Public Goods and Commons: The Foundation for Human Wellbeing [1 ed.] 9783111132525, 9783111134611, 9783111135113

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Roland Bardy Public Goods and Commons

Roland Bardy

Public Goods and Commons The Foundation for Human Wellbeing

ISBN 978-3-11-113252-5 e-ISBN (PDF) 978-3-11-113461-1 e-ISBN (EPUB) 978-3-11-113511-3 Library of Congress Control Number: 2023946633 Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available on the internet at http://dnb.dnb.de. © 2024 Walter de Gruyter GmbH, Berlin/Boston Cover images: Top left to bottom right: SergeyIT/iStock/Getty Images Plus; Daniel Balakov/E+/Getty Images; mbaysan/iStock/Getty Images Plus; Urupong/iStock/Getty Images Plus; vm/E+/Getty Images; loloalvarez/iStock/Getty Images Plus. Back: Fahroni/iStock/Getty Images Plus. Typesetting: Integra Software Services Pvt. Ltd. Printing and binding: CPI books GmbH, Leck www.degruyter.com

Preface This book was written when the war commenced by Russia against the Ukraine was damaging peace in Europe and its consequences were destructing food security, above all, in Africa, and when the effects of the COVID-19 pandemic were still impairing health in many countries and were also impeding the free flow of merchandise in world-wide supply chains. Global peace, global availability of food, global health, and global access to markets – these are foundations of wellbeing; they are public goods which need to be accessed by all members of humankind, and no one shall have to suffer from obtainability by another member. Free accessibility and non-depletion through the use by one individual or party is what makes the essence of public goods. But when war rages without a peace treaty in sight, when it obstructs food channels and damages lives and prospects of living, and when all this happens while a pandemic is still threatening the world, no such access to our primordial public goods is possible. There are more than just those four goods which are presently endangered by a warmonger and by a pandemic; to a certain extent, all of them, whether natural ones like clean air and fresh water or social ones like education and a well working labor market, are exposed to detriment if the society, on a global level and on all local levels, does not act with prudence and carefulness. Prudence and carefulness will not only protect and expand the public goods – and the wellbeing of all people, for which another expression would be the “public good”. Public goods, hence, are a foundation of the public good – or the “common good”. This term connects to “the commons”, which, other than being available to all, are participatory resources to which access may be restricted. Public goods foster the public good, the commons foster the common good – this is not just a play of words, but it describes a connection which a priori seems evident. As will be shown in the book, there is more to this nexus, both from the purely notional and from the pragmatic. The pragmatic relates to the outcomes, and the book will deal with the comprehensive efforts that are needed on a global scale to ensure that public goods provision achieves the public good. Some content that this book entails is related to a work which the author did in collaboration with Raymond Saner of Basle University, Lichia Yiu from the Centre pour le Développement Socio- Éco-Nomique in Geneva and Arthur Rubens of Florida Gulf Coast University, and which was laid down in their joint publication “Public Goods, Sustainable Development and the Contribution of Business” (Cambridge Scholars Publishing, 2021). The focus, here, is different, even though there is no doubt that the business sector, when partaking in the provision of public goods, contributes substantially to the public wellbeing. The author of this book, nonetheless, feels the need to acknowledge his gratefulness to his colleagues Raymond, Lichia and Arthur for allowing him to build, in part, on their common composition.

https://doi.org/10.1515/9783111134611-202

Contents Preface

V

Introduction

1

Chapter 1 Defining public goods and commons 4 1.1 The societal/philosophical approach 4 1.2 The public finance perspective 9 1.3 The property rights approach 11 1.4 The commons: Collective ownership and self-regulation 14 1.5 Connecting public goods and commons to human wellbeing 18 1.6 Public goods and the measurement of wellbeing 21 Chapter 2 Typologies of public goods and commons 25 2.1 Fully or not fully non-excludable and non-rivalrous: Pure, impure and club goods 30 2.2 Collective spending 32 2.3 Local – regional – global 34 2.4 Intergenerational public goods 37 2.5 Club goods of a specific type: The commons 40 Chapter 3 Sources for providing public goods and commons 42 3.1 Who creates benefits to society? 42 3.2 The role of the public sector 44 3.2.1 Providing systemic governance for societal concerns 45 3.2.2 The example of public health 47 3.2.3 The example of public education 51 3.3 The welfare state 56 3.4 Externalities: Who pays for public goods usage? 59 3.4.1 Contingent valuation 62 3.4.2 Free riding 65 3.4.3 Philanthropy 65 3.5 The private sector providing public goods 67 3.5.1 The contribution of private business 68 3.5.2 Corporate responsibilities: Social returns and market returns The triple bottom line and the multiple capitals concept 73 The circular economy 80 3.5.3 The role of civil society organizations (CSOs) 83

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3.6 3.6.1

3.6.2 3.6.3

Contents

Public-private partnerships (PPPs) 88 Models and content of PPPs 88 Construction 89 Water 90 Health 91 Education 94 Beyond the local level 96 Co-funding and co-production 98

Chapter 4 Policymaking and managing 101 4.1 The commonstock and the dis-appropriation argumentations 102 4.2 The market failure argument 106 4.3 Policies that lead out of the antagonistic public-versus-private resentment 108 4.3.1 Solving the decision makers’ dilemmas 109 4.3.2 Convincing and non-convincing solutions 112 Japan’s resources policy 112 “Green Deals”: U.S. climate policy and the European Union’s green taxonomy 113 Austerity measures in the United Kingdom 114 Labor market policies in Europe 115 Privacy protection and policies in the European Union 117 4.4 Frameworks for managing collective efforts 121 4.4.1 Legal requisites 121 4.4.2 Risk sharing 122 4.4.3 Public consultation 124 4.4.4 State participation in commons 125 4.4.5 Mirroring viewpoints of practitioners on PPP management with theory 126 4.5 The database 129 4.5.1 Which value for which goods? 130 4.5.2 Non-monetary value indicators 133 4.5.3 Monetization of tangible and intangible public goods 137 Resource effectiveness for the Urmia Lake Basin 142 Social capital in sustainability reporting of Italian cities 144 4.5.4 Public goods in public statistics 147 4.6 Monitoring public goods provision 150 4.6.1 Enablers and monitors global collective efforts: WTO, UNCTAD and UNHRC 152

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4.6.2 4.6.3 4.6.4 4.7

Food security: A global public good to be controlled bottom-up Safety for fishermen 161 Standards: A means to control provision of public goods 163 Fighting corruption and free riding 166

Chapter 5 The global level revisited: Public goods in the SDGs 175 5.1 Social, economic and ecological wellbeing are inseparable 5.2 Societal control 178 5.2.1 Transformation of issue spaces 179 5.2.2 Control activities by the global non-profit sector 180 5.2.3 Rediscovering social capital 182

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Conclusion: Businesses, individuals and state actors collaborating for public goods and human wellbeing 186 References Index

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Introduction Human wellbeing, whether for individuals, for families, for regions or countries rests on a large array of factors and prerequisites. Its constituents can be determined as personal and public security, access to basic materials, to infrastructure, to food, healthcare, good social relations and last not least as the freedom of choice and action. The enumeration clearly spells one basic presumption: The individual is intrinsically linked to the public – without a foundation laid by the community, there is no wellbeing for a member of it. The other indication given by that enumeration is that there are components which can only be provided if they are available to each and everybody and that no one can prevent someone else from using them – which certainly is the case with the provision of public security of clean air and fresh water and the provision of freedom to choose one’s action. Here we are with two terms in the definition of public goods: non-rivalrous consumption and non-exclusive accessibility. These terms denote publicness and hence there is a close relation to the terms of the “public good” or the “common good” which can be seen as a synonym of public wellbeing. So, studying the economics of the public good should include the perspective that it is built, to a large extent, on the provision of public goods. This perspective, though, is not very often found in writings on human wellbeing and on the public good. E.g., in “Economics for the Common Good”, a text recently published by Nobel laureate Jean Tirole (Tirole 2017), only a short paragraph mentions the connection. This book will attempt to close that gap. The public good – the wellbeing of people – has been a foremost concern for humankind from the ancient Greek philosophers and early Christian authorities up to present time sociologists. Human wellbeing drives social and economic progress, and the ethical and policy foundations for fostering human wellbeing have influenced not only the conceptions of the topic; they have become the guiding principle for intervention by the state and other authorities until today. One such authority is Pope Francis: In his May 2015 encyclical, Laudato Si’: On Care for Our Common Home, he argued eloquently for common-good thinking in an ever-changing world. This is not just abstract idealism. Deliberating about the common good offers a useful framework both for setting shared goals and for working out how to achieve them. Francis talks about the need for subsidiarity (the principle that any issue that affects human wellbeing is best addressed at the most local level possible), and he calls for viewing the world through the eyes of the most vulnerable. For protecting the conditions that sustain human life, Francis asks us to explore whether social, economic, and political changes are needed. He argues that decision-making for the common good means defending the dignity of the socially, politically, and economically marginalized – not just with words but with policies and new forms of collaboration. It means building a network of solidarity through which the unheard can partake in critical decisionmaking processes. For the Pope, it is not enough to see the tenet of the common good https://doi.org/10.1515/9783111134611-001

