Public Service

The economic view is that the public sector provides goods and services that are
desirable but which, for one reason or another, a market economy cannot supply
effectively.

Elements of Public finance

a) Public Expenditure
The Government at a national and local level and through the nationalisation
industries spends money.
Government expenditure has the following purpose:
 To provide public goods and services such as health services, public education,
security, roads, public buildings etc. and to pay its administrative workforce.
 To alleviate poverty
 To provide payments to certain members of society such as pensioners etc.
 On a small scale, perhaps, to provide finance to encourage investment by
private industry e.g. by means of grants.

Public expenditure is spending by central and local government and nationalised

industries.

The main government spending departments

Name of Global / Responsibility

Ministry regional
Health WHO: World National/ leadership on global health matters -
Health keep the world safe and serve the vulnerable.
Organisation Shaping health research agenda setting norms and
standards providing technical support to countries
and monitoring and assessing health trends.
Defence UN : United Navy Amy and Air force – Maintain international
Nation peace and security develop friendly relationships
among nations, achieve international cooperation
and serve as a centre for harmonizing the actions
of nations. Deliver Humanitarian aid. Support
Sustainable development and climate action
Education & UNESCO: Promoting International cooperation in
Technology United education sciences, culture, communication and
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 Nations information. Knowledge sharing and free flow of
Educational ideas to accelerate mutual understanding and
Scientific and more perfect knowledge of each other’s lives.
Cultural
Organisation
Natural UNEP- United Environmental Protection: Mission to provide
resources & Nations leadership and encourage partnership in caring for
Environment Environment the environment by inspiring, informing and
Programme enabling nations and people to improve their
quality of life without compromising that of the
future generations. Six areas of concentration: 1.
Climate change, 2. Post conflict disaster
management, 3. Ecosystem – marine environment
from land based activities. 4. Environmental
governance, laws, policies, mainstreaming
environment in development. 5. Harmful
substance strive to minimise the impact of harmful
waste and on the environment and human being
Strategic Approach to international chemicals
management (SAICM) to reduce risk to human
health and the environment .6. Resource efficiency
/ sustainable consumption and production.
Afforestation .
Home UN- United Unite nations court of Justice. Courts police prisons
Affairs/ Law Nations
Labour ILO – ILO is a United Nation labour agency- Training
International schemes etc. bringing together governments ,
Labour employers and workers to set labour standards ,
Organisation decent work for all
Agriculture, FAO - Food A United Nation organisation aims to increase
fisheries & and agriculture food production throughout the world and tries to
Food organisation make sure people in poorer areas can get the food
they need. Agriculture Policy
Commerce & WTO ( World Global rules of trade between nations.
industry Trade
Organisation)
Foreign UN -United Embassies- diplomatic mission – for political,
Affairs Nations cultural and social relationships between the
states.

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 Finance IMF( IMF oversees the stability of the world’s
international monetary system. The IMF focuses on
monetary macroeconomic and financial stability .
fund/ world World bank goal is to reduce poverty by offering
Bank assistance to middle income and low income
countries. The world bank lend money to
governments of poor members to improve their
economies and to improve the standard of living
of their people.

There are two types of goods that the public sector provides; Public goods and merit
goods.

Pure public goods or Pure social goods

These types of goods cannot be divided into saleable units – and are therefore non
non-rival in consumption. For a given level of production of a public good one person’s
consumption does not reduce the quantity available for consumption by another
person. Example: the same light that Thandie uses to a bureau. Rodger can use the
same street light to establish whether he has found the street in which a distance
relative of his lives. Similarly, the protection provided by Malawi National Defence
force (MNDF) to the inhabitants of Lilongwe does not reduce the quantity of
protection available to inhabitants of Blantyre

Non Rival in consumption has two important implications:

i. The fact that one person’s consumption does not reduce the quantity available
to the other consumer implies the marginal cost (i.e. the cost of admitting an
additional user) is zero.
ii. Excluding anyone from consuming a non-rival good even if it was feasible to do
so, is pare to- inefficient. Allowing Ibrahim to use the above street light at zero
marginal cost will clear make him better off than before yet it will not detract
from the enjoyment that Thandie and Rodger derive from that same street light.
iii. Non – Excludable it is impossible to exclude particular individuals from
consuming such goods. Or it is not possible to assign property rights to public
goods or enforce them. The non-excludability characteristic of the public goods
and services creates incentives for free riding. The expectation that benefits

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 may be enjoyed without having to pay for it. Those that cannot be excluded
from enjoying the benefits of free lights become free riders

Mixed and merit goods.

