I am going to the hockey game in a few minutes, so I am just picking off a decent primer amongst many, but this paper is a good, accessible survey of the types of goods and services most suited to being (pure) market goods or (pure) public goods, with a specific environmental frame of reference...
ABSTRACT

Economics is the science of the allocation of scarce resources among alternative ends. Market forces are efficient at allocating market goods: resources that are both excludable (one person can prevent another from using the resource) and rival (one person's use of a good or service precludes use of the same by another), and produce no negative externalities. However, the growth of the human system relative to the global ecosystem that sustains us is rapidly increasing the scarcity of ecosystem goods and services. Many of these services are non-excludable and/or non-rival, and hence not efficiently allocated by market mechanisms.... Neo-classical economists tell us not to worry, that as a good becomes scarce, its price increases and entrepreneurs develop substitutes. Yet non-market ecosystem services have no price, are predominately non-excludable, and will not be produced by market forces.... This paper will show how a proper analysis of ecosystem goods and services in the context of `rivalness' and excludability can dramatically enhance the rigor of economic analysis and help us develop an economic system compatible with a full planet.

This leads to an even bigger problem; it is difficult if not impossible for neclassical economics to properly value natural assets.  So it makes sense to destroy whole ecosystems by mining or deforestation, or by mining the soil as in the Midwest, whereas in the very long term the destruction of these natural assets is disastrous.

I think the solution to this may be to change the property rights to natural assets, such that the government has certain ownership rights.  But that's just an idea to throw out there.  I don't know if mechanism design can handle these objections.

Many services have public good aspects but can still be operated by the private sector. The UK's public health system may be cheap, but having lived in that country I can personally attest that systems in countries like France or the Netherlands, which have universal health insurance but are comprised of many private and public health-care professionals and clinics, provide a higher standard of service.

As for giving governments property rights to natural resources, experience shows that what matters is governance, not so much who owns the resources. I can think of numerous examples of poor stewardship of natural resources by government owners, from various Communist-run countries to the UK when it still ran a state-run coal monopoly.

Most governments exercise some control over access to their marine resources, but their performance has varied widely. Canada botched it in the 1980s and 1990s (when its policies to promote expansion of a domestic fishing fleet helped precipitate the collapse of the north-west Atlantic cod stock); Iceland, New Zealand and Norway have managed their stocks reasonably well.

These are only my personal opinions.

the worst resource exploitation occurs in the absence of the capacity to challenge a particular use of a resource.

But what I don't understand is why economics and economists deserve bashing here. Yes, pick up an Economics 101 textbook and there won't be much in it on political economy. But the training of people who specialize in economic policy usually includes a grounding in political economy, as well as some training in law, and the intersection between law and economics. How many economists do you know who pretend there aren't such things as externalities, public goods and institutions that enforce property rights and the rule of law?

These are only my personal opinions.

People operate according to various frameworks, or paradigms, if you will, and neoclassical economics resides at the core of the conservative critique of government.  So that is fundamentally what worries me.

But that does not mean that "public construction, such as public transit, gets left out the picture", as you put it. To go back to my original comment -- that this post sets up a straw-man argument -- you must be talking to a rather select group of policy advisers, Jon, if you have the impression that "the entire intellectual environment seems to dismiss such public construction out of hand". Yes, economists have some interesting and useful thoughts about how some infrastructure could be privately provided, but more often the debate is how to introduce competition into the provision of public services (or infrastructure) that are nonetheless still regulated by the government.

Trash collection in Paris (which now includes collection of recyclable materials as well), for example, was long ago contracted to private companies. You know what? It works, and it works well. Seven days a week.

These are only my personal opinions.

I have no doubt that neoclassical economics is a useful tool in certain situations, particularly when the situation fits the basic outlines of most models -- where there is a competitive situation, with many similar firms, in the short term.  But in the situation I feel we are in now, we should at least be discussing very big questions about how to fit together the different pieces of our civilization -- energy, transportation, agriculture, manufacturing, etc -- and I think that requires a different kind of thinking.

In fact, I hope in the next couple of posts to lay out some of these ideas in a more organized fashion (I hope), because my main interest is not in criticizing neoclassical economics (as cathartic as that might be) but in trying to offer an alternative.  So I hope that I can gain more of the benefits of your wisdom in that venue -- in this particular one at this moment, though, I must put my three-year old to bed.  So thanks for the back-and-forth, a bientot.

Societies should not rely on market forces to protect the environment or provide quality health care for all citizens, a winner of the 2007 Nobel Prize for economics said on Monday

That is a translation by the article's author of the following quote:

"The market doesn't work very well when it comes to public goods,"

It sensationalized the quote to grab attention. Your second link explains the value of the theory:

"It can provide important justifications for government intervention in the operation of markets such as health care..."

In other words, it can help identify where government intervention in the market might make sense. The bottom line is that we need good governance capable of picking when and when not to use the creative power of millions of competitors to solve a problem. The articles also use cars as an example where markets work. Half a million Priuses getting twice the mileage of the Subaru Outbacks they replaced is a prime example of how a market can make massive changes based on consumer demand for an environmentally benign car. The fuel saved dwarfs that saved by government backed corn ethanol.

