When Public Goods is No Good

28 03 2011

 In the upcoming assembly elections in Tamil Nadu, the competing Dravidian parties, DMK and AIADMK are bending over each other to please (bribe ?) the electorate by offering unheard of freebies. Given below is a quick overview of the promises made by the two parties taken from MSN.com.

AIADMK

20 kg of rice for all ration card holders

20 litres of drinking water daily

1 mixie, 1 grinder & 1 fan

Laptops for students of Class 11 & ITIs 25,000 & 4gm gold coin as marriage assistance

Free modern, green homes of 300 sq ft, costing Rs 1.8 lakh each to three lakh BPL families

Rs 25,000 or 4 gm gold as marriage assistance

60,000 cows and sheep

DMK

35kg rice for below poverty line families

Wet grinder or mixie

Laptop for all backward college students 15,000 marriage assistance for poor women

Rs 15,000 marriage assistance

The media and the political analysts are all shocked at these promises. Elections are about promises made in manifestoes and all attempts are made to lure the electorate by showing them a vision of a better future.  Is mixie, grinder, fan or laptop for the poor not a vision for a better future? It is. Then why is everybody shocked.

The shock comes from the fact that these appliances or items of consumption are private goods and not public goods. The implicit assumption in public discourse is government expenditure ought to be made for public goods. Nobody is shocked, if a political party promises better roads or more electricity or drinking water. Because these are essentially public goods. It is expected that government is best equipped to create these infrastructure and deliver these services.

Quoting Wikipedia :

In economics, a public good is a good that is nonrival and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability that no one can be effectively excluded from using the good.

The opposite of a public good is a private good, which does not possess these properties. A loaf of bread, for example, is a private good: its owner can exclude others from using it, and once it has been consumed, it cannot be used again.

It is not that there is no demand for public goods in Tamil Nadu. Tamil Nadu is a power deficit state and Chennai has a perennial water shortage. It is not that there is a lot of surplus in the government coffers, far from it. Tamil Nadu has a huge debt burden . Then why this great desire to improve the standard of  living by providing mixies, fan and even laptops to the poor .

The political parties have understood that the electorate have become smarter and mercenary. Perhaps based on the TV gift given by DMK in the previous elections which swung the result in their favour.  The voters are clearly asking ‘what’s in it for me ?”. The electorate in Tamil Nadu perhaps realizes that expenditure incurred in creation of public goods, benefit the politicians and bureaucrats far more than it benefits them. So they would much rather be happy taking home an appliance free, obviously, paid for by the taxpayer.

Is this a good trend? Obviously, not. Private good purchases are best left to individual choice. Large quantity of appliances purchased through tender and placing the order on the lowest priced ( L1) supplier is not going to satisfy majority of the users, even if he/she is poor. This will trigger a secondary market for these appliances and distort the market for these products.  Or else, it may lead to wastage. The voter may accept the appliance because he is entitled and may not use it at all.

Hopefully, better sense or election commission will prevail to curtail this dangerous trend.

– G. Mohan








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