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Introduction

as a corrective for the current system’s excesses, it should constitute the system’s central objective. Equally important is collaboration: All parties must be on the same page about the ‘what’ in addition to the ‘how’. With a common-good approach, each step of the process is almost as important as the result (Schneck 2016). From the angle of an economist, Tirole (2017, p. 1) asks whether the market economy has produced a new environment that sacrifices the concern for (public) wellbeing. With the crises of the twentieth century – wars, financial disasters, increased unemployment, the pandemic, climate change – the focus on wellbeing and social progress might appear to fall behind the pressing imperatives of economic enhancement and of building a new global order. There is no doubt that we live in a period of deep change and transformation with significant impact on societies, economies, and people. But history has shown (if we take, e.g., the industrial revolution) that there are often positive impacts of seemingly calamitous evolvements. There was progress which has improved the lives of people and has advanced societies. If we compare what we have now with how life was in pre-industrial times, there is visible progress in basic terms like providing access to water, access to food, job opportunities, and roads that reduce physical distances – public goods that all contribute to wellbeing. Some of them are provided by the state, and some are provided by the private sector. In both sectors, failures may evolve – whether through an over-emphasized predominance of the market or through excessive state-intervention. Overcoming these negatives through public-private collaboration eventually strengthens the welfare state, and it may also re-focus the attention on human wellbeing. Wellbeing will become a central concern in politics, in management, economics, and business sciences, in human resource and workplace management. These fields also connect to psychology, science, and medicine, and all of them relate to understanding how to improve and consolidate human wellbeing. Progress in society (and in science) develops the most when there are many areas of concern that overlap. There is an overlap, also, of the terms “The Public Good”, “Public Goods” and “Commons”; while they have different meanings that the book will keep apart, they will often appear to be intertwined. One case is that very often the outcome of policy decisions affects all three. Public policies affect the commons to a lesser extent, as they are “socially owned” (commons, per definition, are a broad set of resources, natural and cultural which are shared and governed by a definite group of many people1). But with regards to wellbeing, the commons often can contribute faster and more direct support through collective action and communal efforts. This can be seen when social coherence increases in crises like natural disasters or in circumstances that stem from manmade disasters such as the outflow of migrants from the war-torn regions of the Ukraine. Still, during times of crisis, in view of the magnitude of the problems, the call for receiving goods and services from the state also increases. So, commons and public

 For more on the definition of the commons see section 2.5.

Introduction

3

goods will merge into each other and together provide the power that is needed for a community to manage its concerns. If that community is mankind as a whole, the term “global commons” is an apt description for issues that span beyond national jurisdictions, when essential resources need to be managed or topics such as biodiversity conservation and climate need to be addressed by local, global, private and public actors. But there are distinctions between the goods concepts; the definitions that have evolved over time will not only improve the understanding, but also assist decision-making. Therefore, Chapters 1 and 2 will first present the various approaches to the phenomenon, followed by a discussion of the sources for public goods and policy considerations exhibited in Chapters 3 and 4. Then, Chapter 5 revisits the issue of global public goods, before a brief summary is given in the Conclusion.

Chapter 1 Defining public goods and commons There is a centuries old historical perspective of the topic which mainly builds on what philosophers, principally in Europe, have defined to be the responsibilities of the nation states. These responsibilities, in whichever form the nation state is governed, end up in representing all citizens and in ensuring that fundamental human rights are respected. So, there is a close nexus to individual and public wellbeing. But, as the view on the role of the state has changed over time, the view on public goods has, too. For the purpose of this book which aims to exhibit how the development, the use and the governance of public goods connect to human wellbeing, two more approaches to the phenomenon will be discussed: One is the public finance approach, the other one is the property rights approach. The public finance approach leads the way to the characterization of public goods that was mentioned in the Preface: they are non-exclusive (anyone can use them) and they allow collective consumption (when one person uses a public good this does not reduce the use by another person) – both promote wellbeing, i.e. wellbeing of all members of society. The property rights approach or legal approach sets the context to ownership of a good and the responsibilities connected with this ownership, and it exhibits how public-private interaction can provide the benefits that arise from those goods.

1.1 The societal/philosophical approach There have been efforts in all early societies to distinguish between what is public and what is private. One very distinct manifestation is what the Roman Republic phrased as res publica, which literally means “public thing/public affair”, and which is opposed to res privata. The term res publica has a triple meaning: It denotes (1) the executive power of the republic which it has over all its citizens; (2) the publicly accepted constitution set up by the republic; and (3) the objective behind the republic, which is the public or common good (bonum commune). Peter Wivel (2007) in his study The State and the Citizen – Natural Law as a Public Good, exhibits two concepts on which the Roman Republic was based: first, on consensus regarding the law, iuris consensus; and second, on common utility, utilitatis communio. The latter is drawn from the treatise De re publica written by Roman statesman and philosopher Marcus Tullius Cicero about 54–51 B.C., and the same concept is exposed by Saint Augustine, Father of the Church, in his extended book The City of God which he wrote from 413 to 426. Saint Augustine’s proposition is that any society is “the people’s concern”. Like Cicero, he pronounces that only a state governed by the people can be called a state at all. Like Saint Augustine, many European thinkers after him worked on the conception of “the state” and of “the bonum commune” as will be explicated below. But there https://doi.org/10.1515/9783111134611-002

1.1 The societal/philosophical approach

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were developments on the topic in the Far East well before the Roman republic. As early as 500 B.C., Confucius claimed that collectivist wellbeing ranks higher than individual. Confucianism’s perception of what is “human” is equal to the common good concept. It fundamentally considers that people’s actions stem from their membership to social groups (the family, the clan, the political community) and not from their individual motivations. To Confucius, the “good of the state” is the specific advantage which is shared by all and beneficial for all members of a given community (Zhang 2010). Confucius was a contemporary of the Greek philosophers Plato and Aristotle. It was their thoughts from which Cicero took his viewpoints, like Plato’s imagine of an ideal society where all goods are communal and Aristotle’s application of this to reality in life. Both, however, acknowledged that a “community of goods”, while largely beneficial to society and producing wellbeing for all, may not be the only resolution. It can also be beneficial, they said, if some goods are privatized and a charge is raised for their use (Tirole 2017). An example for this in present times is privatization and pricing for water as it will keep this good from being wasted, or the charges for carbon dioxide emissions, which “privatizes” the use of air and upgrades its quality, or allocating the limited resource of bandwidth to those operators who are able to use it in a way that benefits all (Tirole 2017, p. 5). The Greek philosophers’ main concern was the relationship between public and private interest. The writings of Aristotle strikingly appeal to the struggles of today in balancing the goals of state and the individual: “For even if the end is the same for a single man and for a state, that of the state seems at all events something greater and more complete whether to attain or to preserve; though it is worthwhile to attain the end merely for one man, it is finer and more godlike to attain it for a nation or for city-states” (Aristotle, Nicomachean Ethics, Book I, 2, [1094b], p. 7f.). As mentioned, Saint Augustine applied Cicero’s definition of res publica to his conception of the common good. He asked which types of “goods provision” should be delivered by the state. But while the Roman philosopher argued for “utility”” to be ultimate measuring stick of judging what the state should procure, St. Augustine’s petition was for a higher rationality: The decisive argument, according to his writings, would be “what the people hold dear” (Wivel 2007, p. 5). Hence it is consensus that determines whether a certain good should be provided by the state or not. This reasoning catapults Saint Augustine’s thinking into the most contemporary setting and towards what is meant to be “social welfare”. As per a definition created early on by Nobel laureate Kenneth Arrow, social welfare is not the group of assistance programs designed to ensure the wellbeing of a nation’s citizens, it is the outcome of these programs, of which he also said that it constitutes the state of social order, the “social state” of a community. Arrow argued that the aim of society can be “described by saying it seeks consent on how to maximize the social utility or social welfare subject to whatever technological or resource constraints are relevant”, “. . . it chooses the social state yielding the highest possible social welfare” (Arrow 1950, p. 334). So, while social welfare is certainly a public good, the public welfare policies are just its “input”. The various policies, e.g., as redistributional transfers or wage subsidies produce different outputs which, in their