The mindset that government is good, markets are bad is simplistic. You need both and finding which works best in a given instance is not always obvious and that is why these guys have developed this theory of Mechanism Design.

"For example, the U.S. spends more on healthcare than any other nation, and gets worse results. There are various reasons for this, but one is that a competitive market in health insurance tends to provide more insurance and less healthcare than public insurance mechanisms"

Our health care system sucks but you sure can't say it is the result of a free market. The AMA lobbies our "government" to allow them to restrict the number of physicians, thus keeping their wages grossly inflated. I can't walk into any doctor's office I choose and get care. Switching health care is a nightmare of red tape. This system bears little resemblance to any free market system I'm familiar with. Doctors should be falling over themselves to get my business.

Imagine what buying a car would be like if the process resembled our medical system. The car salesmen would all be making a quarter-million a year. You would be making huge monthly payments just in case you need a new one some day and have to get approval before you could buy from the approved dealer.

I'd say our crappy medical system is ultimately the result of bad governance, which admittedly, may be the result of an ignorant, uninformed public.


In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world

Imagine what buying a car would be like if the process resembled our medical system. The car salesmen would all be making a quarter-million a year. You would be making huge monthly payments just in case you need a new one some day and have to get approval before you could buy from the approved dealer.

Where did you come up with that? It's brilliant -- I'm still chuckling!

P.S., I'm writing from Quito, Ecuador, where I've been attending a meeting on (what else) biofuels. A lot of the countries -- governments that is --down here have big plans for palm oil and diesel made from palm oil. It doesn't seem to matter to them (or they don't understand the point) that, per litre, the world price of crude palm oil is almost twice that of crude petroleum oil. One official even defended turning palm oil into biodiesel by saying, "But of course we want to sell a product with more value added". Um, sir, you mean with value subtracted, don't you?

But that's a story for another blog.

These are only my personal opinions.

It may well be that the automobile will turn out to be either the worst or one of the worst technological choices humans ever made. And the imposition of that system, like every transportation system in history, has been constructed mostly by the government (think Rome).  So how should a choice of a transportation system be made?  I think it requires a wide-ranging discussion of alternatives.

Also, BioD and Ron, I think BioD and I came to an agreement a while back that we need both the government and markets, either one in isolation would be a disaster (has been a disaster).  If I understand you correctly, when you use the word "governance", you're talking about policy, regulatory and otherwise, which I think means the government (at all levels, not just Federal) makes particular policy decisions, ideally in a democratic and participatory way.

Also, you guys might be interested in the work of my mentor, the late Professor Seymour Melman, because if there is one excellent example of where government involvement in the economy has bad results, the military-industrial complex is it, and Melman wrote several books going into gory detail on how that process works, or rather doesn't work.

But when they are owned by Government, you call them public.

Health care: I have proposed a child health care plan based on the XO machine's Give One, Get One.   I would allow each adult to add a poor child to their health care plan who is not related.   Simple, and the kid would get the same care as if her dad or mom had that plan.

Texeme.Construct(function(x)=Participation(x))

Also, to address this whole straw-man argument:  Yes, you will rarely find an economist in a university who says "free markets are the best way to go all the time."  BUT, you can't move without stepping on a corporate "expert" (often trained as an economist) who is happy to take a huge paycheck in exchange for saying things like "yes, privatizing water is the most efficient way to make sure everyone has water" at public hearings or behind closed doors when the regulations are being written.  They probably know that economics textbooks are full of counter-examples but they don't care.    

Water is not a public good, at least not according to the economics definition of a public good. A pure public good is non-rivalrous in consumption (i.e., if I consume some of it, it doesn't affect your consumption: think street lighting), and is non-excludable (e.g., national defense).

Water fails both tests. The one aspect of water that does arguably have public-good characteristics is its quality: everybody benefits by keeping water-born pathogens out of the water supply. That in itself does not necessarily lead to the conclusion that the whole supply and distribution of water has to be government owned and operated.

France -- that leftist bastion -- privatized water supply 100 years ago. It works. Of course public authorities regulate the industry. But the quality and reliabiliy of its supply is among, if not THE, best in the world. The UK used to have public water companies that for years under-invested. Many are now operated by French companies, which had to pour in billions of dollars to bring the infrastructure up to snuff.

Allowing the private provision of water infrastructure does not necessarily mean that governments have to cede control of the water itself (e.g., if it comes from a public reservoir), nor over pricing policy. While some governments in developing countries have negotiated bad deals with foreign water suppliers, neither have they universally operated their own systems particularly well, nor equitably. It is well known that cronyism in governments often leads to supplying rich and middle-class houses with water, but leaving poor people to fend for themselves -- often by buying water from small-time vendors at many multiples of the price charged to the lucky families served by the "public" water system.

I think that we can all agree that there is a public interest in ensuring that everybody has access to clean water. But invoking "public good" arguments to reject private-company involvement in the provision of water is not, in my view, convincing.

These are only my personal opinions.