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Winter 2016

ISSN 0890-913X

Volume 31, Number 4

Categories: Winter 2016 | Public Goods

An Interest Group Theory of Public Goods Provision: Reassessing the Relative Efficiency of the Market and the State

Joseph Michael Newhard, East Tennessee State University

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TheJournalofPrivateEnterprise31(4),2016,21–41AnInterestGroupTheoryofPublicGoodsProvision:ReassessingtheRelativeEfficiencyoftheMarketandtheStateJosephMichaelNewhard*EastTennesseeStateUniversity______________________________________________________AbstractExtendingBrennanandBuchanan’smodelofleviathan,inwhichrulersrepresenttheresidualclaimantsofconstitutionallyunconstrainedtaxrevenue,thispaperpresentsamodelinwhichthegovernmentprovidesthelevelofpublicgoodsthatmaximizesitsrevenuesurplusasafunctionofthecostofemigration.Totheextentthatemigrationisimpeded,governmentconvergestowardpuremonopolyprovision,generatingmonopolyrentsthatfacilitatetherent-seekingsociety.IncontrastwithNiskanen’smodel,inwhichgovernmentstendtooverproducepublicgoods,thismodelsuggeststhatgovernmentstendtowardunderproduction.Thisresultunderminesthenotionthatgovernmentmustprovidepublicgoodstoovercometheunderproductionofprivateprovision;inreality,governmentprovisionmaybelessefficientthanprivateprovision.______________________________________________________JELCodes:H41,L41Keywords:regulation,interestgroups,rent-seeking,publicgoods,government,monopolyI.IntroductionSinceSamuelson(1954),ithasbeenwell-understoodthattheefficientquantityofpublicgoodsisthatwhichequalizesthemarginalcostofproductionwiththesumofconsumers’marginalratesofsubstitution.Toovercomethefreeridingthatmayoccurunderprivateprovisionduetotransactioncostsrelatingtogroupsize(Olson1965),governmentprovisionisdeemednecessarytoachieveefficiency.However,thispaperarguesthatliketheprivatesector,governmenttendstowardunderproductionofpublicgoods.Astheresidualclaimantsofconstitutionallyunconstrainedtaxrevenue,*ThankstoThomasSaving,LiqunLiu,AlexanderWilliamSalter,andanonymousrefereesforhelpfulcomments.

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Title	An Interest Group Theory of Public Goods Provision: Reassessing the Relative Efficiency of the Market and the State
Authors/Creators:	Joseph Michael Newhard, East Tennessee State University
Year:	2016
Volume:	31
Number:	4
Pages:	21 - 41
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	regulation, interest groups, rent-seeking, public goods, government, monopoly

Citation:
Newhard, Joseph Michael / 2016. "An Interest Group Theory of Public Goods Provision: Reassessing the Relative Efficiency of the Market and the State." The Journal of Private Enterprise, 31(4): 21-41.