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Chapter 1 Defining public goods and commons

total, yield the outcome of welfare. The obvious output of transfer policies, for example, is social peace and to reduced distortions in the economy (Sala-i-Martin 1992). The policies may be categorized as public goods per se or productive public goods because they produce an output (more on the categorization of public goods will be exhibited in Chapter 2 of this book). After St. Augustine, the history of Europe was shaped, in substance, through power struggles between the Catholic Church, whose authority kept growing, and the private interests of mighty kings, dukes, counts and other rulers of fiefdoms. As the control wielded by the papacy evolved through the Middle Ages, the church evolved into the guardian of common interests. For this, the term “unitarian” was coined by the U.S. social/political philosopher Victoria Held (Held 1970). The presumption is that when there is one unifying source that defines the best way of pursuing true needs and interests to the benefit of the common good, all members of society are served best. Simm very fittingly described what was believed at the time. The common good is viewed as objective and normative. It is not an object of discussion and debate but rather a law of nature and provides a God-given goal for the society. There is no fundamental opposition between the common good and the individual good. All individual goods are contained within a common good. The knowledge of the common good lies with good rulers. The only real threat for the common good arises when the rulers act in their own selfish interests. (Simm 2011, p. 558)

Whether it is sufficient or desirable to rely on a “good ruler” was seriously questioned afterwards. The most prominent critic was the English philosopher Thomas Hobbes, (1588–1679). In his view, “the state” is something which is independent from the structure of government. Best known is his comparison of the ruler of the to the figure depicted in his book Leviathan (1651), which he named after a creature from Jewish belief that has the form of a sea serpent, is omnipotent and breaks all resistance. It can only be overpowered by Behemoth of the Earth. Behemoth is a symbol of God’s power over nature. From there Hobbes derived the concept of the natural state. Human nature, he argued, would be able to craft an entity the would be the best format to further human development, irrespective of how it is ruled. This would warrant perfect freedom for a society and its citizens; it would guarantee security and protect private ownership. That entity is called, alternately, the common good or the public good and is brought about by the Laws of Nature. He said that “before social contracts and laws were formulated, neither justice nor injustice, neither public goods nor public evils were more natural among human beings than they were among animals” (Wivel 2007, p. 9). After Hobbes, the sequence of political thinkers in England who discussed the social contract and the public good went to John Locke (1632–1704), to David Hume (1711–1776) and to Adam Smith (1723–1790). Smith dealt with the concept of public good in what he wrote on moral philosophy, which then inspired John Stuart Mill (1806–1873). In Locke’s opinion, only a society with a representative democracy can uphold the Laws of Nature, and this parliamentary form of government was – in nuce – established in England in

1.1 The societal/philosophical approach

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Locke’s time. So, his followers’ concern was not which system of government to choose, but rather which politics affect the citizens’ wellbeing. The rationale was that for achieving common interest/the common good, one first must have choices, i.e., conscious moral choices. From these choices society’s laws are created. They include the question from where to provision the common good – whether it would be wholly procured by the state or through a configuration of goods provided both by the state and private parties. Therefore, what determines a public good would have to be social processes in which one catalyst is the pursuit of private interests. But these individual interests must be compatible with the public interest. The optimum is found where a society is capable to align these oftentimes conflicting interests. While one might assume this to be selfevident, there is ample evidence, currently, where private groups like militant environmentalists or greedy businesses take the public interest hostage and thus severely damage social processes that would have led to consensual decisions. Civil society organizations play an eminent role here. This will be dealt with later in the book. In view of the conflicts that are mounting between the various sectors of society, contemporary social philosophers emphasize that the most critical component for defining public goods is common interest. In consequence, they connect the definition of public goods to social and community-based arrangements. For instance, Dupré (1994, p. 173) speaks of “goods proper to, and attainable only by the community, yet individually shared by its members”, and Cahill (2005, p. 9) defines a public good to be a solidaristic association of persons that is more than the good of individuals in the aggregate. On another end, for Hollenbach (2002, p. 81) the common good (singular) is the good realized by the mutual relationships in and through which human beings achieve their wellbeing, while Deneulin and Townsend (2007, p. 20) argue that the extent to which goods are perceived as “public” – common goods – (plural) does not depend as much on their inherent characteristics as on prevailing social values within a given society: these values define what should be provided by non-market mechanisms. Sekera (2014), a contemporary sociologist, meanwhile points out that public goods can only be created through collective choice, that they need to be paid for collectively and that, in their pure form, they must be provided through non-market, public production without charging the cost to individual recipients. But sociology’s request that public goods provision must stay in public hands is failing as it does not look at the inadequacies of government: No government anywhere possesses the means, the power, and the abilities to procure all the essentials of life; what is needed to ensure the wellbeing of a society is collective action of all its members. The term “collective action”, while has been developed to denominate occurrences in many areas of the social sciences, like anthropology, psychology, political science, and economics, has best been applied by Mancur Olson’s reference to social processes that produce the common good. Olson (1965) posits that if a society or a group of people benefit from a public good, then they have a common interest and will make sure that the good is provided sufficiently (and not abused or deleted) and that it produces a generalized benefit. This is a very positive assumption, and it negates that there may be private groups who attempt

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Chapter 1 Defining public goods and commons

to abuse public interest, even though the assumption accepts that there will very often be a mismatch between individual motives and collective outcomes. On the other hand, it would allow that when one party needs to be rewarded for contributing to the outcome, the other parties will accept and provide this incentive. The reason is that otherwise the question may arise whether all parties would have to be forced to share the burden of cost. On this, Olson says that the attitude will generally be rational and self-advantageous; therefore, when some party would seek to get the result for free it will soon recognize that all are better off if a collective interest is realized (Olson 1965, pp. 14–15). Collective action works differently whether a group is large or small. When one member of a small group refuses to contribute its share, the others might withdraw entirely which would forfeit the effort altogether. Or, positively, if one self-interested member of the group foots the bill for the whole group, the collective action can still produce the common good. An example would be the case for wastewater treatment where one large production facility allows a few smaller ones to discharge polluted water into its treatment plant. In a large group this type of solution might be prevented by the lack of solidarity or deficiencies in communication and coordination (Olson 1965, pp. 48–50). Some critics of Olson’s declare that his idea of “convivial, expressive, affectionate and non-acquisitive behavior may work in the separate realm of leisure and consumption but not in business or in government” (Stretton and Orchard 1994, p. 68). Another line of reasoning which argues that there is an advantage of large groups in securing certain types of collective goods because a large group may often resolve itself into an assemblage of smaller groups (Hardin 2015). Nevertheless, a group whose members number in the millions may still include someone who finds that for the benefit to be produced by a collective good, singular action is needed (Crenson 1987, p. 230). This will often motivate philanthropy in areas that are not accounted for by multiple donors. For example, parents of schoolchildren may find that the outcome of basic education does not meet their expectations. So, they will start collective action on their communitylevel as shown by some notable efforts in Australia and in the U.S. which aim at raising the quality of public schooling. One case is the Florida-based initiative Enlighten Education,2 where retired teachers or other qualified persons assist within the schools. The program has extended beyond the state of Florida, not the least because school authorities supported the idea and made it widely known. Olson was also criticized for his supposition that coercion would be a substitute for voluntary cooperation where governments cannot persuade their citizens that they should join in contributing to maintain a public good. Coercion, the critics say, is notoriously ineffective to achieve consensus, and it would only succeed if it was supplemented by what is called “habitual obedience” (Schauer 2015, p. 7). Habitual obedience is not just complete subjugation; rational, self-interested people would also be obedient when they encounter a framework of enduring social relationships. An ex-

 https://www.enlighteneducation.com.

1.2 The public finance perspective

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ample of this is the decision-making processes in the European Union: Here the nation states habitually surrender parts of their erstwhile autonomy to this international regime because they believe that the regime provides and expands a broad array of public goods for their citizens (Hurrelmann, Schneider and Steffek 2007). There may be shortcomings in what Olson said about coercion and about the influence of group size on collective efforts and their outcome. But his contributions to the topic have led to explorations into the spectrum of public goods and how some of them convert into being not purely public (i.e., where benefits can be partially excluded from society as a whole). The example that is quoted the most is public swimming pools which can only serve a community if access is restricted: The number of users must be subject to an exclusion mechanism. But this may increase allocative efficiency. From this discernment, a typology has been developed that distinguishes between pure public goods, impure public goods and club goods. This will be dealt with in Chapter 2. At this stage, the discussion of the societal/philosophical view on the public goods phenomenon will be ended, and the other two approaches to the concept will be presented. While the philosophical view extends from the local to the regional and global levels because public goods like security and peace have a cross-border perspective, the public finance and the property rights approach are, at first sight, limited to the area of state finances and state regulation of ownership. But, as will be explained in the sections that follow, these two perceptions have ramifications to a global perspective as well.

