In a rich market economy, private goods tend to be abundant while public goods are starved, because private goods are marketed and sold while public goods must be paid for through taxes.
Galbraith described it in The Affluent Society (1958) with the picture of a family driving an air-conditioned car along badly paved, litter-strewn roads to picnic beside a polluted stream. The imbalance, he argued, followed from private wants being cultivated by salesmanship while public services had no advertising budget.
In practice
- A town with a new car in every driveway argues for years over a levy to repair its library roof.
- A family spends freely on a new television and resents the local tax that pays for the park it uses every weekend.
- Possible explanations
- One explanation is visibility: private purchases bring direct, personal benefit, while public goods are shared and taken for granted. Another is Galbraith's own, that advertising inflates private wants. A third is political, since taxes are felt as losses while services are diffuse.
- In its favour
- Describes a persistent pattern in public finance debates and anticipated later work on the political weakness of diffuse benefits.
- Against it
- Critics point out that public spending has grown greatly since 1958, and argue that shortfalls may reflect inefficient public provision rather than underfunding. The right balance between public and private is a value judgement.
- Standing
- Disputed across the political spectrum as a question of values as well as evidence. Compare the dependence effect and the tragedy of the commons.
- Subject
- Economics & Incentives
- Essay
- The theories behind every argument about money