Egalitarian | Public goods and federalism

There is a growing concern on how public goods are provided in a federal framework given that the country is used to a unitary setup. Also, it was a source of hot discussions on how the public goods are provided.

Publicly produced goods are those that are provided by the government such as roads, hospitals, welfare services, public protection. To those with some advanced training in economics, they will readily think of the roads, trains, bridges, clean air, peace and order, and good health. These are characterized by a “constant returns” to scale.

When we say constant returns to scale, we refer to the mix of inputs and corresponding impact on output. Such that any increase in input will mean an equivalent increase in the volume of outputs. A public good is non-rival and non-excludable.

Non-rivalry means that one person who enjoys the benefit of using a road or a health care service cannot prevent others enjoying similar advantage simultaneously. On the other hand, non-excludability means that the enjoyment of a person in accessing the services of the government will not prevent others of access to it. When relating to technology requirement, any technology use will not hamper the production of the mentioned goods and their similar types. Hence, technology is of minimal requirement in public goods.

Compare this to a condition when the public good, say transportation, is viewed as a private good whereby, an ordinary citizen needs to pay for the services. Then a service may become rival but non-excludable.
The effectiveness of providing rival yet non-excludable goods rests on the assumption that all individuals need to consume the same level of goods. On this, the individual citizen needs to compromise. Note however that compromise needs to be effective else it will be costly. The government will be providing public services at a greater bundle to fit the heterogeneous characteristics of the large population.

Accordingly, compromise is usually initiated. Imagine the process of making compromise in a very large population. It will be very chaotic, but it is efficiently achieved in a smaller population. In addition, the partition of the people into smaller groups tend to facilitate less compromise because the division is a result of some defined characteristics such as culture and ethnicity, preferences and tastes.

Given this, the public goods are efficiently provided by a government that understands the people that demands it. The government that can do this is the State government and not the Federal government. The citizens obtain benefits from the goods, pay for these goods, and eventually, the general welfare of the individuals improves. The case at point is simple; a publicly produced goods need to be closer to whom it serves so that optimum benefits are enjoyed.

On the other hand, if the public goods are consumed collectively, a possible social loss is incurred. The social loss of the collective consumption is minimized when each is encouraged to consume the average of all citizens’ private demand for collective goods. The loss can be minimized if the publicly produced goods are provided by the State government for the consumption of its citizens who are similarly characterized given their geographic incidence, cultural beliefs, resource endowments, and general preference. Simply saying, it is what they want and what they want is what they consume. Since they consume it to their benefits, they pay for it; no other groups will be required to pay the benefit of the services other than those who enjoy it. This is the nature of public goods in federal setup; unlike in unitary where a subsidy to the MRT will be paid by all Filipinos whether they have used it in their lifetime or not.

How about a public good like a High Speed Train in Mindanao? The benefit of a high speed train in benefit cuts across economic and social benefits. It is a symbol of massive growth happening to Mindanao. And when MinDA takes a bigger and significant role in the implementation of the TransMindanao High-Speed railway, surely it is to the benefit of the huge majority. It is to the benefit of connectivity of the people in Mindanao, it is to the benefit of productivity, it is to the benefit of true development.

Federal Philippines and massive development of Mindanao are legacies of President Rodrigo R. Duterte; these also are the sources of passion and energy of the MinDA Chairman Secretary Datu Abul Khayr Alonto.

Posted in Opinion