1.2 The public finance perspective The public finance view on the phenomenon of public was first introduced by Nobel Prize winner Paul Samuelson. Samuelson reproached conventional economic thinking for solely concentrating on the theme of taxation without considering the topic of public expenditure and its destinations. He set up an explicit classification of goods which are available to society: One type, he stated (Samuelson 1954), are private consumption goods. They can be parceled out to different individuals. The other type is collective consumption goods; they can be enjoyed by all individuals at the same time and one individual’s consumption of that type of goods does not diminish its consumption by any other individual. These characteristics have been called non-excludability and jointness in consumption (or overall accessibility), and non-rivalry. Another term for non-rivalry is “indivisibility of benefits” (Drahos 2004). Non-rivalry and non-excludability are very strict terms, and even when looking at gradual deviations within these characteristics, Samuelson’s definition cannot wholly encompass the concept of neither public goods nor commons. The concept of commons is affected as well by the definition even though commons are partially private. As was mentioned above and will be specified below, policy frameworks for public goods may as well apply to commons. In their pure forms, commons are only available to private members. Access may be limited, and rival consumption can occur

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(like in a privately installed irrigation system for a big area of farmlands – which is the classic example of Elinor Ostrom who won the Nobel prize for her seminal work on the concept; see Ostrom 1990). With a special view on wellbeing, handling common goods can often contribute benefits faster (see Section 1.4 below). The weakness of Samuelson’s definition is that the claim of full non-rivalry and overall accessibility makes it highly restrictive. Strictly speaking, as observed by Buchanan (1999 [1968]) and others, no good or service will fit the extreme definition: There are almost no “pure” public goods. Buchanan proposed a classification that would embody various degrees of publicness. He pointed out that “jointness” can occur both in consumption and in production of a public good (e.g., public roads provided and used by both private businesses and the state). And he showed that external economies, or externalities, because of the many interrelations within an economy, arise in the provision as well as in the consumption of public goods. The behavior of one user can very often adversely or positively affect the consumption of a certain public good (Buchanan and Kafoglis 1963). An example is public access to water where one user can benefit to the disadvantage of another user. The other way round, others will benefit (a positive externality) from, e.g., education or vaccination paid for by someone else. The first economic contribution to the issue of private benefits from public goods and the creation of the term “externalities” came from Arthur Cecil Pigou who founded the School of Economics at the University of Cambridge (Pigou 1946). He referred to situations where a government finds it necessary to correct a societal problem where one party earns a benefit from public goods usage and another party receives a loss, and where no mechanism can be installed for compensation. This has later been equated with market failure (e.g., Bator 1958), and government regulation is seen to be the way out of this (see Section 4.2 of this book). But it has also been shown early on that an externality could also be dealt with through bargaining between the affected parties (Coase 1960). This book will deal with the theme of externalities in a separate section. But the concept is closely intertwined with public goods, and hence, it will appear in several passages of the text. Whether dealing with externalities or simply with the question of how to produce and to manage public goods, there have always been discussions between governments and businesses on the functions that should be delivered by the state. This discussion extends to the public at large: The reasoning goes about what should be “in the market” and what not, i.e., it should be provided by the state. But non-state actors are increasingly taking over – there are many examples, in the areas of health, security and education. Some political theorists deplore this to be of ‘neo-medieval’ character because there often is a “multitude of authorities and actors of varying power at different jurisdictional levels . . . that are moved more by political compulsion than by concern for all” (Offe 2018, p. 152). Is there really a need to deplore this? And does the reference to “medieval” make sense? Let us look how health issues were managed in the Middle Ages. We definitely see a configuration of overlapping authorities in the 13th and 14th centuries because

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hospitals were managed privately and funded privately by churches or charities, and state rulers only interfered when fear of infection and death broke out publicly. Similarly, poorhouses that were born out of charitable considerations would also shield the public from health concerns and against crime and social unrest (Desai 2003, p. 66). Certainly, this is not the case today. Significant public efforts have been made in health management ever since – whether in sanitation, induction of health certificates or quarantine, and this has led to significant change in how the public good of health is dealt with. While there may be differences in how the health sector is managed in different countries, there are always interventions from the public domain. The same applies to other public goods: roads, water, housing, and transport are always managed collaboratively by public and private actors. Desai (2003, p. 64) has suggested to examine the question of who shall do what by examining three basic issues: a) Preference revelation: Which goods does the public want in the public domain and what it is willing to pay for them to the public coffers? b) Political bargaining: How are decisions made on which goods to include in the public domain, how much of these goods to include, and how to make them accessible to all? c) Production of these goods by public or private agents. These “Three Ps of public goods provision” (preference revelation, political bargaining, production) can serve as a base to analyze the consequences which arise for policy makers if they approach a specific avenue for accessing the public goods issue. The three Ps do not include the topic of financing. The issues related to finance are covered in the sections which exhibit the sources of public goods delivery in Chapter 3. There is a similarity to the property approach which will be presented below: For many public goods, finance often comes exclusively from the state, and they are hence owned by “the public”; the ownership question becomes more difficult, if public and private funds are used. And commons often have other sources of finance, depending on their level: Global commons need public finance, local commons rarely do. This then has an effect on who can claim ownership and ownership rights.

1.3 The property rights approach Both the philosophical/societal access and the public finance access to the phenomenon of public goods are connected, at least to some extent, to another origin of the conception, which is the legal debate over ownership. For a long time, the conventional view among Western jurists was that the foundation of property in ancient times was occupation of land – either by a single proprietor or a family (Ostrom and Hess 2007). Then, in 1861, the English jurist H. S. Maine, having extensively researched, among others, on the work of 19th-century lawyer Georg Ludwig von Maurer on the ancient Germanic village communities (the “Marks”), concluded that “it is more than likely that joint own-

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ership, and not separate ownership, is the really archaic institution” (Maine 1963 [1861], p. 252). Beyond their academic contribution, these findings caused a major political debate in the late 1800s and the early 1900s over the status of common property, and the connotation of private property compared to common property remains contested in scholarship. The famous article by Garrett Hardin (1968) “The Tragedy of the Commons” on the impact of greedy conduct has foreshadowed the discussion on the demise of all collectively managed endeavors. However, in a 1998 update, Hardin acknowledges that his statement was led by an overestimation of how far greed might reach: He went back to the famous quote which he had taken from William Forster Lloyd’s 1833 Oxford lectures on pasturelands that were left open to many herds of cattle and where, with this resource available to all, the greediest herdsmen would gain for a while; but then, as demand would grow in step with population (while supply remained fixed), a time would come when all herdsmen would be trapped by their own competitive impulses and the unmanaged commons would be ruined by overgrazing. In his update, Hardin offered a way out, which was “most notably the suggestion that the way to avoid disaster in our global world is through a frank policy of mutual coercion, mutually agreed upon” (Hardin 1998, p. 683). Mutual coercion, to expand Hardin’s postulate, is a prerequisite for positive outcomes of all collaborative efforts, irrespective of how the goods in question are owned. Private actors can provide goods that contribute to public wellbeing – and, after all, most politicians agree that private property is a fundamental ingredient in economic development (see, e.g., Welch 1983). They would also agree that there are both rights and limits of private ownership: Ownership implies responsibility of the owners (and their property) for all actions relating to the property. These responsibilities mainly derive from moral considerations, but there also are legal provisions with regard, e. g., to land use (see Parkinson 2013) or to cases of collisions between copyright and competition law (see Ramello 2002). The legal protection of ownership rights is high, but the powers that are conferred to an owner in relation to others reach an end where they affect others negatively. This is “corrective justice”, a contested topic in law theory. It has been addressed since Aristotle (Weinrib 2002), and, in its extreme abridgement, it means that private ownership must be converted into public ownership when this can avoid harms to society. However, the very notion of what is public ownership is also contested: When an asset is publicly owned, this should not necessarily mean that a government or a state agency owns it. The primary meaning of public is the people; the people elect representatives to whom they confirm the management of this asset. This is a mechanism which must be embedded in a legal conception, and all affected parties must agree on this mechanism. Chapter 4 of this book will deal with the forms in which the public sector should fulfill its ownership responsibilities and how delivery of public goods by the state should be monitored. Apart from the legal treatment, there may be economic motivations that lead away from the hegemony of private property. It is commonly agreed that “within a system of property rights which protects and gives meaning to people’s right to be left

