Public-goods theory constituted a major element in James M. Buchanan’s research agenda throughout the 1960s. The Demand and Supply of Public Goods is a major part of that work.
At the time that Buchanan was elaborating on his theories of public goods, the prevailing trend in public economics was the emergence of public-expenditure theory, which attempted to form a comprehensive theory of the state around the notion of market failure.
The Demand and Supply of Public Goods established Buchanan’s broad purpose of explicitly comparing market performance with political performance. As such, the book is an important part of Buchanan’s contractarian theory of the “productive state.”
Conceived originally as a series of lectures given at Cambridge University in 1961 and 1962, The Demand and Supply of Public Goods is written for students, but is in no way a textbook of dry pedagogy. Instead, as Geoffrey Brennan writes in the foreword, “What Buchanan provides here is a clear statement of the contractarian approach to public goods problems, very much in the ‘voluntary exchange’ tradition of Wicksell and Lindhal.”
The theory of public goods, as partially sketched out in early chapters of this book, is not a theory of public organization or supply, in either a normative or a positive sense, although it has been interpreted to be such by many scholars. In Samuelson’s early and rigorous formulation, goods were classified into two polar categories, purely private and purely public. The allocative norms of modern welfare economics, which were developed in application to private goods, were then extended to public goods, as defined. Given the use that has often been made of these allocative norms with reference to private goods, it is understandable that organizational-institutional implications were read into the theory of public goods from the outset, regardless of the intent of the theory’s original proponents. In a sense, and despite the apparent circularity, the implication that “public goods should be public” seemed a natural one. And, of course, linguistic philosophers would suggest that the very usage of the term “public” itself carried substantive overtones for organizational policy.
James M. Buchanan
In 1986 James M. Buchanan (1919-2012) was awarded the Alfred Nobel Memorial Prize in Economic Sciences. Universally respected as one of the founders of the “public choice” school of economics, he is the author of numerous books and hundreds of articles in the areas of public finance, public choice, constitutional economics and economic philosophy. He is best known for such works as The Calculus of Consent, The Limits of Liberty, The Power to Tax, and The Reason of Rules. Buchanan has devoted himself to the study of the contractual and constitutional basis for the theory of economic and political decision making.
See also at Econlib: the Concise Encyclopedia of Economics entry on Buchanan