International Public Goods Research Paper

1. Definition Of Public Goods

Public goods and common-pool resources—as stated above—may be defined by the analytic economic criteria of universal accessibility and (non-)rival consumption. These attributes may be properties that are inherent in the goods themselves, or they may be properties that are attributed to goods through societal consensus and/or political decision. In the older economic literature the central attributes of public goods—nonexcludability and nonrivalry (Samuelson 1954, Musgrave and Musgrave 1976)—have been regarded as sources of market failure, from which the need for state intervention has been derived. The problem with common-pool resources and public goods lies in their limited excludability. As a result, prices cannot be charged and hence private provision through the market is not feasible. More recently, economic theory (Cornes and Sandler 1996) has argued in a more differentiated way that an exception is the case where a particular actor has an incentive to provide a public good irrespective of the free-riding behavior of other beneficiaries. The same holds true when, in the case of a common-pool resource, the stakes of provision are high enough to induce cooperation among actors (Cornes and Sandler 1996). Only in cases where the private provision of common goods fails are governments called upon to remedy the market failure (Bator 1958). Another aspect from which public goods can be viewed is the phenomenon that some market activities generate external effects. Positive, as well as negative, external effects are not part of the actor’s economic calculation and as a result they are under or over-produced from an aggregate view. In the traditional perspective externalities are seen as by-products of economic activities and internalization of externalities traditionally has been viewed as a government task (Pigou 1920). However, in the 1960s a new interpretation started to dominate the economic literature. According to this view, Pareto-relevant externalities are internalized through market forces if property rights are well defined and transaction costs are sufficiently low (Coase 1960, Buchanan and Stubblebine 1962).

While economic theory views the properties of a public good as inherent attributes of such a good from which a specific institutional form of provision is deduced, political science goes beyond this notion to insist additionally on a processual view of common goods. It argues that what constitutes such a good and how it is provided for institutionally depends on specific situational and technological conditions, and, moreover, is determined in a political and social process. First, it is not clear in many cases what constitutes a public good or a common-pool resource in so far as there are no absolute and objective criteria for defining them in a general sense. Instead, what constitutes a public good depends in part on the specific situational context of provision and consumption of the good, and its technical properties.

Thus, the importance of a specific situational context for the definition of a good as a public good in terms of nonexcludability and nonrival consumption is illustrated by the example of the protection offered by the ozone layer vis-a-vis radiation for sunbathers, which is a public good in the classical sense. One sunbather enjoying the sun does not impinge upon the protection offered to other sunbathers. In this sense, the ozone layer is a public good, accessible to all with nonrival consumption. In another sense, however, it may be perceived as a common-pool resource. Seen in terms of the relationship between producers and sunbathers, and given that scientific research has identified a problem of scarcity in the ozone layer, certain productive activities, such as the production of refrigerators with chlorofluorocarbons, diminish the protective quality of the ozone layer and jeopardize the protection offered to all. This is rival consumption. In this specific context, the ozone layer constitutes a common-pool resource which is accessible to all and is depletable (Snidal 1986).

Technological innovation may force a reconsideration of the definition of a public good in cases where a good, which had hitherto been regarded as universally accessible and nondiminishable, has been rendered potentially excludable. A case in point is broadcasting. This good used to be accessible to all and of nonexcludable nature, but as a result of technological change, access to the good can now be limited to those paying for the service via a telematic coding system. Put in different terms: the transaction costs for establishing property rights were reduced drastically by technological progress so that the gains from excluding free riders and the precise allocation of user costs now exceed the costs of establishing property rights. Second, the definition of what constitutes a public good and what does not, may not necessarily be determined by ‘objective’ characteristics, but instead by political and social definition. There are huge cultural variations across polities and time as to what is considered a public good or common-pool resource and what is a private good. Thus, universal and free healthcare may be formulated as a political goal and consequently be considered as a common-pool resource in one polity. But in another, the same service may be regarded as a private good that each individual has to buy on the market. In the same way, policy makers in one society may decide that its provision should be left entirely to the buying power of the individual through the market. Hence, what constitutes a public good or common-pool resource can be answered either in terms of analytic economic criteria or in terms of a process of social and political definition. Once a good has been identified as a public good or a common-pool resource, the institutional mode of provision of the good has to be determined.

