on different things, the government is changing the allocation of
resources. Is this change good or bad? Should there be more schools and
fewer houses or more houses and fewer schools? More generally, should
we have more private consumption and fewer public goods, or less
private consumption and more public goods?
John Kenneth Galbraith’s 1958 book, The Affluent Society, proclaimed that
a correct assignment of marginal utilities would show them to be higher
for an extra dollar’s worth of public parks, clean water, and education
than for an extra dollar’s worth of TVs, shampoo, or cars. In Galbraith’s
view, the political process often fails to translate preferences for public
goods into effective action; thus more resources are devoted to the
private sector and fewer to the public sector than would be the case if the
political mechanism were as effective as the market. He lamented the
resulting “private opulence and public squalor.” Many economists would
argue that Galbraith’s observations are even truer today, 60 years after he
first published them.