Within
the w e b e econornics hework,
the
optimal level of provision of
a
public
good
is
determineci
in
part
by
the
preferences of the citizens
witbui
that
particular jurisdiction for that public
good.
The socially optimul state is
a
condition where
the
amount of the public good desired and the amount
of
the
public
good
thot
should be provided by the public sector
are
the same.
R
s
differentiates the weIfâre
econornic approach of
addressing
the
potential under-pncing of
hear
idhutructure fiom other approaches,
such
as
strictly
financial
assessments of cunent pricing
practices.
Financial approaches to
correct pncing
initiatives
tend to only require costs of
municipal
seMces to be covered, regardles of
what
might be
ccnsidered the socially optimal level of public service provision, or the distribution of the cost of this
service among its citizens. Simply, fiaancial approaches to
correct
pricing
do not reco-
problems
associated
with private
market
Eailures.
Rational
Versus
The Extra-Rational Aspects
Of
Municipal
Semce
Provision
The
rational versus
the
extra-rational
aspects
of the supply process
are
seldom considered
in
the traditional
discussions of encouraging efficienciw
in
the use of municipal
services.'
The administrators that supply the
local services, however, inevitably
have
an
important role
in
ensuring the efficient levels of provision
and
consumption of public
goods
and
services.
As
argued
by
Bailey:
[tlhe conventional argument for user-charges,
that
there
will
be
excess
demand
for
seMces
provided
free
at
the
point of use
(a
demand
side explanation), is too simplistic
in
that
it
ignores
the
decision-making
mechanism
which deterrnines supply.9
There might
be
cases
in
which politid actors and bureaucracies have
interests
in
ensuring
that
inefficiencies
penist
in
the
provision of municipal services.1° For
instance,
the
over-supply of physical
services by
a
political agency
Mght
be
undertaken
as
a
way of providiag evidence
of
his
or her physical
accomplishments.
Roads,
schools,
and
water
and sewage networks
are
often
considered evidence of
the
achievernents of
a
govemment currently
in
office. Altematively,
the
theory
of seif-serving bureaucrats,
wbose interests
are
directed towards expanding the bureaucracy
and
guaranteeing
jobs
and
promotions
in
8
Decisions
ma&
by
bureaucrats
and politicians
which
are
based
on
issues
other
than
efficiency
and
equity
are
considaed
eirtm-mtionul.
9
Stephan
Bailey.
''User
Charges
for
Urban
Services."
Uhn
S d i e s .
Vol.
3
1 .
I
994.
P.
754.
10
It
should
be
recognized
that
economic muciels
used
ta
determine
the
political
and
bureaumatic optimum,
such as
Niskanen's
model,
r e v d
d i f f m t
objectives
between
the
politician
and
the
bureaucrat.
lhe
ciifferences
in
the
public
goods
and
semices
provision
optimums.
