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June A. Sekera, The Public Economy in Crisis. A Call for a New Public Economics

Maxime Desmarais-Tremblay
p. 585-588
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June A. Sekera, The Public Economy in Crisis. A Call for a New Public Economics, Berlin: Springer, 2016, 128 pages, ISBN 978-331940486-8

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1The state is a difficult realm to conceptualise for economists. It used to be the main object of early treatises of political economy in the seventeenth and eighteenth centuries. As the classical and neoclassical approaches, with their focus on commodity production and market interactions, established themselves as the core of economic matters, the public economy has been relegated to a derivative subfield. In this Springer Brief, Sekera is motivated by the question of “how to restore the role of the state as a strategic agent that creates and implements collectively binding solutions on behalf of all citizens” (23). She blames market-centric economics for the government’s failure to achieve what should be its goals, that is to satisfy social needs. Her objective is twofold: To identify the limitations of mainstream economic and managerial visions of the government and to suggest a way to conceptualise the reality of the public sector. Ultimately she hopes that adopting positive representations of the state might change the way public policy is conducted and participate in a constructive democratic dynamic.

2Sekera is a public policy practitioner who brings three decades of experience at the Federal, State and Local levels of government in the United States to her reflection. She observed on the ground how the neoliberal vision gradually transformed public administration practises without any explicit and public discussion on how it affected the capacity of the state to realise its purpose. She did not find in the existing literature in public economics and public management a convincing alternative to market-centric theories of the state. This vantage point explains the interesting range of references on which Sekera relies, especially from outside the academic literature in public economics.

3The neoliberal vision presents itself as the only rational approach to government, imposing blinders on alternative perspectives. One of Sekera’s target is New Public Management which she characterises as a “real-world manifestation of neoclassical economic theory” (17). She provides a few examples of failed administrative reforms in the US (prisons, jobseekers support, the “Obamacare” website) that were motivated by narrowly conceptualised goals of efficiency improvement. In each case, the importation of private sector management techniques disregarded the particular nature of the public sector. Sekera shows how outsourcing at every step of the production and delivery of public services has often resulted in significant cost increases. Paradoxically, financial scandals involving many contractors fuelled resentment toward the government which, in turn, helped the advocates of privatisation in their ideological quest for shrinking the scope of the public sector. More generally, so the argument goes, by seeing citizens as consumers, “market mimicry” would pose a threat to democratic governance.

4Sekera’s main argumentative strategy is to identify the differences between the market economy and the public economy in order to show why the “transplant” does not work. For instance, the logic of competition does not apply to the public sector because the government acts as a monopsonist and because free entry and free exit in governmental services are often not possible. Information asymmetries and principle agent problems are also widespread. Prices do not restrict supply. Rather, administrative rationing follows from the legislative appropriation of a determined quantity of financial resources. Most goods are provided for free, or sold at prices that are not economically significant. Moreover, the state is less risk-averse than corporations and private individuals, and can therefore invest in very long-term projects. Its indefinite horizon also explains why it can protect natural resources from overexploitation, with a duty of care for future generations. Some goods and services provided by the government have been conceptualised by Richard A. Musgrave as non-rival and non-excludable. This definition assumed that citizens-consumers are able to assess the benefits of public services, which is not the case for merit goods like healthcare, education, and many cultural goods. What is more, a substantial share of public expenditures funds useful, but partly invisible, programmes for the prevention of catastrophes, for the maintenance and repair of infrastructure, etc. To be fair, Sekera should have acknowledged that many of these features are not differences of nature between the market economy and the non-market public sector, but more differences of degree. The causes of market failure, such as asymmetry of information, principal agent problems, increasing marginal returns and non-rivalry are also present, to some extent, in the market economy.

5For Sekera, contrary to the bilateral exchange of markets, the public economy can be represented as a “three-node production flow” between the government as a producer, the public beneficiaries and the elected representatives (62). The government must work with often ambiguous demands from the population and conflicting goals from its elected representatives. As Musgrave remarked a long time ago, political processes are central to the public economy. Unfortunately, economists have taken narrow paths to conceptualise them, either in public choice or in social choice theory. Sekera’s suggestion for a realistic institutional theorisation of the public non-market is interesting, but it is only a call for a new theory, as the subtitle of the book states. Contrary to what the publisher insinuates on its website, the short book does not propose a fully fledged alternative theory of public economics or public management.

