Private Provision of Public Goods and the Failure of the Neutrality Property in Large Finite Economies.

Abstract

The pure public goods paradigm has been criticized because it implies the implausible result that, under certain assumptions, any (small) arbitrary income redistribution will have no effect on the allocation of resources. It is shown that this particular criticism is unwarranted because, for large enough economies, the assumptions necessary for this neutrality property will hold true for a negligible small subset of the parameter space. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.