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Taxation has two primary functions. First, it determines how much of a society’s resources will come under the control of government, for expenditure in accordance with some collective decision procedure, and how much will be left in the discretionary control of private individuals, as their personal property; call this public-private division. Second, it plays a central role in determining how the social product is shared out among different individuals, both in the form of private property and in the form of publicly provided benefits; call this distribution. Though these functions are typically run together in political discussion--by the use of slogans such as “big government”–they are conceptually and normatively distinct. It is difficult, however, to address the two policy issues separately, since the two functions are mutually interdependent in practice.

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.

Conventionally, pension funds are perceived as a part of a system for providing income to those of old age in which the other components include earnings-related social security, either provided to those without a pension or compulsory, compulsory flat rate social-security pensions, work after retirement, support from the family, and individual saving that also encompasses the purchase of residential property as well as life-insurance-based savings plans. Social security thus proves to be one of the fundamental factors in the framework of retirement-income provision and in private pensions' further development. As the chapter addresses the need to provide an account regarding the key issues in social security, it looks into some of the basic concepts, such as how the public provision of pensions is justified, social security's economic implications, public schemes, and the various manifestations of social-security pensions.

Although in the southern hemisphere an extended household is regarded as a vital determinant of caretaking, its purposes and underlying processes have not been sufficiently explored. Propositions such as the homogeneity and the natural inclination to provide social protection and welfare of kin groups encourage further understanding of social policies in the international realm. Re-examination of the responsibilities of and the expectations from household members, relatives, and significant others as welfare endowers demonstrates that the distribution of public goods and services will be facilitated by heightened awareness and comprehension of caregiving practices and norms positioned in various cultural orientations. In view of this, it is valuable to take note of the caretaker's characteristics, potentials, personal necessities, and limitations as well as of the existing public provision policies.

This chapter is the outcome of an attempt to unfold and comprehend the processes available in decentralisation, which may overcome the quandaries of providing social services. It begins with the emphasis on the separation of economic and political factors, whether in favour of or against a decentralised setting. Definitions of decentralisation and regulation, and its implications on the betterment of the distribution system followed the discussion. The chapter goes on to consider the notable issues in fiscal decentralisation, the importance of inter-administrative transfers as instruments for supplying incentives to domestic institutions, the resolution to problems encountered in the delivery of social services, the assessment of decentralisation elements, the components of the regulatory framework of public provision, and the analysis of government intervention in the pursuance of social welfare.

The chapter describes the dilemmas on cost recovery by concentrating on Zimbabwe. Cost-recovery policies were adopted during a structural adjustment programme in 1991, which was mainly a counteractive reaction to the country's fiscal crisis. At that time, Zimbabwe was faced with stagnant state income, lack of funds in the health industry, general shortages, poor public investment, and nationwide economic depression. All of these led to a decreased accessibility of medical assistance for the poor, which eventually affected individual development and social welfare. Although financial decisions related to public provision must be patterned according to cultural background, history, and conditions of a country, the Zimbabwe case reflects that cost recovery planning and implementation should be the least priority.

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.

This chapter is about ‘public provisions for children’. This term encompasses a wide range of out-of-home settings where groups of children come together, from schooling, through a range of early childhood, play and out-of-school services as well as group residential settings, to lightly structured spaces for children's outdoor, unsupervised play. This is treated as a dominant understanding in the UK today, producing public provisions as primarily technical and disciplinary undertakings, concerned with regulation, surveillance and normalisation, and instrumental in rationality and purpose. The chapter also considers another social construction with a different rationality and purpose: public provisions understood as ‘children's spaces’. It argues that the meanings people attach to public provisions for children are inextricably linked with social constructions of childhood and our image of the child, which are taken to be contestable subjects produced in the social arena.

The final problem threatening societies like the US concerns the pervasive bias in favour of privately produced goods and services at the expense of those provided by government. Inadequate public provision, Galbraith argues, hampers the most effective use of society’s expanded productive capacity while unnecessarily impoverishing most citizens’ lives. This outcome is due to an amalgam of the factors and forces identified earlier in the book – namely, the debt-fuelled process of want creation, the malign impact of vested interests, the ideology of market fundamentalism and the associated attack on the proper economic role of the state. Galbraith’s analysis raises issues that have recently resurfaced in heated debates over privatization. It also strongly resonates with recent developments in environmental economics and policy. In short, Galbraith’s theory of social balance remains one of the enduring contributions of The Affluent Society, fifty years after its publication and counting.

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.

Chapter 9 uses the examples of school governance (specifically basic education) and community-driven development to explore three distinct mechanisms through which transparency and participation initiatives potentially could address weaknesses in top-down public-service provision. In the first mechanism, transparency and participation work “upstream” to enable citizens to better hold politicians to account for delivery on their promises. In the second mechanism, transparency and participation support public provision more directly, working from the bottom up by strengthening the influence networks of developmentally oriented actors, thereby enhancing their ability to prevail in local-level “threat-trumping” conflicts. The third mechanism bypasses the public sector entirely and embraces parallel, participatory arrangements for service provision. The evidence suggests that the latter two mechanisms indeed can improve service provision and local governance, even in settings where public institutions are weak—with success depending on the ability of developmentally oriented coalitions to “trump” potential predators.

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.

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.”

With the general premise that cross-border mobility affects the public provision and financing of higher education, this chapter compares an old and a new paradigm. In the old paradigm, students remain in their country of birth for education and later career. Public financing of higher education with no or little private contribution is, therefore, like an implicit contingent loan that students repay after graduation. In the new paradigm, cross-border mobility involvesat least three countries: the student’s country of origin for pre-tertiary education, the host country for higher education, and the destination country for post-graduation career. In this context, a host country is not incentivized to provide a socially efficient quantity of higher education when numerous foreign students return home after graduation. For improving efficiency, avenues are explored which provide decentralized devices approximating the efficient centralized one, like substituting the host country principle by the origin country one. This, however, does not resolve all the issues. Making the students financially responsible is the most straight forward approach. There is indeed a growing trend toward increasing student contribution. Tuition fees can, however, be both inefficient and unfair with liquidity constrained individuals. There are better instruments, in particular contingent loans or Bhagwati taxes.

Freedom of conscience means that faith-based institutions should be free to serve their members’ needs in accordance with their religious teachings, even if doing so is at odds with basic principles of equality. But what should happen when faith-based institutions serve the general public, often with public funds? This chapter argues that there is more scope for political choice in answering this question than is often supposed, because states are entitled to use religious, as well as secular public-service providers to provide important public services, rather than seeking to provide them themselves. However, those acting on behalf of the state have to abide by norms of equality that are applicable to the state. Hence, the scope for conscientious exemptions by religious providers of public services is limited, and does not depend on whether they are subsidized by the state.