The task of public institutions to "handle problems"


The most important characteristic of public institutions is that they have been created to “handle problems” (Frederickson and Pallas, 2; Liu and Horsley, 3).This means that public institutions are the outcome of a collective effort of a group of people faced with collective action problems in the creation and distribution of a public good. According to standard economic theory, public goods are characterized by being both non-excludable and non-rivalrous and therefore, their production is beset with the free rider problem (people refusing to contribute and hoping everyone else will do their part and lead to the production of the good). In order to avoid the non-production of the good, the state generally steps in and coercively imposes a society-wide sharing of the burdens necessary to establish the production of the public good (Investopedia - public goods). While disaster relief could be organized on a private basis, with the subsequent exclusion of a large number of people, this has been considered inappropriate given the large cost in lives it would entail. Thus, similarly to other classical public goods such as national defence or flood protection, states have decided to handle disaster relief through state-run institutions.

Note: See source document for full reference.

Applicable to: