Merit Goods in a Utilitarian framework1优效品概念应用

Merit Goods in a Utilitarian

Framework

STEFAN MANN

Agroscope FAT Ta

¨nikon,Ettenhausen,Switzerland A BSTRACT Merit goods are defined here as goods for which government interference with the aggregated willingness to pay increases utility.The paper argues that three cases exist where consideration for merit goods would lead to a Pareto improvement and where merit goods should therefore be reintegrated into the public economics framework.The state may be better informed about the conditions for the possibility of certain consumer wants.In cases of multiple preference orders within one person,the state may need to play a role if market preferences and reflective preferences are to converge.And the state may be needed to internalize psychological externalities.The inclusion of the merit goods concept may explain how some policies,like schooling policy,may increase overall well-being,whereas the classical public economics framework is unable to do so.

1.Introduction

The concept of merit goods has never fit easily into economic discourse.Soon after Musgrave (1957,1959)introduced the concept,its critics (Baumol,1962;Solf,

1993;McLure,1968;Tietzel &Mu

¨ller,1998)became much more numerous than its supporters (Head,1966,1969;Folkers,1974).But while the fundamentals of merit goods have been developed at a far slower pace than its celebrated twin,the social want or public good,a few publications during recent decades have con-siderably advanced the concept of merit goods.This paper aims both to honour these attempts and to enlarge upon their contributions.

Merit goods were originally defined as goods that provoke policies aimed at increasing their production through interference with individual preferences:‘The apparent willingness of the public to provide for a second car and a third icebox prior to ensuring adequate education for their children is a case in point’(Musgrave,1957,p.341).Demerit goods,on the other hand,are goods which the state taxes or bans in order to decrease consumption,such as drugs.

It is clear that,for instance,deontological or perfectionist scholars could easily claim reasons for providing citizens with goods that don’t match their

Review of Political Economy,

Volume 18,Number 4,509–520,October

2006

Correspondence Address :Stefan Mann,Agroscope FAT Ta

¨nikon,CH-8356Ettenhausen,Switzerland.Email:stefan.mann@fat.admin.ch

ISSN 0953-8259print =ISSN 1465-3982online =06=040509–12#2006Taylor &Francis

DOI:10.1080=09538250600915691

510S.Mann

preferences.Even moderate perfectionism sometimes allows arrangements that are‘against what the human being considers as good’(Deneulin,2002,p.499). The intellectual challenge,however,lies in establishing the compatibility between meritocracy and utilitarianism.1If the provision of goods independently of consumer demand could be shown to increase individual utility,then it would be expedient to integrate the merit goods concept into the mainstream discourse of public economics.2

Such an attempt may be worthwhile because a gap exists between main-stream economic theory,based on utilitarianism,which rejects merit good type interventions by the state,and empiricalfindings.Consider schooling policy as an illustrative case.As Gutmann(1982)has shown,subsidising schools and even making schooling compulsory can be advocated by rights theorists,but not within the framework of classical welfare economics based on utilitarianism. Taking current public economic theory to its logical conclusion,we might hesitate to argue that parents should decide about schooling for their kids rather than the children themselves,and there would be hardly any arguments available to justify any major state role.

On the other hand,we know from Barro&Sala-i-Martin(1995)that public investment in schooling,particularly in primary schooling,enhances economic growth.The connection between compulsory schooling and societal wellbeing seems to be so obvious that school enrolment is sometimes used as a dependent variable for the success of education policy(Coady&Parker,2004).It seems to be so clear that compulsory schooling increases overall wellbeing that no applied economist bothers about the lack of justification in economic theory.

I do not attempt to solve the contradiction between Musgrave’s early merit goods definition of‘interference with individual preferences’and utility maximization because,‘following the most popular interpretation among20th century writers,utility is a measure of preference satisfaction’(Mongin& d’Aspremont,1998,p.382).But the development of the merit goods concept in the last few decades has slightly shifted in emphasis.The traditional public econ-omics concept has largely been challenged by recent merit goods writers(Brennan &Lomasky,1983;Erlei,1992;Ver Eeke,2003)in respect to its reliance on people’s consumption decisions(willingness to pay for private goods)and their stated willingness to pay for public goods.Thus,nowadays,merit goods are more commonly defined as goods that the government should supply,thereby interfering with aggregated individual‘willingness to pay’decisions.In main-stream neoclassical economics,the link between preferences and willingness to pay is strong enough to justify this redefinition,which may be more of a clarifica-tion,given the sometimes hazy meaning of preferences.3

1Even supporters of the merit goods concept have been sceptical about the possibility of doing so:‘A merit good is justified on moral grounds,not on the basis of a utilitarian calculus’(Ver Eeke,2003, p.702).

2Here I am defending merit goods that increase overall utility.Other authors might defend some merit goods even if they do not always increase overall utility.My point is that mainstream econo-mics does not have a way to defend merit goods that increase overall utility.

3Sagoff(1994),for example,recalls good reasons to focus on choices,not preferences.