective supply of public goods. Finally, the thesis analyses a central bank-the FED, whose property rights attributing to private,concluding that the largest public goods can still be provided by the private in the condition of property restriction. In this thesis, the research methods mainly include literature study method and case analysis.In this paper, the concrete framework is as follows:Chapter1is the introduction. Mainly includes problem introduction and research significance, research methods, research dynamic condition at home and abroad, as well as the innovation and shortcomings of this article.Chapter2is the definition of concepts. Firstly, this paper introduces the concepts of transaction costs, property rights and system, which will be used repeatedly. Then introduces the traditional definition of public goods of classical theory, and analyzes its existing problems, and finally clarifies the natural attributes of public goods from the perspective of transaction cost and property right.Chapter3is analysis about the possibility of private supplying public goods. This chapter elaborates the possibility of private supplying of public goods in two kinds of circumstances:when it’s exclusive and when it’s not exclusive. The emergence of newly exclusive technology, the establishment of exclusive organizations and the establishment of exclusive system make it possible for private to supply public goods, and even in non-exclusive circumstance, private is also willing to provide public goods as long as he can get profits.Chapter4illustrates the role of government in the realization of private supplying public goods. Mainly includes providing the system, making property rights and ensure its realization and the function of supervision and specification. It’s difficult for the economic behaviors of individuals on the rails without government’s series of system security.Chapter5mainly discusses operation mechanism of the FED. Private property rights perform public functions,which attributes to reasonable system arrangement. Reasonable system arrangement controls future incertitude of property right in lower cost. Through the analysis of the FED, we can get more profound understanding of the problem of public goods supply.Chapter6is the conclusion of this paper. Public goods is the right that generally be abandoned by people because that transaction costs are too high in the nature, in this case, the transaction costs are mainly the costs of defining property rights. The efficiency of providing public goods does not depend on the nature of the property but relies on if uncertain property rights was under control and its cost. Reasonable system arrangement is beneficial to reducing the transaction cost, so if the arrangement of property right system was reasonable, the uncertainty of property costs was under control, public goods can be provided by private as well.The innovations of this article include two points, one is redefining public goods from the perspectives of transaction cost and property right, and putting forward many possibilities and methods of private supply of public goods combining with the reality. This paper argues that public goods are those rights generally given up by people due to their high transaction costs, mainly mean the costs of the protecting property rights. The second point is that this paper takes the FED for example, analyzing the existence mechanism of the FED from the perspective of public goods, this is what other literature doesn’t referring. The FED exercises public function, while its property belongs to private banks. It’s reasonable system arrangements control the uncertainty of property in low cost, so the FED’s operation is possible. The shortcoming of this article is not making much deeper research about further problems:how to measure transaction cost, the specific supply mechanism of public goods. And different items face different situations, to get a unified standard is difficult, so this article may not be comprehensive. Finally, about the FED, I learned it through reading other literature indirectly, so some details may can’t be obtained. For these deficiencies,I hope I can have a chance to do further research in the future.