Mixed goods possess both private and public characteristics

Two classes of mixed goods and services can be distinguished:

i. Non- rival, excludable mixed goods and services. Consider Kamuza highway, the
exclusion principle can be applied by installing a toll gate. There will be no rivalry
in getting access to the highway as road user has no need to compete for scarce
space.
ii. Rival non excludable mixed goods and services. On weekdays main
thoroughfares in down town Lilongwe and Blantyre city are a good example of
the class of mixed goods characterised by rivalry in consumption and non-
excludability, Rivalry in the form of competition for the scarce road space is
fierce and the marginal cost of road usage increases as congestion increases.

Merit goods – these are politically regarded as meritorious are often provided via
national budget. Education and health, the reason for treating merit goods and service
in a special way is that individuals who buys or receives them often confers external
benefits on other people and hence on broader community.

ii. Public Goods

There are two types of goods that the public sector provides; Public goods and merit
goods.

Public goods are commodities that are non- rivalrous and are non-excludable. Non-
rivalrous means that the consumption of the commodity does not reduce its
availability to others. And non- excludable means that no one can be effectively
excluded from enjoying the benefit of the commodity. If the market were to provide
such goods and services the providers would have problems of free riders, people
consuming without purchasing them. I.e. street lights, national defence can be used
free of charge they will not be supplies by private firm. Public goods are therefore
supplied by central and local government.

Public goods and Common goods

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Goods are generally classified by using two criteria:

1) Rivalous Non rivalous

Only one person can consume several people can consume the

the goods at a time goods simultaneously

2) Whether excludable or non- excludable

The owner can restrict consumption The owner can not restrict
of the goods by other people consumption of the goods by
other people

Therefore, a pure private good is rivalous and excludable while a pure public good in
non rivalous and non excludable.

A common good is rivalous but not excludable

A toll good is non rivalous but excludable

A public good is an item which cannot be withheld from one consumer without
withholding the good from all consumers. Non tax payers cannot be excluded the
government provides these goods for free or mainly free of charge to increase their
supply and consumption i.e. health, education)

Merit Goods

Merit goods (and service) are commodities that are excludable but which, for reasons
of equity, government decides to provide them. Government provides the
commodities (services on basis of need rather than ability (or willingness) to pay.

A merit good is useful item, such as education, which some people are unwilling to
buy. Merit goods are supplied by public authorities either free or for a minimal charge
so as to enlarge consumption.

Merit goods which are desirable goods but which if left to be to be provided by private
firm they would be under supplied or under consumed.

(The government provides these goods free or meanly free of charge to increase their
supply and consumption).

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Regional Public Goods

These are goods that display characteristics of being both non-rival and non-
excludable with respect to the benefits they offer. Non-excludability means that when
a pure public good is created or supplied, it is not possible to exclude additional users
(consumers) from the benefits/ services it generates. Non-rivalry means that the
additional user or beneficiary of the service does not reduce the benefit enjoyed by
existing users. This classical definition applies to ‘pure public goods’ such as clean air,
world peace or international financial stability. other examples of pure public goods
include limiting the spread of contagious diseases and publicising basic research
findings.

from a policy perspective, there are several reasons why RPgs should be a focal point
of national and regional development plans . firstly, by pooling resources to supply a
shared good, individual countries can access public goods at a reduced cost due to
economies of scale. secondly, providing RPgs creates the foundation for future
cooperation among countries by creating trust and establishing formal and informal
ties among different national agencies. Thirdly, individual countries may more easily
achieve national objectives by contributing to the supply of a RPg rather than trying to
do it alone. fostering national peace and security through regional peacekeeping
efforts is a good example of the latter as seen in the eastern Congo region bordering
Rwanda and Burundi. National public goods have regional spill-over effects that might
justify a bilateral or regional strategy for provision of that good.