2. The Provision Of Institutional Answers To A Collective Action Problem

Different paths may lead to an institutional answer for a stable solution for providing public goods at international level. The solutions may be designed intentionally, as is the case of international agreements. They may develop without being planned, as in a case of spontaneous coordination, for example, in the case of the standardization of products. Either way, once in place, they develop an institutional dynamism of their own and over a period of time they may transform the processes in the institution and, in turn, transform the preferences of the actors involved.

The intentional formulation of an institutional solution to a public-good problem may presuppose an acute awareness of an existing social dilemma and a need for collective action where there is cross-boundary problem interdependence. For example, in the case of an imminent cross-border environmental problem, an international conference will be convened that seeks to develop a format of cooperation. After a lengthy process of bargaining, institutional answers for solving the problem will be found and agreed. All those involved in the negotiations will seek to maximize their own interests, for example, by minimizing the implicated costs. In other words, institutional solutions to collective action problems are interpreted in terms of their distributional impacts on the actors involved (Knight 1995). In the great majority of cases, the negotiators do not all enjoy the same degree of power, and in the event of an agreement not being reached, the stronger actors may take up a fallback position. While a solution may be desirable for them, they may not consider it vital. In other words they have more resources for negotiating an institutional solution. This route to an institutional solution, i.e., interest-oriented negotiation with a view to the distributional results, generally applies where the interests at stake are clear-cut and substantial. A case in point is the negotiation of CO emission limits at international climate conferences. All the states engaged in the bargaining process, to find an institutional solution for reducing emissions, view the process in terms of its distributional impacts on the market position of domestic industries, and so forth. However, there are situations where collective action problems need to be solved and the actors involved do not really appreciate the nature of the problem at hand, much less which interests are at stake. Consequently, the preferences of the actors involved are uncertain. In such situations deliberation, exchange of arguments, and persuasion will prevail as the actors strive to reach, at best, a common perspective on the problem at hand together with possible solutions; or as a minimum, to establish clarity as to the different stakes involved (Knight and Johnson 1994). Only then does interest-oriented bargaining follow and asymmetries of interests and power come into play. Cases in point are complex environmental problems or the problem of providing more transparency and certainty in financial markets.

The second avenue for developing an institutional solution to a collective action problem is that of the spontaneous emergence, rather than the intentional development of a solution in a planned social interaction at international level. Here, the strategic uncertainty as to the preferences of other actors promotes behavior likely to resolve a social dilemma. It makes sense to shape other actors’ perceptions of one’s preferences and to give signals of willingness to coordinate and be trustworthy. These signals enable like-minded actors to locate others who are equally so, and who can in turn build up a reputation for responding cooperatively to trust (Bates 1988). Because actors prefer coordination as one of the outcomes, as opposed to noncoordination, they will use whatever salient information (focal point) they have in order to achieve that coordination (Schelling 1960). In time, other actors will follow suit, and a social convention is established which provides information about the future actions of others (Knight 1995). The focal point may be relatively contingent, but henceforth serves as a point of reference for future coordinating actions (Calvert 1986, Schelling 1960). Third, irrespective of the path along which an institutional solution develops, be it design or spontaneous emergence, once established, it gains a dynamism of its own. The institutional process then begins to develop its own rules beyond the formal and informal rules originally instituted, or interprets the original rules in the light of the day-to-day need to make decisions, thereby transforming and developing those rules incrementally (March and Olsen 1989). This process may change the preferences of the actors involved. As well as the path of development of an institutional solution to secure the provision of a public good or a common-pool resource, the specific context in which it is shaped and the institutional arrangements in which it is embedded have been discussed in the literature.

3. The Context And Institutional Mode Of Provision

What is the general context and what are the more specific institutional and instrumental conditions in which the provision of a public good and a commonpool resource occurs? The overall question is: under which conditions do particular institutional arrangements apply particular instruments to produce favorable results for providing public goods at international level? With respect to the overall context, generally it is argued that the greater the number of participants involved in an attempt to resolve a social dilemma and the greater the heterogeneity of the actors involved, the greater the difficulty in arriving at a solution. In this sense, the prospects of an efficient solution to collective action problems for agreements at international level, with its heterogeneous actors and large numbers of participants, would appear to be bleak. However, as has been pointed out (Ostrom 1990, Martin 1994, Snidal 1984), this relationship is not as simple as it first appears. Heterogeneity may constitute a precondition for an actor to take the lead in organizing collective action because they have a specifically strong incentive for this action to be successful. Thus, the US has repeatedly acted as a hegemonic actor in cooperating with Western public and private actors when it comes to solving collective action problems such as sharing banking information to enable countries to uncover money-laundering (Schmidt 1995). Furthermore, the problem of coordinating an unwieldy number of actors is often alleviated by organizing the participants into groups according to commonly shared criteria. Each group is represented by a speaker, as in the case of climate negotiations, thereby reducing the number of actors sitting at the bargaining table. Moreover, the extent to which homogeneity facilitates negotiations in collective action problems depends upon the nature of the homogeneity: if all actors are intent on having the same resource, homogeneity may render agreement difficult. If, by contrast, the preferences of actors differ over time and in intensity, they may be made complementary through issue-linkage (Martin 1994).

