The political economy of publicly provided private goods

This paper integrates two different approaches to the analysis of public pr ovision of private goods (education, health care, day care, etc.). While no rmative public economics has established an efficiency case for such provis ion, the commonly held political economy view has been that it is an econom ically inefficient phenomenon generated by the political process. We establ ish a political economy framework which in general yields an efficient choi ce of distributional policy. It follows that the central mechanism studied in the normative theory is equally relevant to voting models of decisions o n public provision. It is shown that under plausible information constraint s economically efficient public provision of private goods will be part of politically rational decisions. The result is established both within a med ian voter process and a representative democracy of political parties. (C) 1999 Elsevier Science S.A. All rights reserved.