When Does Public Spending Constitute the Best Use of Public Resources?
Addressed here is the how, but not the why, of public funding. Regarding the “why” of public funding, the economics of public choice suggest several criteria to gauge whether a particular expenditure constitutes the best use of limited public resources. These criteria include: • the cause, organization or project provides a clear and identifiable public benefit (that corresponds to the economist’s notion of a “public good”); • society needs more of such public good than the private or voluntary sectors would provide in the absence of support (or increased support); • the benefits of spending (or increased spending) for the particular public good exceed the cost; and • the particular expenditure contributes more to social welfare than alternative uses of public resources. In practice, these criteria are both mediated and informed by the political process. An Evolving Document This discussion has benefited from many constructive comments from members of the Regulatory and Capacity Tables