6The main flaw of the argument is the amalgamation between neoclassical economics, the neoliberal vision and public choice theory. A more nuanced presentation of the different economic approaches to the state would have prevented some sweeping generalisations about the “mainstream”. A sympathetic reader might be convinced by the author’s rejection of any catallactic approach to government and might support the idea that public action should be driven by “societal needs”. This reader might have been interested to know that this way of conceptualising the public sector was common among German economists in the nineteenth century and it was also Musgrave’s starting point in public finance. This reader might not be convinced by Musgrave’s efforts to bring this vision of a distinct public sphere in line with the market failure approach in the 1950s. Yet, the broad spectrum of conceptualisations within the neoclassical family calls for a more qualified judgement on their fruitfulness for any theorisation effort on the functioning of the state (see Marciano and Medema, 2015).

7The book is part of a new series of short Briefs published as ebooks and printed on demand by Springer (similar to the Palgrave Pivots). The price tag of €44 for a softcover is more reasonable than many other academic books, but for 128 pages it still comes up to a hefty price per page. What is more disappointing is the lack of editorial work by the publisher. Sekera writes in a clear and easily accessible language, but the argumentation is often sketchy with many very small paragraphs and numerous lists of elements. Furthermore, there are some repetitions over the chapters that could have been avoided by a thorough editorial job. The layout also leaves something to be desired, especially coming from a renowned academic publisher.

8All things considered, this thought-provoking book should inspire future conceptual work on the public economy. One unaddressed question is the extent to which the unsatisfactory nature of mainstream economic visions of the state is due to a defective theoretical framework, as the author argues, or rather to the values promoted by these visions. With hindsight, the new public management that guided policy reforms in the 1990s focused on making efficiency gains (perhaps at the cost of promoting equality of opportunity), which is one of the values at the heart of the welfare state. Another question is whether it is possible to develop a theory of the public economy centred around the production of goods and services. Against those who argued that the nature of public goods laid in their joint supply, Musgrave and Samuelson showed that some goods were public because of the particular way in which they are consumed (Desmarais-Tremblay, 2017). Goods are public because their consumption is non-rival and because it is difficult to exclude consumers from their enjoyment even if they do not pay for it. These features stand irrespective of who actually produces these goods. Beyond this neoclassical framework, Mariana Mazzucato (2013) has recently shown how the government plays a crucial role in growth-fuelling technological innovation. This is perhaps a good starting point for a more systematic understanding of the productive role of the state in economics.

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Bibliographie

Desmarais-Tremblay, Maxime. 2017. Musgrave, Samuelson, and the Crystallization of the Standard Rationale for Public Goods. History of Political Economy, 49(1): 59-92.

Marciano, Alain and Steven G. Medema (eds) 2015. Market Failure in Context. History of Political Economy, 47(Suppl.).

Mazzucato, Mariana. 2013. The Entrepreneurial State: Debunking Public vs. Private Sector Myths. London: Anthem Press.

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Référence papier

Maxime Desmarais-Tremblay, « June A. Sekera, The Public Economy in Crisis. A Call for a New Public Economics »Œconomia, 9-3 | 2019, 585-588.

Référence électronique

Maxime Desmarais-Tremblay, « June A. Sekera, The Public Economy in Crisis. A Call for a New Public Economics »Œconomia [En ligne], 9-3 | 2019, mis en ligne le 01 septembre 2019, consulté le 13 juillet 2020. URL : http://journals.openedition.org/oeconomia/6174

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Auteur

Maxime Desmarais-Tremblay

Goldsmiths, University of London. M.Desmarais-Tremblay@gold.ac.uk

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Les contenus d’Œconomia sont mis à disposition selon les termes de la Licence Creative Commons Attribution - Pas d'Utilisation Commerciale - Pas de Modification 4.0 International.

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