In Which I Review the Theory of Public Goods

Sep11mem.ParkNYBecause “art is a public good” is an oft-used trope for justifying public funding for the arts, every so often I like to review Samuelson’s seminal work on the topic, “A Theory of Public Expenditure.” (It seems, lately, that reading mid-twentieth century economic theory has become something of a pastime, or, depending on the author and topic, a class prep necessity — but I digress.) In his seminal 1954 paper, Samuelson does not refer to public goods as “public,” instead defining “collective consumption goods” as those goods “which all enjoy in common in the sense that each individual’s consumption of such a good leads to no subtraction from any other individual’s consumption of that good” (p. 387). Mancur Olson (1965) makes the important observation that “collective goods can only be defined with respect to one specific group” (p. 14 fn.). He cites a parade in making this point, noting that for the group of apartment dwellers who look down upon the street, the parade is a public consumption good, but for those who buy a ticket to sit in a seat in the reviewing stand, it is a private consumption good.   He defines public goods as a specific type of collective goods that are “the common or collective benefits provided by governments” (p. 14). Other theorists do not necessarily make a distinction between collective goods provided by the government and those provided by non-governmental institutions as long as they are non-excludable and non-rivalrous. This is where the implications of public good theory intersect with arts/cultural policy. A work of art in a public park is clearly indivisible and, if provided by government, meets all potential defining characteristics of a public good – it is non-rivalrous, indivisible, and provided by government. What about public funded performing arts, however, in which individual seats are sold – or even given away. Now the consumption of the good is both rivalrous and divisible. Can it then be considered a public good? There is a continuum of indivisibility between purely private and purely public goods. Margolis, in a comment to Samuelson’s essay, cited public education as an interesting example of the indivisibility characteristic. Whereas one might argue that the education of a student in a school is a divisible benefit, the positive externalities of education to the society as a whole are indivisible.

I was brought back to this literature by a discussion on a friend’s facebook page about “theatre as a public good.” While the theatre seats might be divisible and even rivalrous (i.e., if I sit in it, nobody else can), the positive externalities of theatre — as well as other types of cultural production – are themselves a public good. When theatre – as well as other types of cultural production – connects with its community and serves its collective needs, one can argue (as I do here and elsewhere) that it is a public good.   The challenge, then, is for artists is to make work that truly DOES serve the public good and for advocates to clearly articulate its public benefit.

Casson, in the weighty Handbook of the Economics of Arts and Culture, explains it better than I:

Culture is an intangible good. Cultural values and beliefs can be shared, which indicates that culture, like knowledge, has the properties of a public good. The fact that one person holds certain beliefs, for example, does not preclude another person from holding these same beliefs too. There is no rivalry in the consumption of culture (p. 364).

For further reading:

Casson, M. (2006). Culture and economic performance. In V. A. Ginsburgh, & D. Throsby (Eds.), Handbook of the economics of art and culture, Volume 1 (pp. 359-397). Amsterdam: Elsevier.

Margolis, J. (1955). A comment on the pure theory of public expenditure. The Review of Economics and Statistics, 37(4), 347-349.

Olson, M. (1965). The logic of collective action: Public goods and the theory of groups. Cambridge, MA and London: Harvard University Press.

Samuelson, P. A. (1954). The pure theory of public expenditure. The Review of Economics and Statistics, 36(4), 387-389.

Samuelson, P. A. (1955). Diagrammatic exposition of a theory of public expenditure. The Review of Economics and Statistics, 37(4), 350-356.

Samuelson, P. A. (1958). Aspects of public expenditure theories. The Review of Economics and Statistics, 40(4), 332-338.



About lindaessig

Linda Essig is director of Enterprise and Entrepreneurship Programs at the Herberger Institute for Design and the Arts at Arizona State University, including its award-winning arts entrepreneurship program, Pave: The opinions expressed on creativeinfrastructure are her own and not those of ASU. You can follow her on twitter @LindaInPhoenix and "like" the Pave Program in Arts Entrepreneurship at Find Pave's journal, Artivate, at
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2 Responses to In Which I Review the Theory of Public Goods

  1. What happens when the artist’s perception of public good goes against what the general public perception is? Or the perception that funding sources have of what constitutes public good?
    Would Maya Lin’s fabulous Vietnam War Memorial ever been built had she had to acquiesce to the wants and desires of Washington’s community or the general publics idea of public good?

    • lindaessig says:

      Richard: You seem to be confusing “the public good” with “public goods.” Public goods are nonrivalrous and indivisible. Maya Lin’s Vietnam War Memorial meets the objective definition of public goods and has been enjoyed by millions since its construction. “Public value” is more subjective, but that is not what this post is about. For something on the concept of public value — see – an old post in which I critique the arts and culture advocacy community for using the language of neoliberalism.

      I wonder, Richard, since you are such a frequent critic on this blog and elsewhere, if you have a space of your own where you post original content. You may be more successful in making your arguments if you post them on your own site where you can build them from the ground up, rather than merely reacting to what others say. I also recommend participating in local government action where your opinions may be heard by people who actually make decisions. Also, vote.
      Best wishes, LE

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