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in peace, individual initiative will produce the essential elements of human flourishing” (Schmidtz 1988, p. 185), but there also is consensus that this requires an efficacy of markets which may be faulty. Markets can fail. This is where the need arises for a public entity, a state, to step in: A state, to cite a famous statement by Mancur Olson, is “first of all an organization that provides wellbeing for its members, the citizens“ (Olson 1965, p. 15). The state provides benefits to all people irrespective of whether, or not, they contribute to the state´s budget by paying taxes or join in collective efforts to produce a public good. This collective provision of public goods is collectively rational, but it often may lack individual rationality, above all, when the benefits are distributed unevenly. The most frequently cited cases are publicly financed opera houses that are maintained, in part, from taxes paid by people who never visit a theater, and public schools that are also financed from the taxes of people who do not have children (see Towse and Hernández 2020). Is it “socially fair” (Kohn 2020) that citizens contribute taxes for governmental activities whose outcomes they do not share? The question essentially is what should be provided by the state and what should be left for private provision. On the question whether a good should be provided by the state and on which grounds, Adam Smith’s argumentation on lighthouses is often referred to by economists: Since the benefit of a lighthouse’s beams cannot practically be withheld from any ship passing by, the lighthouse should be regarded as a public good (see, e.g., Wood 1996, p. 130). At present times, the argument cannot hold: When Adam Smith lived, there was no alternative around to this warning system. However, 250 years later, state-of-the-art technology can provide an alternative like radar, and the production of this good can be adapted to demand. There are many other cases where a decision must be taken in the political field whether to convert a private good into a public good or vice versa, and politicians have to give a reason for this. They will always be confronted with side effects: Some economists, for example, take the case of the U.S. 1927 and 1934 legislation that privatized broadcasting, because, as they say, the ”control of the airwaves” through the broadcasters “meant that commercial values would dictate the evolution of our culture” (Bollier 2001, p. 67). But, for one, the state might not have had enough funds to develop broadcasting to new technical levels. And secondly, if we take the German public TV to prove the culture argument, the ca. 8 billion € that enter the coffers of the state annually from levies on each household and each business location are by no means contributing to raise the cultural content of the TV programs. The focus on education of public television in Germany is steadily dwindling. Topics of history, medicine, nature, and technology (in that order) are covered in documentaries, but the bulk of programming is focused on TV series (thrillers, soap operas, comedy) which sometimes have very low-level content (Hoynes 2019). Provision of culture and education, two foremost public goods, is a topic that can neither be looked at from an ideological perspective nor from a purely economic one. It is a typical case for collective efforts. The commons, a frontrunner of collective efforts, may offer a solution with these two eminent public concerns. This will be shown in the

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next section that will deal with the characteristics of the commons, the history of their development and their significance for public wellbeing. Before getting to the theme of the commons, a prominent sociologist’s view on property shall be presented here as a sideline. The quote is from British scientist John A. Hobson (1858–1940), who is said to have introduced welfare into the sphere of economics and whose lifelong activism for legislation on the subject has shaped new social policies in Britain and elsewhere. His stance on social order is, in part, grounded on the idea that constituting private property is “natural law . . . because any individual uses up vital energy by carrying out productive efforts, and hence every member of a society has a right to replenish this usage and thus establish property: . . . nature assigns to every producer as his separate property that portion of his product or some equivalent in exchange required to sustain his productive energy” (Hobson 1919, p. 99–100). There is a nexus of this to societal collaboration and to public goods/commons, because the producers, as Hobson calls them, need social institutions, they need knowledge, they need a public legal system, public roads, etc. These are all goods that are collectively provided by the various actors in those markets: state, businesses, civil society, highclass individuals. The topic is discussed in academia within social economics (see e.g., Lutz 1999), which may also be called the Economics for the Common Good (Tirole 2017). All these endeavors by economists addresses issues of the day, no matter what the specific area of an economist would be. Economists who join in public debates, and politicians/practitioners who join in academic debates will forward solutions to the many challenges facing society.

1.4 The commons: Collective ownership and self-regulation Whether from the property rights perspective or from the societal perspective, a view on the commons always combines several distinct attributes. Apart from collective ownership,3 there also is the user perspective, which was introduced into the debate on the consumption of publicly available resources through Garret Hardin as mentioned above. His views on the topic can be summarized in the conclusion that any good which cannot be sufficiently excluded from private use is a common good and will eventually be either overused or neglected (Brunnhuber 2022). The debate which followed among economists and politicians found its culmination when, in 2009, the Nobel Prize in Economics was awarded to Elinor Ostrom (1933–2012). She was criticized because she connected the theme to Mancur Olson’s concept of collective action (Olson 1965).4 It was said that ‘forcing’ collective action into a format of self-regulation

 Commons are also called collective property resources, or common property resources (see Capelari et al. 2017).  For other criticism, see end of this section.

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is not compatible with uniting people to fight for a societal objective. But then a new stimulation was given to the discussion by the worldwide adoption of the UN Sustainable Development Goals (SDGs) in 2015, because many of these goals meet the attributes of a common. The old question comes back within the SDG implementation efforts: How can over-usage or neglect be avoided? There also is a new question, as the SDGs are looking at all economic levels from the local to the global. This question is about how to guarantee sound and safe financial incentives. The nexus to the SDGs has led to a more comprehensive categorization of the commons that relates to all levels of provision and consumption: Firstly, ecological (or “natural”) commons such as clean air, fresh water, usage of land and biodiversity, and secondly, social goods such as access to education, access to healthcare and to information.5 While there is general agreement on the content and the social impact of commons, opinions on how to finance them are heterogenous. How to finance the commons naturally differs by their magnitude and their spatial extension. But financing also has an impact on how they are managed. For both, the caveats have already been shown in the historic examples of communal irrigation and grazeland: If there are members who contribute a higher share than the other, they will want to take control, and if there are greedy members, they will try to outmaneuver the others. When the communities are small and stable, they should be able to prevent these malicious commotions from happening. The means would be incentives and sanctions which in turn require strong management. But this cannot work for a large-scale setting like, e.g., mitigating the consequences of climate change in a specific region. Here the stakeholders are a multitude of, for example, farmers or fishermen or small dwellers, and it would need some cross-regional authority to implement and enforce stand standard approaches for managing these commons. On an even larger scale, supranational entities need to intervene, as would be the case with tackling the effects of global warming. One solution would be that the beneficiaries of such measures internalize the cost (Tirole 2017, p. 200). Pricing, hence, might be an instrument that alleviates the funding of the pertinent measures and their control. Financing the commons through setting a price for their usage is one of the resorts that may ultimately lead out of the conundrum that there are not enough funds in private or public budgets for meeting the commitments to be made by public authorities – like through the Kyoto Protocol. First, though, there will be the call for government funding of products and services that contribute to public wellbeing and the common good. The state authorities will have to resort to financial institutions, and these might then also turn into large impact investors or philanthropic organizations. There is enough financial capital around in the financial markets that seeks allocation, but those funds (these purchase powers) need to be properly aligned. Toxopeus

 The emphasis must be on “clean air” and “safe water”, not just air and water, and “access”, not just availability.

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et al. (2017) suggest a very clear-cut scheme for realigning purchasing power towards meeting the needs of finance for large commons: Table 1: Realigning purchasing power. Individual wellbeing

Common goods

Individual purchasing power Regular impact investing Pricing the commons Collective purchasing power Public-Private finance Community finance Source: Toxopeus et al. 2017, p. 187.