Beyond the general context conditions, various institutional arrangements and instruments are applied in the provision of public goods and commonpool resources at international level which determine the degree of success in solving the collective action problem. The institutional arrangement denotes the structure and the nature of the relationship among the actors involved; the instruments that are applied define how the desired behavior of the target actor is to be elicited. The basic types of institutional settings for providing public goods are hierarchy, negotiation, societal self-regulation, and markets (Mayntz 1997, Scharpf 1999). Hierarchy is an arrangement in which a central actor (government) has an electoral mandate that permits it to legislate specific provisions, such as the statutory requirement to use a fully regulated catalytic converter, with noncompliance being sanctioned in order to protect the quality of ambient air. Thus, legal obligation is backed up by a bureaucratic apparatus to ensure implementation. In an international context, hierarchy as an institutional arrangement for providing public goods and protecting common-pool resources can only be applied to a very limited extent. However, even in international negotiations among sovereign states seeking to solve a collective action problem, a certain amount of initiative needs to be taken by one or a group of actors if public goods are to be provided jointly. As a result, we find power being yielded by central actors in varying degrees in order to facilitate cooperation. Thus, a central body may consist of member-actors who only make framework decisions that subsequently are made more specific by actors at the decentral level, or the central body may delegate power to members to implement the decisions. However, it is also conceivable that the outcome of autonomous actors cooperating voluntarily is strict implementation by command-and-control once a decision is agreed. Depending on whether the decision is vaguely, as opposed to precisely, formulated the ensuing latitude for such actors is either great or little. Power to sanction noncompliance may again be vested in a central body or, alternatively, in decentral bodies (Martin 1994).

Another important institutional setting in which solutions to collective action problems at international level are found is negotiations in bipartite, tripartite, or multipartite actor constellations. However, it can often be linked to elements of various forms of hierarchy. Thus, if negotiations are not successful in bringing about a solution to a problem, actors may move out of the arena and turn to a court or a tribunal for a ruling in order to overcome the conflict. In anticipating this possibility, actors may be more willing to compromise. Thus, in the European dispute over social policy, if social partners do not negotiate an agreement successfully, the Commission may propose legislation for submission to the Council of Ministers. The ‘shadow of hierarchy’ (Scharpf 1997) speeds up negotiations. Some actors are particularly apt at brokering agreements in negotiations at international level in order to bring about a common solution. In the European context, the Commission has played a pre-eminent role in hammering out such agreements by acting as a policy entrepreneur and broker in different arenas, bargaining with various actors simultaneously in order to develop solutions acceptable to all, for example, by proposing package deals, compensation payments, etc. (Grande 1995).

Yet another institutional arrangement is the self-organization and self-regulation of actors. Self-regulation in providing a public good or common-pool resource implies that the same actors who make joint decisions about how to provide the common good also implement these decisions. The actors concerned build on the motivation, expertise, and resources of the actors immediately affected in order to provide public goods (Mayntz and Scharpf 1995). These forms of self-governance are also linked frequently to elements of hierarchy, such as the possibility of appeal to a third-party tribunal (Ostrom 1990).

Finally, markets may serve as an institutional context for the provision of public goods and commonpool resources under specific conditions, for example, when a group of actors have such high stakes that they engage in the provision. It has been increasingly claimed that quasimarkets should be created to provide public goods and common-pool resources (Le Grand 1991). Thus, many Western countries have promoted the liberalization of state monopolies in the provision of network utilities. However, a pure form of market as an institutional arrangement for providing public goods and common-pool resources can rarely be found either. Rather—as, for example, in the case of the provision of network utilities—markets are regulated at two levels: in terms of market creation to guarantee competition on the one hand, and at the level of market correction as regards ‘service public’ obligations to guarantee the accessibility and affordability of these services. Here—as with other institutional arrangements—two or three different types of institutional arrangements for providing public goods or common-pool resources are combined rather than existing separately as pure forms.

