The Normative Problem of Merit Goods in Perspective

Abstract

International audienceIn his Theory of Public Finance (1959), Musgrave invented the concept of merit wants to describe public wants that are satisfied by goods provided by the government in violation of the principle of consumer sovereignty. Starting from Musgrave’s mature discussion (1987), I construct two categories to classify the explanations of merit goods. The first strand of thought attempts to justify merit goods within the New welfare economics, by modifying its assumptions to accommodate irrationality, uncertainty, lack of information, and psychic externalities. The second category encompasses more radical departures from consumer sovereignty, drawn from philosophical critiques of economics. In the third part of the paper, I argue that the two strands might be represented by a non-individualistic social welfare function. I also show how this solution echoes Musgrave’s early views on public expenditures before he coined the concept of merit wants. From an historical perspective, the survival of the concept highlights the persistence of a social point of view in welfare economics

Calabresi on Merit Goods

“…16 In fact, Calabresi acknowledges that there would still be reasons to forbid some forms of trading on human parts and lives, even if the distribution of income would be radically equalised: "Even under conditions of almost absolute egalitarianism or wealth neutrality, we may well feel that one must still be given a certain education and a certain sphere of bodily integrity, however minimal, and that these should be inalienable, that one should not be able to forgo them, for example, by selling oneself into slavery." (Calabresi, 2016, p. 194 n18) The most popular rationale for merit goods which is not directly taken up by Calabresi involves paternalistic reasons (see Desmarais-Tremblay, 2016). Even if they had the money, some people would not make the best decisions for themselves.…”

“…Through taxation and regulation, the state could also aim to decrease or ban the consumption of "demerit goods" such as drugs, tobacco, or prostitution. Musgrave did not provide a complete justification for why certain goods should be labelled as merit goods, but he hinted at different rationales (Desmarais-Tremblay, 2016).…”

Paternalism and the Public Household. On the Domestic Origins of Public Economics

“…18 Musgrave does not use the concept of merit goods in his dissertation, but he talks about 'socially interpreted individual wants' which I think is a direct antecedent. See Desmarais-Tremblay (2016) or Desmarais-Tremblay (2017a).…”