Table 1 shows how the private and the financial sector can cooperate in making impactful investments when a common good is missing or when individuals are not in a position or are not willing to pay for individual wellbeing. The four types of finance would all be applied to organize impact investing, i.e., providing funds for achieving social or environmental goals with the intention to also generate profit. An example for regular impact investing are funds directed towards agricultural cooperatives that produce food (an activity that benefits the wellbeing of its consumers), along with the condition that they produce it in a way which minimizes the detriment of commonpool resources (no air pollution, no deforestation, no overuse of pesticides). The example for pricing a commons that is referred to the most is emission rights trading which translates the cost of governing the common good of clean air into a price. Critics hold that a commitment like the one made by the European Union which uses pricing schemes for reducing greenhouse gas emissions has failed because they address a phenomenon which cannot be curbed locally: If the countries beyond Europe do not follow the example, they are just free riders on Europe’s clean air (Tirole 2017, p. 208). This has brought up the idea of compensating for this negative by introducing a European Carbon Border Adjustment Mechanism. The format would be to levy a tax on imports of products manufactured in countries that cause high carbon-dioxide emissions. But a measure like this would only make sense if the proceeds of the levy were hypothecated towards innovation in low-carbon technology and channeled towards adaptative investments in Least Developed Countries (Burke et al. 2021). It is, however, not very likely that such hypothecating will take place (Marcu et al. 2020). Protecting the public good of sustainable living conditions in Least Developed Countries requires other measures. The book will cover this aspect in Section 3.5.4 which deals with the role of the SDGs. The lower left quadrant of the scheme exhibited in Table 1 refers to improvements of individual wellbeing through collective funds. This is the classic case of welfare payments through governments: They are handed out to individuals whose lives would be improved by a specific common good or service (access to affordable housing, nursing in case of disabilities, etc.), but who cannot invest in their wellbeing themselves. Private investors might join those government efforts by providing addi-

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tional finance and/or charitable contributions. If we go back to the nineteenth century, these type of private ventures, which may be called “social partnerships”, were already undertaken by business pioneers such as Cadbury, Rowntree and the Lever Brothers in England and some others on the continent: They provided housing and healthcare to their workers, and they also cared for education (Waddock 1988, Bush et al. 2008), one first case of impactful investment. In the fourth quadrant (lower right) of Table 1, the term “collective purchasing power” applies to not only public funds but to a community of investors who unite in supporting a common cause. One of the means could be crowdfunding. Crowdfunding has some elements in its format that may seem to increase the propensity to invest in commons, like flexible investment structures which are adaptable to the specific project, a transparent process which allows potential investors to view who has invested already, and a series of payoff structures to choose from. The format can raise billions, like Kickstarter, a NY-based public benefit corporation whose mission is to help bring creative projects to life. As of January 2023, Kickstarter has received 7.0 billion US$ in pledges from about 22 million backers to fund some 232 000 projects, such as films, music, stage shows, comics, journalism, video games, board games, technology, publishing, and food-related projects (https://www.kickstarter.com). These are all concerns of the common good. The payoff often is tangible rewards or experiences in exchange for the pledges.6,7 From the medieval irrigation systems to “Kickstarter”, there has been a long way of successes and failures in the history of the commons. The essential characteristic, though, which is collective management of a participatory resource, can be found in all evolvements. Whichever the magnitude and the field of activity, there are several conditions and prerequisites for making collective efforts in common goods provision effective. They comprise the definition of exit strategies, harmonization with the local settings, rules for choice and decision making, surveillance and conflict resolutions (Ostrom 1993). This corollary of features constitutes an important part of the commons concept. A more detailed view of this is given in Section 3.5. Two critics of the common goods concept shall be mentioned here: One is the American economist Kenneth J. Arrow. While his writings came out prior to Ostrom’s, his claim that an objective social good does not exist would also relate to commons, because they serve a large group of members who all have individual desires. He de-

 Kickstarter has used its civic platform to build for–profit–entities as well, like a building project for 3.6 million US$ in Brooklyn as headquarter, where the finance, however, comes from venture capitalists. Many other common goods platforms use this model also, especially in the media industry (Ridgway 2015).  For reward–based crowdfunding, trust between all parties is vital. Therefore, incidents of fraudulent behavior by campaign creators can be lethal. So, when suspicions came up of fraudulent campaigns related to Kickstarter (like the campaign ‘Rewards Not Delivered’), Kickstarter established a ‘Trust & Safety Team’ to uncover evidence, and then suspended dubious campaigns (Cumming et al. 2023).

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plores that by viewing at individual preferences, academia mostly relegates the existence of a social ideal to the meaningless (Arrow 1951; see Lutz 1999, p. 105). By contrast, his contemporary Joseph Schumpeter, the Austrian economist most known for his theory of creative destruction, using health an example, stated that we all speak of the same when we talk about the common good of public health, but that this is strictly not a social ideal, only a very important commons (Schumpeter 1954, p. 801). The other, very fierce, criticism is from Walter E. Block, Professor of Economics at Loyola University New Orleans. He condemns the concept of the commons “because it contains a nasty, vicious attack on private property rights, the lynchpin of a civilized order. Anything that weakens private property rights promotes barbarism . . .” (Block 2011, p. 1, 2). His argument is about common property actually being a partnership and not common ownership. He says: “If one can be excluded from the ‘common’ resource (by not being accepted into the partnership), everyone can be deterred from participating in its benefits, except for the partners who will then exclusively share the benefits specified in the contract among them” (Block 2011, pp. 3–4). But Block’s criticism, and Arrow’s, too, do not hold if exposed to positive and normative economic grounds. Positive economics is based on fact. If confronted with the factual evolvements of the commons concept, even the skeptics must agree that the many collective efforts therein have strengthened human wellbeing (Karpoff 2022). And normative economics, which is based on value judgments, builds on the assumption that people´s actions seek to satisfy coherent and a priori preferences. So, why should people not relate the institutional design of the commons concept to their commonly held value judgements? And in view of the benefits offered, why should they not (commonly) prefer this format to its alternatives? If we hold that normative economics is focused on questions of efficiency (maximizing net benefits), the net benefit to society from the practice of commons is undisputable as will be shown in the next section: The scale of society has grown, and commons problems have spread across communities and across nations. A good example is water allocation issues, which by nature often cross borders. They are, as of today, frequently addressed by common-property regimes of collective management (Stavins 2011). And in larger spaces, where no over-arching authority can offer complete control (air and water quality, hazardous waste, species extinction, ozone and greenhouse gases in the stratosphere), collective action is the only way for rendering solutions.

1.5 Connecting public goods and commons to human wellbeing In the discussion that was presented in Section 1.3 on the issue of private and public property, Mancur Olson was quoted with “the state is first of all an organization that provides wellbeing for its members, the citizens” (Olson 1965, p. 15), and this was contrasted to distributive deficiencies, like benefits from statal activities being unfairly distributed, contributions levied from people who do not enjoy the benefits and other

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inadequacies. Yet even though quite a few members of society may feel that their public authorities are imperfect and the services they deliver are insufficient, it is first the state whom people have in mind for providing public goods. The expectation is that those public goods provided will benefit all and maintain or increase wellbeing of everybody. The main petition here is that each person who wishes to benefit from those public goods can actually do so. There also is the point whether a strong state is in a better position to ensure that all citizens behave in a way that wellbeing for all is accomplished. One example is the strife for clean air: When comparing the fight against air pollution in China and in India, China’s progress and India’s malfunctioning can be traced back to the strength of China’s one-party system that brooks no opposition and where local authorities necessarily fall in line with initiatives prioritized by the central government; in India, with local governments being run by an array of different parties, the coordination is much more complicated. Also, India is much less wealthy than China: here the economic output per inhabitant was US$ 12 500 in 2021, India’s was a mere US$ 2 300. This may explain why India has obviously decided that it has urgent economic needs which will be prioritized over environmental clean-up (Raj et al. 2022). The strong-state argument must be pondered carefully. While the unitary structure of a strong state enables it to impose policies over the objections of particularistic interests, the danger is that this jeopardizes civic freedom. But if there is a system where state policies that articulate collective interests are balanced with robust social forces, a strong government will not inhibit participative policies. France and Germany, even though their political structures differ considerably, are good examples. In France, the president has more powers than the German chancellor. But in either country, when a new party comes into power and wishes to demonstrate leadership, the robustness of social forces will prevent excessive changes because society and societal powers are fairly developed. The state will have to ensure that its delivery of public goods contributes to social inclusion and strengthens the sense of shared citizenship. Only the state can provide the public goods of maintaining law and order, protecting the rights of workers and a well-functioning labor market. Another aspect is that some public goods need entrance barriers to safeguard them against depletion from over-consumption that would reduce the wellbeing of all. Public space and physical infrastructure, for instance, if used by too many at the same time, will deteriorate and jeopardize wellbeing. It is the duty of the state to prevent this. On another end, the state must accept that there is the question of choice: A public healthcare system, while apparently creating the common good of easy access to physicians and hospitals, may be rejected by citizens because even though they may associate this with welfare, they might not want that governments provide each facet of it. And they would certainly want to stay away from a system that is prone to defects, over-usage, and abuse (Poteete et al. 2010). An example is the long-standing discussion in the United Kingdom on the National Health Service – the NHS – which has led to a broad array of suggestions for transforming publicly funded health – “wellbeing”, in this

