Kling on Public Goods

Writing about the housing bailout, Arnold Kling proposes a definition of public goods:

My test is this: would an overwhelming majority of Americans be willing to donate a significant amount of their personal funds to the cause of bailing out troubled homebuyers? If the answer is "no," then it is not a public good. The answer probably would be "yes" for courts, police, national defense, or cleaner air. If so, then those are indeed public goods.

I must confess, I find this a bit puzzling. Public good has a pretty clear standard meaning, and this just isn't it. As Paul Samuelson initially describes them, public goods are those that, once provided, can be consumed by others at no additional marginal cost. In other words, a public good is one that people certainly value but also one that it is rational to free ride on. In other words, by the standard understanding of "public good," they are, by definition, things that no rational actor should be willing to pony up for.

So Kling's definition really makes no sense at all. If enough people actually pony up to make a service happen, then that providing that service wasn't a public goods problem in the first place. Certainly lots of the ancaps here at DR will like that view. But I don't think that's really Kling's position.

Indeed, even from a practical point of view, Kling's definition is, well, slightly crazy. He's more-or-less giving the government carte blanche to spend on anything, just so long as it's popular. His definition makes Social Security (which is tremendously popular) into a public good. In fact, properly framed (i.e., "Would you be willing to donate to keep entire neighborhoods from collapsing?" or maybe "Would you be willing to donate to keep the economy from worsening?") even the housing bailout might pass the test. There is, after all, nothing in the test about a proposal actually being true. The test is just whether people would donate to a cause.

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A test, not a definition

In fairness to Kling, it's not a definition but a test. It kinda works in a microcosm. A subway musician is offering a public good (or service if you like): you can enjoy the music whether or not you pay the musician. Some people pay despite the fact that they do not have to. The better a musician is and thus the more valuable his good, the better able he is to draw voluntary donations. Thus capacity to draw voluntary donations seems a reasonable test of the value of a public good - which is what I think Kling is really talking about, i.e., how valuable the good is given that it is a public good, and not whether or not it is a public good. Keep in mind that a public good may not be worth the cost of producing the good, so if a public good is not valuable enough to draw many donations, it may be that it is not worth the cost of producing it. My terminology is rusty but I think that you are right on the definitions and that Kling isn't using the terms correctly. But I think he's raising a legitimate point and the test is a reasonable one, properly understood.

Fair point

I think Constant's (extremely charitable) reinterpretation of Kling is a reasonable position. Kling himself seems to want to define a public good as something that passes the test, which means that, strictly speaking, the subway musician wouldn't, unless she managed to snag donations from more than half of the folks passing by. But if we look at it as a test not of whether something counts as a public good but rather as a test of whether or not it's worth providing something as a public good, then that's reasonable.

It is not, however, particularly libertarian. It would leave open the worry that the (very popular) Social Security is a public good that is worth providing. And it is still subject to the framing problem: If I can word some program in such a way as to generate majority approval, I will have demonstrated that it's a public good worth providing.

I much prefer the standard definition of a public goods problem combined with a traditional cost-benefit analysis (one that takes into account public choice considerations) to determine whether or not it is worth providing. I fear that Kling's post is an attempt to get around what would end up being a tendentious cost-benefit analysis by defining the problem away.

I agree with Kling

and Social Security is one of the most successful universal welfare programs in the history of the world, a public good.