An Interest Group Theory of Public Goods Provision: Reassessing the Relative Efficiency of the Market and the State

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Extending Brennan and Buchanan’s model of leviathan, in which rulers represent the residual claimants of constitutionally unconstrained tax revenue, this paper presents a model in which the government provides the level of public goods that maximizes its revenue surplus as a function of the cost of emigration. To the extent that emigration is impeded, government converges toward pure monopoly provision, generating monopoly rents that facilitate the rent-seeking society. In contrast with Niskanen’s model, in which governments tend to overproduce public goods, this model suggests that governments tend toward underproduction. This result undermines the notion that government must provide public goods to overcome the underproduction of private provision; in reality, government provision may be less efficient than private provision.