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context, would rather mean that account is taken of the changing needs and wants of society (see, e.g., Bevir and Waring 2018). For a more exhaustive understanding of how public goods contribute to public wellbeing, the perspective of wellbeing must be widened beyond the welfare discussion to the perspectives of an educated society, of technological capabilities and the standards of living, to take the foremost features. From there we get to what is also encompassed by the concept of public goods, which are solidarity, connectivity, and identifiability. As per this typology that was introduced by Kalthoff (2014), goods that can be enjoyed in the company of others, like public television or public transport would fall under the solidarity criterion; this would as well apply to any other network. All these would also fulfill the criterion of connectivity. However, as said before, there might be the need to set up entrance barriers in order to prevent overusage; on the other hand, full connectivity with low or no entrance barriers must be provided in many cases where technology is not an argument. U.S. philosopher John Rawls (1921–2002) has included connectivity in what he called “primary goods” in public space, like liberties, economic means, chances of good positions and selfesteem (Rawls 1996, p. 181). These goods would build the structures which a society needs to regenerate itself. With regards to identifiability, the meaning of the term can best be exposed by what it means in statistics of mathematics, where it defines the property that a mathematical model must have in order satisfy inference. Analogously, if a person feels that he or she can identify how another person will act or react, this contributes to individual wellbeing, and when translated to all members of a society, we have collective wellbeing. Transparent policing and policymaking would be the main public good which fosters identifiability (Loader and Walker 2001). Transparent policing and policymaking through governments and governmental agencies is an example of a public good for which no other provider than the state itself is conceivable. If well applied, all members of a society will benefit. For many other public goods, the benefits that they deliver may as well be procured by non-state actors. Which goods this should be, and to which extent the state should allow privatization is the subject of a never-ending discussion. The debate reaches from the claim that this would end up in “private plunder of our common wealth” as per the title of a book by David Bollier (2002), to what has been called the folk theorem by Nobel laureate John E. Stiglitz: “Anything that the government can do, the private sector can do as well or better” (Stiglitz 1994, p. 31). Neither of these arguments is valid. There are mostly practical reasons: Governments, sometimes, do just not have the funds to support the range of public goods that society needs – which may sound ”tragic” (Nussbaum 2000), but this shortage can only be remedied by private intervention; also, cost-benefit considerations will often suggest private intervention. On the other end, distrust in the powers and the competence of the public sector is often unfounded. A positive approach to the topic is from Barrett (2007) who lists a series of reasons why public-private interaction is not only feasible but also desirable in providing public goods. He mentions that each provider (the businesses and the state) will reap

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some monetary benefit, that coordinated efforts in establishing public good regimes will create new ways of accessing the main issue and side-issues, and that the citizens might find that where the state remains the sole provider, government regulation, after all, may safeguard public goods for this and the future generations (Barrett 2007, pp. 74–102). And where governments lack the knowledge that is needed or the costs of supervision would be too high, and businesses are not willing or not able to provide resources, new institutions must be created to protect and manage public goods – like the commons. Also, as stated by Ostrom (1990), leaving certain policy areas to the governments alone might end up in bad scenarios – from inadequacies, fallacies, and mounting cost to developments into completely failed states, where the wellbeing of citizens is down to nothing. “Failed state” may be the extreme, but that status can be quickly reached through conflict and political instability, with dire consequences for e.g., nutrition, healthcare, and employment, as has been seen in many African states, in Afghanistan and parts of Southeast. Is private provision of public goods an adequate remedy in failed-state situations? This issue will be discussed below in Chapter 4 within the topic of policymaking.

1.6 Public goods and the measurement of wellbeing If public goods contribute to wellbeing, this should be reflected in measures for wellbeing. One good deposition that shows this nexus is a definition of wellbeing that “refers to diverse and interconnected dimensions of physical, mental, and social wellbeing, . . . including choices and activities aimed at achieving physical vitality, mental alacrity, social satisfaction, a sense of accomplishment, and personal fulfillment. It captures aspects of welfare beyond real income, which is what economists typically use to proxy utility . . . Health is the most obvious example; education, civil liberties, civic participation, respect, dignity, and freedom are others” (Naci and loannidis 2015, pp. 121/122). The traditional measure used by economists on the level of national economies, or on some lower aggregates, was gross domestic product (GDP) and its growth over time: If GDP, the value of all goods, increases – including physical public goods like public infrastructure, public schools, and public roads –, then utility and wellbeing increase. The notion of utility, here, starts from the assumption that wellbeing is represented by a usefulness function that is also the basis of decisions made by individuals and by the state. By contrast, modern behavioral economics rests on the supposition that people’s decisions deviate from economic utility because they have deviating value judgments. It was Samuelson , originator of the public goods concept, who claimed that it should be the “concern of economic analysis to examine the consequences of various value judgments” (Samuelson 1947, p. 220). Since then, many attempts have been made to establish measurement of this judgements’ outcome. Whether “Beyond GDP” explorations (see, e.g., Bleys 2012), Bhutan’s Gross National Happiness Index (see, e.g., Burns 2011), the OECD wellbeing Framework (OECD 2020) or “happiness regressions” based on self-reports (Deaton 2018),

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all include a weight of immaterial personal judgments – goods that, to many, matter more than material public goods.8 Still, the measures also encompass the service/the benefits from physical public goods. This book cannot portray all these indicators and measurement instruments; it will just present the basics of the OECD framework because the nexus to public goods can be seen very well here. The OECD Framework for Measuring Wellbeing is based on recommendations made in 2009 by a high-level expert group attached to the OECD. It also reflects earlier OECD work and various national initiatives which have taken up concerns about the inadequacy of macro-economic statistics in providing a picture of the living conditions experienced by ordinary people. The framework is built around three distinct components: current wellbeing, inequalities in wellbeing outcomes, and resources for future wellbeing (OECD 2020). Figure 1 exhibits the eleven indicators for current wellbeing in the upper part, and it also shows propositions on how to quantify them.

CURRENT WELL-BEING How we measure them

Key dimensions Income and Wealth

Subjective Well-being

Work and Job Quality

Safety

Housing

Work-life Balance

Health

Social Connections

Knowledge and Skills

Civil Engagement

Environment Quality

Averages

Inequalities between groups

Inequalities between top and bottom performers

Deprivations

RESOURCES FOR FUTURE WELL-BEING How we measure them

Key dimensions

Natural Capital

Human Capital

Economic Capital

Social Capital

Stocks

Flows

Risk factors

Resilience

Figure 1: The OECD Wellbeing Framework. Source: https://www.oecd.org/wise/measuring-well-being-and-progress.htm

 A method to convert personal judgments into monetary values through specific survey techniques is “Contingent Valuation”. See Section 3.4.1 of this book.

1.6 Public goods and the measurement of wellbeing

23

The lower part of Figure 1 shows the “resources for future wellbeing” (i.e., the foundations on which wellbeing can be built for all times). Their quantification can resort to measurement in monetary terms – even though there are many different opinions on whether monetization is possible (or desirable) of natural and human and social resources or not. An overview of this discussion is given in Bardy et al. (2021). This book will cover a part of the topic in 4.5 which deals with the valuation of public goods. The question of whether and how to monetize natural, human, and social resources is not only led by economists, accountants, and statisticians. It has become a political theme among humanists who detest the idea of numerical values for an individual, and among the advocates of strong sustainability who hold that to avoid the commercialization of the biosphere, any type of monetization must be avoided right away (see, e.g., Helm 2016). With the set-up of the United Nations Sustainable Development Goals and the deliberation on how to monitor and evaluate their implementation, not only have accounting schemes come up (Long 2019), but the idea has also influenced the programs of political parties: One example is Labour in the UK where the collectivist argument for full employment, public goods and a fairer distribution of income has been expanded to the argument that for determining how social goods increase people’s wellbeing their effects need to be treated like a growth in private income (Jacobs 2011, pp. 9–10). There is no positioning in the OECD framework about which element of wellbeing ranks above the other. This would depend on the situations – in war torn Ukraine, safety and health will certainly rank highest. And it is apparent that, generally, human rights are prioritized above economic wellbeing. But as there is no taxonomic definition of human rights,9 civil society organizations and judges in administrative courts often demand a broadness of that definition which may jeopardize economic or social progress. There are two examples where court decisions have marked a conspicuous unbalance against economic prosperity: One case is a November 2022 court ruling in Australia which sets the protection of a large area of Aborigines land and the affectedness of future generations by carbon dioxide emissions from coal mining near that land over the economic need of providing coal to users who are short of other energy. The users are customers in India, and the coal would be burned there and not in Australia. While the Aborigines could be compensated, the Indian users would lose a basic resource. The Australian government is not bound by that court decision, but the government followed the court decision in previous cases that were similar but of less economic magnitude.10

 There is definitely a common understanding that human rights guarantee all human beings to have inherent dignity and worth, and that they should be treated with respect and fairness. The Universal Declaration of Human Rights was adopted by the United Nations on 10 December, 1948, but all human rights organizations agree that the concept does not allow an explicit taxonomy because many of its elements are being judged over time (Park et al. 2020).  http://envlaw.com.au/waratah.