A further, more contextual institutional mechanism for solving collective action problems is the development of ‘social capital’ and trust among the actors concerned (Taylor 1996, Hardin 1993). The underlying notion is that you can trust the others involved to cooperate in the provision of a public good. Trusting others is reasonable because it is in their interest to be trustworthy in a specific situation in which a social dilemma is to be overcome. One’s own trust depends on the interest of the trusted (Hardin 1999).

The instruments of command-and-control, bargaining, setting incentives, persuasion, and information are often closely linked to the institutional settings in which they are applied. Thus, command-and-control is often applied in a hierarchical context where a government authority requires the regulatees to behave in a particular way and where sanctions are applied in cases of noncompliance. However, a majority decision can also be made in favor of applying incentives. Hence, hierarchy may be linked to instruments other than command-and-control. In the institutional setting of negotiation in bi-, tri-, and multipartist settings, bargaining, together with issue linkage, compensation payments, and compromises are the main instruments used to reach agreement, while deliberation and argument also play an important part. The negotiation process may, however, also result in the application of a strict prescription of behavior linked with the levying of fines. Incentives are set in the institutional environment of the market. Trust would be linked to information and persuasion.

4. Implementation

Agreement on a joint institutional solution to provide a public good does not automatically guarantee its implementation. The path from decision-making to the final realization of the measure is a long one, and many obstacles may prevent it being a smooth process (Pressman and Wildavsky 1973, Mayntz 1983, Windhoff-Heritier 1980). At international level, typically we are faced with the situation that the definition of the goods and institutional solutions for providing the public good or common-pool resource occur at international level, while implementation takes place at national level. This may raise particular problems of compliance. Thus, for example, if an international environmental agreement stipulates the extent and time-span for a reduction in CO emissions, this does not mean that the signatory states, in cooperation with industry, will necessarily honor their obligations.

Research on implementation concludes that solutions for providing public goods that are redistributive in nature have little chance of being realized, whereas solutions with distributive outcomes, where all stand to win, meet with fewer difficulties. This applies as long as the redistributive solutions do not rely on hierarchy/command-and-control that prevents actors who are adversely affected by the decision from trying to change the contents of the decision in the course of implementation; and as long as those who are to benefit from the potential solution do not mobilize in order to exert pressure for a speedy implementation process (Windhoff-Heritier 1980). However, since hierarchical guidance and command-and-control can only be used to a limited extent in international governance, effective implementation depends much more on setting incentives which induce actors, over whom there is no hierarchical control, to comply with the agreed solution. Alternatively, it depends on societal mobilization where the actors profiting from the agreement press those who resist implementation into compliance. The same effect may be achieved if an agreed provision is deeply embedded in existing societal value systems. Furthermore, by using reputational mechanisms parties which do not comply are ‘named and shamed’ into compliance. The noncompliance of a state would result in the loss of reputation.

5. Outcomes And Impact Of The Institutional Provision Of Public Goods

A final question relates to the outcomes and impacts of specific institutional provision of a public good at international level. What are the policy outcomes of such a solution and how does it affect existing governance structures? The first question addresses the problem-solving capacity of an institutional solution, i.e., the performance of the institutional setting that has been created and the instruments applied in solving the problem. Thus, the question may be raised: does an international environmental agreement help protect endangered natural resources? Since institutional solutions are largely negotiated with a view to their potential distributional outcomes, their de facto distributive effects must be identified. Who gains and who loses on account of a specific institutional solution, and what does this mean in terms of the stability of the chosen solution? The second aspect relates to the fact that specific institutional solutions to public good problems across boundaries affect existing governmental and governance structures. Thus, the formal decision-making powers and the de facto power of national actors are changed by specific institutional solutions to problems. A case in point is the attempts of the European Union to solve collective action problems in environmental policy that have challenged the competencies of subnational actors in the member states. Similarly, the de facto involvement of Euro-associations in policy shaping has implied a loss of political power of national associations. Finally, the question must be raised as to how the overall structure and functions of the traditional state change in an environment where public goods are provided by forms of international governance. Does it imply the demise of the traditional state (Majone 1996, Grande and Eberlein 1999) in direction of a the regulatory state?

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