Dear God, Mazzucato can’t even get public goods right

For an economist that’s something of a failing too:

While economists usually talk about things that are not done at all (or done inadequately) by the private sector as “public goods”, investments in “big” public goods like the UK national health service,

This is the wrong damn way around. The private sector does not produce invisible pink unicorns. This does not mean that invisible pink unicorns are public goods. Public goods are, rather, things that the private sector will not produce well or not in large enough quantity as a result of their non-rivalry and non-excludability.

And the NHS is not a public good. It is clearly rivalrous, for a treatment given to one person means that that same treatment cannot be given, with the same resources, to another. It is also excludeable as NICE proves every time it denies a treatment that costs over £30k per qualy.

Vaccines are also not a public good: although the effect of a decent vaccination is. For herd immunity is non-rivalrous and non-excludeable.

It’s vital for economists to get this right. And Ms. Mazzucato isn’t.

Public goods are goods whose benefits are spread so widely that it is hard for business to profit from them (or stop others profiting from them). So they don’t attract private investment. Examples include transport infrastructure, healthcare, research and education.

Transport infrastructure cannot be privately built? Health care? Education? What bollocks is this?

The state’s provision of many of these goods – notably transport, education, housing and healthcare

Housing is a fucking public good now? Crippled JC on a pogo stick this is nonsense.

When public goods are privatised they lose their “public good” nature: it does become possible to profit from distributing mail, running trains, renting out homes and providing education.

You fucking what? If it’s possible to profit from them then they’re not public goods in the first place! For they cannot be profitable if they are non-rivalrous and non-excludeable. That’s the basic problem in the first place.

We’re continually promised that, due to efficiency gains and innovations prompted by the profit motive, public goods can be delivered more cheaply and effectively by the private sector.

Dear God, and this is a supposed economist talking here. What the hell has she been smoking?

Ms. Mazzucato should be locked into a room and forced to write lines. Perhaps 1,000 just so that the idea will sink in.

Public goods are not things that are good for the public, are not things the public desires nor even are they good things the public consumes. Public goods are those goods that are non-rivalrous and non-excludeable.

33 comments on “Dear God, Mazzucato can’t even get public goods right

  1. Most lefties don’t know what the term means, and simply apply a literal translation to arrive at the conclusion that public goods are things that are merely of benefit to the public. That an economist doesn’t know this shouldn’t surprise either: an Open University lecturer who I used to argue with online thought a structural deficit was the deficit resulting from expenditure on infrastructure.

  2. I dunno about this rivalrousness and exludability. It seems to me that a public good is simply somethigng that the community wants supplied to non-payers, regardless of the cause of the non-payment. For instance, if you take it as morally preferable that everyone should have full healthcare cover, you have to make it a public good, since in any market system, some will not have full (or any) healthcare otherwise.

  3. The usual cohort of economically illiterate CiF f*cktards are out in force in the comments section.

    Despite several attempts by valiant patient commenters to explain why the original premises are wrong rendering the whole article nonsese, they are choosing to ignore it.

    This comment by succulentpork sums up Mazzucato and her fellow travellers just nicely… (quoted in full as I’m sure some CiF moderator will consign it to the memory hole)

    http://discussion.theguardian.com/comment-permalink/29861055

    “Mazzucato’s thesis represents the dying gasps of the theoretical justification for socialism. Having lost the debate, the tactic now is to find the least worst arguments and then blow up their importance to make them seem like the critical factors. The same thing was done with the Spirit Level book on inequality. Now the argument is that government is such an important catalyst for innovation that reducing the size and scope of the state will actually rob the private sector of future growth. The private sector can provide all the nutrienrs and watering, but the state is the one that provides the soil and the seeds. Now that we’ve proven this with a few examples about GPS and the fact that without the NHS we’d all be too sick to work, let’s apply to almost everything – because when you think about it everything can be ascribed some public good status. As a narrative fallacy it is a convincing one. The reason it is wrong is because you end up counting the benefits – which appear visible, but ignoring the opportunity costs – which are invisible and bigger the more you subscribe to this sort of thing. If Mazzucato was right, why was the USSR not more proficient at innovation than the U.S? They could make great nuclear submarines but good cars or washing machines were beyond them.”

    What’s hilarious is the stock marxist no true scotsman response to the above in the following comment.

  4. It’s one of those problems of the English language, the adjective & the noun meaning different things but having a tendency to be conflated. Hence right & right, good & good. Maybe it’d help if the language had gender. Spanish don’t have a problem mixing up their chickens.