Multicounty infrastructure projects are considered a special category of RPgs because

of their close association with the growth agenda. increased investment in the right
kind of infrastructure contributes to economic growth. network infrastructure that
facilitates the flow of goods and services between African countries offers significant
cross-country externalities.

in reality, there are many impure public goods where the benefits generated are
available to two or more countries, but where the good displays either partial non-
rivalry or partial-excludability, or both. Club goods are an example of RPgs whose
benefits are fully excludable and partially rival. examples of these goods include
transnational parks, power grids and regional transportation infrastructure. The great

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Limpopo Trans frontier Park is an example of such a good, encompassing south Africa,
Mozambique and Zimbabwe.

infrastructure networks are generally associated with club goods. for these club goods,
it is possible to exclude potential users without incurring excessive costs. usage can
also be tracked quite easily, allowing the suppliers of the good to charge a toll per unit
of utilisation (Rufin 2004). A cross-country toll road is a good example of a club RPg.
users not prepared to pay the toll fee will automatically exclude themselves. The
Maputo development corridor provides insights into the successful development of
club goods.

another class of impure public goods is ‘joint products’ . in this class, a single activity
gives rise to two or more outputs with differing spill-over reach. Examples of this class
include preserving a rainforest, preventing natural disasters, supplying internet
connectivity and providing peacekeeping forces. in each case, two or more goods are
produced. as an illustration, preventing a natural disaster creates a regional public
good by fostering regional stability; while limiting country-specific damage in those
countries that are directly affected.

The preceding discussion allows us to identify four classes of regional public goods –
pure public goods, club goods, joint products, and other impure public goods. These
classes can be further distinguished by identifying the manner in which the good is
supplied by various countries.

International public sources

international financial institutions such as the world bank and IMf have long been
involved in the provision of international public goods and RPgs . some of their income
is derived from their operations but most is due to member country contributions.
international organisations such as the various un agencies are also involved in
providing multiple RPgs . The un is funded through membership fees and donated trust
funds. although the international institutions have a global mandate in relation to their
particular agency role, they often play an important role at country and regional level.
for example, the UNHCR is a specialised agency dealing with refugee migration. This
agency has on numerous occasions played a crucial role across Africa resolving post-
conflict situations and ensuring that displaced persons are well cared for and
ultimately repatriated to their home countries. other un agencies that play important
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regional roles include UNEP (environment protection), WHO (public health) and FAO
(food security).

National public sources national funding plays a role where a national public good
produces benefits that extend beyond its borders. as long as there is a high proportion
of country-specific benefits, it will be in the interest of the host country to expend
some of its national budget on the provision of the good; whether or not neighbouring
countries contribute.

However, the subsidiarity principle suggests that neighbouring countries are likely to
contribute additional funds to ensure that the level of supply is sufficient to cover
them as well. The Lesotho Highlands water Project is a good example of a major
infrastructure project in Lesotho that benefits both Lesotho and south Africa. To
ensure a sufficient level of supply of this RPg, the south African government has
contributed both financially and technically to the project.

Private sector resources and partnerships The private sector has become a major
source of financing for RPgs in Africa, particularly in the development of infrastructure.
for example, the explosion of mobile telecommunication services across the continent
has been primarily driven by the private sector. Transnational infrastructure has also
brought development through PPPs where the private sector brings skills and finance
in exchange for commercial rights to collect toll revenues over a period of time. The
Mpumalanga toll road connecting south Africa and Mozambique is a good example of
how two countries were able to jointly develop a transport corridor by leveraging both
public funds and private finance.

Common property goods are resources that are not owned by any one individual (i.e.
a lake and its fish within it). Unrestricted access or non-excludability will lead to
excessive fishing and reduce voluntary restraint and investment in the resource by any
individual. This leads to free rider problems (if we don’t exploit others will do) leading
to market failure.

Public Goods and Common Property

Public Goods have two characteristics:

1. Non‐excludable good – If a good is consumed by one person, it is automatically

available to others
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 2. Non‐rivalrous good – Consumption by one person has no impact on the
consumption of another
Examples:
 National Defence .
 Clean air
 Museum?? – Here consumption by others can impact my consumption as
it gets more crowded
 Sharing the bill versus splitting the bill in large groups (incentive to run up
bar bill or order deserts)

Other Definitions
Common Property – Property without well‐defined owner
Tragedy of the Commons – The elimination of social gains due to overuse of
common property. The museum is an example of this. Free riding – Reaping
benefits from the actions of others and consequently refusing to bear the full
costs of those actions.

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