In a market economy where the consumer is king, merit goods will be underused
and underprovided.
Even if some people cannot afford the merit goods or do not want to enjoy or
consume them, government may feel like compelling people to enjoy these goods, at
least for the improvement of society. Often, the classification of a resource as a merit
good stems from the existence of external effects. Thus, although education and
health care are both provided by markets, their positive external effects provide a
good reason for government wishing a widespread consumption. Other reasons for
naming them as merit goods include: (1) interdependent utility functions, i.e., use of
the merit good affects directly the utility of another. (2) individual preferences
deviate from individual welfare e.g., when ignorance, shortsightedness mislead
preferences, resulting in underuse.
Basically, the merit good is undervalued in market settings, from the demandside. Concurrently, there is, however, a political (sometimes, collective) recognition
and appreciation of the social value of the merit good. Query: Who decides whether
something is a merit good or not and how far should government support goods,
particularly if the good (e.g. education and health care) is provided to some extent by
the market?
17.4.3 Social Capital
Social capital is a different type of capital good which generates value having a
social dimension. Briefly, social capital (Hanifan 1916) tries to bring up what counts
significantly in the daily lives of people: fellowship, goodwill, sympathy, and social
interaction among the individuals and families who comprise a social unit. Left to
himself, the individual is socially helpless. However, when he meets other neighbours, given adequate interaction, social capital is generated and accumulates. This
might satisfy his social requirements as well as substantially improve the living and
social environment of the whole community. Not only the whole community
benefits by the cooperation of its components, but actually, in his associations –
the individual finds the added advantages: help, sympathy, and fellowship from his
neighbours.
Coleman (1988) proposes a more functional definition, highlighting the value of
social networks, with an associative productivity. There is the possibility that such
social capital, while useful for certain activities might be harmful for other actions.
There is an emphasis in the relationships between and among persons.
482
17 Infrastructure as Public or Private Goods
and underprovided.
Even if some people cannot afford the merit goods or do not want to enjoy or
consume them, government may feel like compelling people to enjoy these goods, at
least for the improvement of society. Often, the classification of a resource as a merit
good stems from the existence of external effects. Thus, although education and
health care are both provided by markets, their positive external effects provide a
good reason for government wishing a widespread consumption. Other reasons for
naming them as merit goods include: (1) interdependent utility functions, i.e., use of
the merit good affects directly the utility of another. (2) individual preferences
deviate from individual welfare e.g., when ignorance, shortsightedness mislead
preferences, resulting in underuse.
Basically, the merit good is undervalued in market settings, from the demandside. Concurrently, there is, however, a political (sometimes, collective) recognition
and appreciation of the social value of the merit good. Query: Who decides whether
something is a merit good or not and how far should government support goods,
particularly if the good (e.g. education and health care) is provided to some extent by
the market?
17.4.3 Social Capital
Social capital is a different type of capital good which generates value having a
social dimension. Briefly, social capital (Hanifan 1916) tries to bring up what counts
significantly in the daily lives of people: fellowship, goodwill, sympathy, and social
interaction among the individuals and families who comprise a social unit. Left to
himself, the individual is socially helpless. However, when he meets other neighbours, given adequate interaction, social capital is generated and accumulates. This
might satisfy his social requirements as well as substantially improve the living and
social environment of the whole community. Not only the whole community
benefits by the cooperation of its components, but actually, in his associations –
the individual finds the added advantages: help, sympathy, and fellowship from his
neighbours.
Coleman (1988) proposes a more functional definition, highlighting the value of
social networks, with an associative productivity. There is the possibility that such
social capital, while useful for certain activities might be harmful for other actions.
There is an emphasis in the relationships between and among persons.
482
17 Infrastructure as Public or Private Goods