From equilibrium models to mechanism design: On the place and the role of government in the public goods provision analysis in the second part of the twentieth century

Abstract

Focussing on their analysis of the optimal public goods provision problem, this paper follows the parallel development of equilibrium models and mechanism design after the accommodation of Samuelson's definition of collective goods to the general equilibrium framework. Both paradigms lead to the negative conclusion of the impossibility of a fully decentralized optimal public goods provision through market or market-like institutions.General equilibrium, Lindahl-Foley equilibrium, Wicksell public competitive equilibrium, private provision equilibrium, mechanism design, free-rider problem, incentive compatibility.