  5. The point about public goods, rivalry, excludability, is that it’s a good economic argument for where the State really should get involved. Forget the complexities of it for a moment and just accept that point.

    So, what Mazzucato is doing is stating that many things which do not meet this technical description of a public good are in fact public goods….therefore the state should expand.

    It’s a suggestio falsi I think the logical point is called.

  6. Tim, the problem is that probably the most popular public good (health) is neither non-rivalrous nor non-excludable, while we have many examples of non-rivalrous, non-excludable goods which are private sector (broadcast TV in non-socialist countries, Facebookngoogle, etc).

    Maybe healthcare should be ad-supported.

  7. Ian B you are trying to win the argument by defining ‘public good’ wrongly. If it’s not non-rivalrous, and not non-excludable, it’s not a public good. 1000 times, please: ‘A public good is not something that is (or is thought to be) good for the public.’

  8. I’m not trying to win an argument; I wasn’t aware I was having one. I was just asking whether a definition that makes internet porn a public good but not healthcare or the courts is much use as a definition.

  9. I worry that your missing the point. The point being “I declare X is a public good. Therefore the government must take over X and the public must be made to pay for X whether they want it or not.”

  10. Yes, it is most useful as a definition. For when we do have a public good (which can also be thought of as a positive externality, not quite the same but similar) then we’ve a well developed series of arguments about whether the government should support the provision of this public good.

    What Mazzucato is trying to do is coopt those arguments into arguments in favour of her favoured policies, for government support of things that are not public goods.

    Which is why we’re all pointing to the formal definition of public goods of course.

  11. Problem is, as I said above, that argument isn’t going to have any traction, because people don’t choose what they think the State should be involved in based on this definition. It’s a moral judgement not an economic one. Is and Ought and all that.

  12. Correct me if I’m wrong, but doesn’t this lady teach at one of the comedy universities?

    Wasn’t she also paid by the EU to produce “research” into how great government spending on innovation is?

    She’s just another example of how rapidly our higher education sector is circling the drain, producing exponentially more bullshit than it does anything of value.

  13. “Public Health” is another expression that’s commonly missed or, if you prefer, whose meaning has undergone a transformation.

    In fact, “public” is in my view widely misused (see, for example, the recent confused discussion of whether a university lecture theatre is “public”). I think I’ll start translating “public” as an adjective into “government-owned” and as a noun into “me and my cronies”.

  14. Yes, it’s like “rational expectations”. Both words mean things in English but the two combined in economics doesnt mean what non-economists think it means.

    I’ve always suspected that this is where the “all economists think people are rational” argument comes from. I suppose the alternative “all economists think people are ‘model consistent’” doesnt really have the same ring to it.

  15. The NHS may not be a public good but national insurance is, because insuring everybody at a fixed average rate is much more economical and arguably farer than working out individualised policies.

  16. Vaccination: is benefit ‘a public good’? I thought you had explained elsewhere Mr W that benefits are not ‘goods’ of any type. Can you buy a benefit? Can they be manufactured?

    Many things produce communal benefits therefore by that definition just about anything is a public good.

    And immunity of some does not in any case necessarily extend a benefit for all.

    If part of a herd of cattle were vaccinated against Foot and Mouth, it being an airborne microbe the part of the herd not vaccinated would get no benefit from those who were immune and would likely contract the disease.

    An immunised individual can also still carry a disease and be infectious without being infected themselves.

    The truth is apart from national defence and street lighting, the list of public goods is remarkably short which is why when people talk of public goods they don’t actually mention any and the ones they do mention aren’t… they confuse goods and benefits or ‘good’ for us to have by their estimation.

    Most people would say lighthouses are a public good so must need Government, except many were built by private money and fees were collected as harbour fees when the ship docked.

    So… we need Government because… ?

  17. John B: the canonical example of a public good is a nice view. I can’t stop you looking at the view (non-excludability) and your looking at the view doesn’t cost me anything (non-rivalry). Similarly, I can’t prevent you from enjoying the herd immunity conveyed by mass vaccination and its marginal cost of provision (i.e. adding one extra person to the pool protected by herd immunity) is zero.

    Most of the problems come with common goods (i.e. those that are rivalrous but not excludable). That’s where the socialists stick their oar in and screw everything six ways to Sunday q.v. fisheries. The set of goods that fall into this category should, rationally, be reduced or better, eliminated. But Mazzucatto and her foul confrères want to extend their remit to all classes of goods.

