p11
Financing Public Goods and Social Overhead Capital: Some Historical Lesson
Anne EC McCants
NOTES (pdf), SLIDES (pdf)
Abstract:
Public investment: what is it good for anyway? In the summer of 2011 most of the industrialized world finds itself once again in heated debate about this question, with expected answers ranging from an extreme perspective of nothing to a great deal indeed. This paper raises a number of questions about the economics of public good provision and social overhead capital investment, in particular how such investments have been financed in the past, and the historical performance of such investments for generating (or stifling) human welfare and economic growth. A number of historical examples will be reviewed (medieval church and bridge construction, 18th c. canal and road transport improvements, and 19th c. investment in railroad construction) to assess the macro-economic and social welfare implications of public investment, and the strategies employed to secure the financing for such investments in the past. Given the current world retrenchment of resources for public investment, we might wonder if there is a tendency to systematically under invest in public goods and social overhead capital? History has much to teach us here of direct relevance to the contemporary debate about public spending.