In general, people are aware that the state “ maintains itself” primarily from public tributes in the broadest sense, among which taxes are predominant. They also generally know that taxes are paid both by so-called ordinary people and by businesses and institutions of all kinds. Few, however, realize that this “universality” is only apparent, and consequently few, if any, are aware of the consequences of this state of affairs. My goal is precisely to make everyone aware of these consequences.
A prerequisite for the meaningfulness of any conversation and any discussion is that each side uses words in the same sense. Therefore, I first want to establish the meaning of the terms that will appear here. Namely, PRIVATE goods and services and PUBLIC goods and services and the corresponding market for each of these categories. I will stipulate right away that my definition of each of these categories differs from those used in the literature of so-called mainstream economics and social science. Unlike the many different and vague criteria for dividing these goods used in the mainstream, which I do not want to analyze here so as not to distract from the main problem, the only criterion I have adopted here is their PURPOSE for which they are used.
Using this criterion, by the term PRIVATE GOODS AND SERVICES I will refer to those, goods and services that people create in order to satisfy ALL OF THEIR LIVING HUMAN NEEDS, and I will call the market in which they make purchase and sale transactions of these goods and services the MARKET OF PRIVATE GOODS AND SERVICES.
In the second category, i.e., PUBLIC GOODS AND SERVICES, I will include those that are used EXCLUSIVELY for the exercise of PUBLIC POWER. In other words, these are goods and services that are needed ONLY IN THE PUBLIC SECTOR, and which NO ONE OTHER THAN THE PUBLIC SECTOR needs. As you can see, the application of the CRITERION OF PURPOSE means that any good can be unambiguously assigned either to the category of private or public goods. This, on the other hand, is not possible if we adopt any of the definitions used in the mainstream. I refer the inquisitive to the numerous sources available at the click of a button.
PRIVATE GOODS AND SERVICES are needed by ALL people regardless of whether at any given time they are acting only to satisfy any of their own needs, i.e. when they are acting in the so-called PRIVATE SPHERE, or whether they are acting, for example, in their role as a minister, mayor of a city, judge of a tribunal or any other FUNCTIONER of the PUBLIC AUTHORITY, i.e. when they are acting in the PUBLIC SPHERE. This is because such a minister, mayor or judge, for example, needs clothes, a car, fuel and many other PRIVATE GOODS AND SERVICES both when he goes on a private vacation with his family and when he has to attend a government meeting, a city council meeting or a court hearing.
It is completely different in the case of PUBLIC GOODS AND SERVICES. I don’t think anyone doubts that in private life, rather, NO ONE NEEDS, for example, a machine gun or a tank, nor the service of a prison warden or the head of the tax office, to name just a few examples of PUBLIC GOODS AND SERVICES for illustration. This is because these goods and services are needed ONLY by those who exercise some form of power or provide that power with their services. Thus, the MARKET FOR PUBLIC GOODS AND SERVICES is a market of ONE PURCHASER, which is the public sector understood as a whole, and MANY SUPPLIERS, who compete with each other. Professionally, such a market is referred to as a MONOPSON.
From the explanations given, it is clear that NO ONE from the PRIVATE goods and services sector appears IN THE ROLE OF PURCHASER in the market of PUBLIC goods and services, because, as I have already mentioned, they do not need them for anything. On the other hand, EVERY provider of PUBLIC goods and services MUST BUY PRIVATE goods and services both to satisfy his life needs and to be able to create and sell his PUBLIC goods and services in the market proper for them. Indeed, it is impossible to produce the machine gun or tank mentioned in the example (a public good) if their manufacturer does not buy steel, energy, labor services and many other PRIVATE goods and services necessary for the production of PUBLIC goods on the market. Similarly, a minister, a mayor or a tribunal judge cannot perform in his or her role if the relevant employee of that institution does not supply him or her with everything necessary for the maintenance and operation of any facilities of that institution. To put it another way, to produce ANY PUBLIC GOOD or provide ANY PUBLIC SERVICE their suppliers MUST USE PRIVATE GOODS AND SERVICES.
To sum up, while EVERY SUPPLIER of PRIVATE goods and services exists in this market BOTH IN THE ROLE OF PURCHASER (i.e., with demand) AND IN THE ROLE OF SELLER (i.e., with supply) of these goods, ALL SUPPLIERS of PUBLIC goods and services exist in the market for PRIVATE goods and services ONLY WITH DEMAND, while in the market for PUBLIC goods and services ONLY WITH SUPPLY.
This conclusion is of momentous importance for establishing the TRUE picture of the economic relations that prevail between the PUBLIC SECTOR sensu stricto, i.e. those who exercise power at all levels in a country, AND THE SUPPLIERS of public goods and services necessary for its exercise, on the one hand, and the PRIVATE SECTOR, on the other. This will be the subject of the next entry.