  18. So all we’ve really ascertained is that the term “public good” doesn’t really cover most of the things that people want to discuss the public provision of; and indeed may not in truth describe anything real at all. Street lighting seems an odd choice. It is just one example of street furniture; and streets themselves can be both rivalrous and excludable and indeed often are.

    So really, perhaps we just need a more appopriate term for the things people want to discuss, rather than this apparently almost entirely useless one.

  19. John B

    There is a benefit from vaccinating other members of the herd. Imagine a situation where there are 100 cows of whom 99 are immunised and one is not. There is some positive probability that any cow will contract foot and mouth and another positive probability that the infected cow will infect others. The unvaccinated cow benefits from the vaccination of the others because they will not become infected and thus will not infect the unvaccinated cow. Even if this number falls to 90 (or lower), herd immunity provides protection for the unvaccinated group. This is a public good.

  20. Much prefer the private sector with a five per cent profit margin to the public sector with a thirty per cent waste margin.

  21. Clearly the lady is deliberately conflating public services with the specific economic meaning of public goods.

    Her opening sentencein the Guardian article refers to Keynes’s “epic book”, “The End of Laissez Faire”. It’s just a twenty page essay in my paperback copy of “Essays in Persuasion”. You’d think an econ prof would be clear on that. Wouldn’t you?

  22. Ian B.

    Public goods are useful in terms of defining where the state should act, according to certain assumptions. The state should act where private provision fails to provide what people want. Otherwise the state should not act. It is a good argument.

    This is no reason to discontinue use of the term. It is related to a particular argument. Lefties love to use it incorrectly because it sounds good (it has the word “good” in it, I suppose).

  23. While it’s good to see the passion in your response to Mazzucato, I think some red herrings have slipped through the red mist. You’re actually reinforcing the points in her Observer article, and her book.
    Of course things like healthcare, transport, education and housing can be supplied in the private sector, by making them depletable and excludable, and therefore profitable. But of you leave it to the private sector then – with the distribution of incomes currently served up by the market – you end up with a sizeable portion of the population uneducated, homeless, suffering infectious diseases, and unable to get to any workplace they might still be effective in. So basic education, healthcare, mass-transit and social housing are public goods. Would you really prefer them not to be publicly financed? Mazzucato points out that as well as providing the necessary goods and services that the private sector can’t (because they’re too risky or unprofitable), the state also supports private education, healthcare etc with big direct and indirect subsidies. Would you like these to be withdrawn, with the private costs already going through the roof?
    And her book provides a mass of evidence that early-stage research and development have exactly the same public-goods characteristics. You should be thankful – there wouldn’t be a World Wide Web to blog on if that state-funded R&D hadn’t taken place.

  24. “Of course things like healthcare, transport, education and housing can be supplied in the private sector, by making them depletable and excludable,”

    You’re making the same mistake as Mazzucato. Things do not become “public goods” or not depending upon who provides them. A publicly provided good can still indeed be a private good just as it is possible for there to be private provision of public goods. You’re simply missing the technical definition. You, I assume, because you don’t know it, Mazzucato who should know it because she is dissembling.

    Housing is obviously rivalrous and excludable and is therefore a private good. Even if the State builds, owns and operates every damn dwelling in the country housing is still not a public good.

    Geddit?

  25. Puzzled

    Actually, we dont leave income distribution up to the market: Which is why we have a social security safety net and fund education and healthcare via taxation. We could achieve private healthcare, housing etc while still ensuring everyone had access – via transfers. Whether we should engage in the scale of transfers that some (on the left) would like, then becomes an argument over equity and efficiency. Neither the NHS nor the current state education system need exist for there to be healthcare and education for the poor.

    Mazzucato is utterly wrong on the definition of public good. Try not to follow her red herring.

  26. as I recall the term economists use to cover some of the things called public goods in everyday language, but which are not public goods as defined in economics, are merit goods.

    http://en.wikipedia.org/wiki/Merit_good

    These are excludable and rivalrous but also things that for one reason or another private provision is regarded as unsatisfactory, usually because it’s thought poor people would suffer unduly if provision was left to the market.

  27. “there wouldn’t be a World Wide Web to blog on if that state-funded R&D hadn’t taken place.”

    That sounds a very precarious argument to try & stand up. You could make the same about telecoms, railroads, air travel…Except these were all the result of private endevour.

    You could try justifying it on the basis computers were developed from a wartime requirement for breaking crypto. Except the whole wartime effort was based on work that’d been developed over the previous decades, mostly in the private sector. And, once you have electronic computing, linking machines together is no less inevitable than linking towns by telegraph. It will be done irrespective of who does it. Or the exact method used.

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