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The failure of public good provision in developing countries implies that many environmental and natural resource allocation problems that have been solved in developed countries, such as water pollution from sewage and indoor air pollution from cooking fires, continue to loom large. Decentralization and transparency in decision making, due process, and stakeholder participation in reform are needed to address these shortfalls. Because of poverty, efficiency is crucial to minimize overall costs. This, together with the wide dispersion in the distribution of pollution between polluters, speaks in favor of the use of flexible instruments such as information and market based mechanisms. At the same time, risk aversion, poverty, and unequal distribution imply that considerable attention must be paid to the distribution of costs and to a participatory approach in policy design.

The world of public goods has changed radically in the past quarter century, rendering some textbook discussions and examples quite dated. This is a good time to take a fresh look at both the nature of public goods and the policy options for managing their provision. Privatization and technological advances have combined to change the very nature of public goods provision in many respects. In the environmental field, in addition, there exists a growing volume of privately produced global public bads, such as pollution. In response, Heal suggests using markets to foster the private provision of public goods. If properly structured, markets can solve the problems posed by this type of good. The chapter describes how a global market in pollution permits could reduce pollution levels while assuring an efficient and equitable distribution of the costs of emission reductions. In a second example of the power of markets to overcome cooperation dilemmas, Heal describes how early actions by large firms or countries can accelerate environmental reforms by smaller actors through a process of adoption spillovers.

This chapter provides a set of questions drawn from material presented in previous chapters. Most are designed to emphasize important points, and to illustrate practical examples of applied welfare analysis. A number of questions are quite long and are intended as assignments, while others are more suitable for tutorial exercises.

Does extensive private philanthropy by the super-rich undermine the democratic processes of state and civil society? In our chapter, we review the history of the relationship between philanthropy, state, and civil society to explore how philanthropists came to be regarded as legitimate providers of public services. We reflect on the implications this shift may have for the practice of democracy. We contend that the modern era has seen philanthropy shift from its contributory role, in which new forms of public goods can be absorbed by the state, toward a more disruptive role, in which philanthropy-backed provisions are alternatives or competitors to those provided by the state. This shift is a product of marked changes in the institutional environment surrounding philanthropy. Among these changes is diminished faith in state bureaucracy to address public needs and expanded faith in entrepreneurialism and markets to solve problems. Thus, the current environment both legitimizes and enables a particular form of philanthropy, which we refer to as disruptive philanthropy. By shaping public conversation about social issues, setting public agendas, and providing public goods in the absence of popular deliberation, disruptive philanthropy runs the risk of eroding democracy.

Existing governance indicators might suffer from "methodological nationalism", in that they focus exclusively on governance at the national level. The Governance Report dashboards provide empirical counterparts to a perspective that considers governance a multi-level and multi-actor phenomenon. The dashboards presented here try to compensate for the neglect of behaviour in the international arena and governance at the subnational level in existing measurements of governance. The Transnational Governance Dashboard consists of estimates of the more or less cooperative stance of countries in the international arena, focusing on international commitments as a manifestation of "responsible sovereignty" and on contributions to the production of global public goods. The City Governance Dashboard presents a set of indicators of social capital, inequality, impartiality, corruption, and public good provision for "global cities". The chapter provides a non-technical introduction to the methods and data that inform these two dashboards and highlights some of the patterns that emerge.

This chapter explores a means of developing a formal economic model that can situate certain elements of club theory within a model of the private provision of a public good. “Warm glow” preferences are presented to begin the formulation of this model. This preference pertains to how. when consumers purchase of a green good, they care only about the private provision of the green characteristic. This model is then further extended to account for more general preferences, compared with the socially optimal club with the open-access market equilibrium club. In conclusion, the chapter develops an economic model that serves as a starting point for formal thought regarding “voluntary programs as clubs, nested within the context of public goods provision.”

This chapter reviews the performance of the Greek economy before and during the global financial crisis. It also presents policy options for Greece going forward, drawing to a significant extent on the conclusions of subsequent chapters. The chapter first studies Greece's economic performance in the decades before the crisis. It discusses the evolution of gross domestic product (GDP) per capita and productivity, debt, consumption, investment, wages and prices. The chapter then turns to the quality of the institutions pertaining to the business environment (product market regulation, justice system, access to finance, and labor market regulation), and to social protection and public good provision (pensions, welfare system, health care, and education). It also identifies interconnections between institutional quality and macroeconomic outcomes.

A recent trend in decentralization in several large and diverse countries is the creation of local jurisdictions below the regional level—municipalities, towns, and villages—whose spending is almost exclusively financed by grants from both regional and national governments. This chapter argues that such grants-financed decentralization enables politicians to target benefits to pivotal voters and organized interest groups in exchange for political support. Decentralization, in this model, is subject to political capture, facilitating vote buying, patronage, or pork-barrel projects at the expense of effective provision of broad public goods. There is anecdotal evidence on local politics in several large countries that is consistent with this theory. The chapter explores its implications for international development programs in support of decentralization.

Why are many of China’s successful rural enterprises publically owned by local communities? Using a set of provincial data, we find that the share of community public firms (Township-Village Enterprises, or TVEs) relative to private enterprises is higher where the central government’s influence is greater, the community government’s power is stronger, and the level of market development is lower. We also find that TVEs help achieve the community government’s goals of increasing government revenue, rural nonfarm employment, and rural income. However, TVEs do not increase rural income given the levels of non-farm employment and/or local public goods provision, indicating possible inefficiency as compared to private enterprises.

This chapter continues our theoretical exploration of the link between democracy and international organization membership. The chapter elaborates on the exact mechanisms by which IOs can and cannot assist democratic consolidation. In doing so, the discussion in this chapter links back to the previous chapter. Understanding the role of IOs in assisting a democratic transition requires understanding the processes by which the democratizing state became an IO member in the first place. The chapter begins by discussing the meaning of democratic consolidation and the influence of domestic conditions on the prospects for successful consolidation. The chapter then argues that the inability of IOs to directly enforce policy is not a reason to discount their importance for democratic consolidation. The chapter details the benefits of IOs for achieving democratic consolidation and connects the challenges of public good provision and governance with the imperative of consolidating democracy. Finally, the chapter links our discussions of domestic political context and IO benefits by considering how a history of military rule can modify the relationship between IO membership and democratic consolidation.

Charitable contributions play a bigger role in the provision of public goods in the United States than in other developed countries. This chapter begins by providing some broader context for understanding the role of tax policy toward charitable giving in the US. It describes the basic components of American tax policy, its implications for incentives for donors, and some of the prominent tax policy issues that arise in connection with the charitable deduction. It also discusses the unusually large role played by wealthy donors by virtue of the charitable deduction. Then, the chapter discusses issues of optimal design of tax policy on charitable giving and examines the possible effect of different tax reforms.