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The second case is Milieudefensie (a Dutch environmental activist group) versus Royal Dutch Shell. In May 2021, the District Court in the Hague ordered the company to cut its global carbon dioxide emissions by 45 percent by 2030, as compared with 2019 levels. The court did not consider that this imposition of a specific technical obligation over and above the reduction targets set by ‘cap-and-trade’ regulations in the European Union may cost billions of euros which the defendant might have used for creating jobs, advance technological progress and invest in large-scale climate mitigation projects. In its decision, the court explicitly referred to what it called the duty of care arising for Royal Dutch Shell from the European Convention on Human Rights. From the standpoint of law theory this may be seen as advance because it ‘hardens’ international soft law (the EU Convention) in relation to standards of corporate conduct. But from a practical perspective, it is highly problematic that a court connects what the Convention spells out on human rights, specifically the right to life and the right to respect for private and family life, with the obligation of Royal Dutch Shell to contribute to diminishing the temperature rise in the Netherlands (Macchi and van Zeben 2021). If courts become an avenue for imposing climate mitigation obligations on public and private actors, the question must be asked if governmental policies are not sufficient or not effective to deal with climate change. The answer may be that policymaking, other than the ruling of a single case by a myopic court, must contemplate all effects on all constituents, whether on mitigation of climate change or any other field. Policymaking in relation to public goods is the subject of Chapter 4. This will be preceded by an overview of the different typologies of public goods and their sources. These differences give rise to differences in policy approaches.

Chapter 2 Typologies of public goods and commons Any attempt to classify a variety of categories must set out from discriminating factors. When contrasting between private and public goods, a discriminating factor would be political choice: It is the citizens who determine what is a public good (Stretton and Orchard 1994). Hence, the way towards categorizing the varieties of public goods would set out from the criteria which should be used for political choice decisions. Political choice must be rational; the wrong way would be to demand that the extent to which a good is perceived as public depends on those values that achieve the highest approval within a given society (Wuyts 1992). There is an unwanted consequence of this utilitarian view: It narrows the scope to a status where the only way to create the largest benefit to the largest number of people would be through providing as much goods as possible through the state: Only through centralized decisions would the state escape from the malaise that what is understood by benefit comes from an almost infinite number of individual preferences (Bürgenmeier 1999, p. 451). But this creates another malaise: The state does not have the means to provide all public goods. The way out of that dilemma can be the following: In order to warrant rationality which cannot be guaranteed by social choice expressed through a myriad of individuals, the inception must be set not with terms that are based on preferences but with terms based on operations (Mortimore 2014). There are three terms on public goods which are operational: “created through collective action”, “paid for collectively” and “supplied without charge (or below cost) to recipients” Sekera (2014). They can be further specified (Sekera 2014, p. 6): – Public goods are created by human effort, as contrasted with natural goods. Air is a natural good; clean air is a public good. Land is a natural good; national parks are public goods. Public goods are created to protect and preserve natural goods). – Public goods are not the same conceptually as the commons. The legal structure that protects the commons is a public good. – Public goods are created by law. From these specifications, even though one may contest that all public goods have legal origin, and from the standard approach of defining public goods’ properties as being non-rival and non-excludable in consumption, a first classification can be made (Figure 2): Quadrant 1 shows that private goods are mostly rivalrous and excludable – as with the example of milk: A person who has a glass of milk is not generally obligated to share it. Once that milk is drunk, it is not available any more for others. However, in other examples, this interpretation does not hold in practice. Whether a parcel of land should be considered private, or public is full of heavy contention. Any government on federal, state or municipality levels, may purchase land to be used for official https://doi.org/10.1515/9783111134611-003

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purposes. But it is not accessible to all. And there is land that has never been acquired by a public agency, but it is deemed to be accessible to everybody, as with lakefront and beachfront. While beachfront properties are owned by private people, they do not have rights over the beach itself – but they have duties to keep it safe (and clean) – like the pedestrian ways in downtown areas (Mears 2009). Appeals have been coming up from homeowners of beachfront properties who claim that their property rights extend to the water’s edge (Mears 2009). But when, in Florida, a rash of hurricanes washed the beaches away and massive amounts of public money was spent for beach re-nourishment, municipalities have called for these lands to be deemed public: Suggestions are that, for a beach which is 200 feet wide, the 75 feet that are nearest to the water’s edge were to be considered public (Mears 2009).

Rivalrous

Non-rivalrous

Excludable

QUADRANT  Examples – Milk – Land – Education

QUADRANT  Examples – Research and development – Non-commercial knowledge – (such as the Pythagorean theorem) – Norms and standards – Respect for human rights – Television signals

Non–excludable

QUADRANT  Examples – Atmosphere – Wildlife

QUADRANT  Examples – Moonlight – Peace and security/conflict – Law and order/anarchy – Financial stability/excessive – financial volatility – Economic stability/flagging growth – Growth and development potential – (such as educated workforce) – Effective/inefficient markets – Communicable diseases spreading/controlled or eradicated

Figure 2: A Conventional Approach of the Basic Properties of Goods. Source: Kaul and Mendoza 2003, p. 82.

In quadrant 3 (non-rivalrous, non-excludable goods) and in quadrant 2 most cases would be purely public goods. Moonlight, laws, controlling communicable diseases – these are all intangibles that are available for everyone. Kaul (2003) gives another example: A country’s growth and development potential (quadrant 3) mainly depends on an educated and productive workforce. For this, universal access to education is required, as well as, ultimately, respect for human rights (quadrant 2).

Chapter 2 Typologies of public goods and commons

27

In a refinement of the classification given in Figure 2, Kaul and Mendoza (2003) go beyond the basic conventions on public goods’ properties towards how they exist in the social environment of nowadays. This modification is shown in Figure 3. The main differences between the two tables are goods that have a socially determined status, which in Figure 3 applies to rivalrous and non-exclusive goods whose intensive use is prone to threaten their sustainability (Kaul and Mendoza 2003). The solution is to make goods more exclusive: Atmosphere (in quadrant 4), is a good which is available for all people to enjoy. With policies such as air pollution permits, this good is made partially exclusive (only if a firm buys this permit, it may pollute the air), and it becomes manageable. The same goes with fish stocks and roads: The implementation of fish quotas and road tolls enable better management of these resources. On the other end there are rivalrous goods that may be kept or made nonexclusive, like basic education and healthcare. Although they can as well be designed to be fully private, which is the case with most of U.S. healthcare, the government may impose policies which make them non-exclusive, like with the systems of Medicare and Medicaid in the U.S. (Scutchfield et al. 1997). The refined classification shown in Figure 3 also allows to introduce the business perspective. If we take knowledge that is referred to as a public good (i.e., something from which the greater society can benefit), we must add that patenting and intellectual property rights may grant exclusive rights to the specific users of knowledge, mostly in the business sector. These private incentives then produce an incentive to execute research and invest in research and new production which consequently will incite more research and innovation. What this entails is the question which utility can be earned from using a public good, because this utility may influence the provision of the good. It is not enough to ascertain that a good is available for general usage. The utility of the good needs to be enabled. Enabling the utility of a public good allows to surpass the ideal assumption that it might serve society with its potential – its potential utility (Laudal 2019). For instance, public healthcare is intended to be available to all, but without a well-refined system that provides access to all in all its corollaries, it is only potentially so. Any reference to the U.K. National Health Service will confirm this (see, e.g., Chaplin 2018). It is the enabled utility which counts. As claimed by Laudal (2019), when defining the characteristics of a public good, the contextual factors must be considered: a) the utility layer, which is the qualities of the good; b) the supply layer, which is how good is provided; and c) the conversion layer, which is the elements of the value-added process. Figure 4 exhibits how the three layers interact. In this graph, for U1 through U4 and for S1 through S4, all four ownership choices are given, with “Toll” referring to private ownerships whose accessibility is regulated by state authorities. When assessing the graph for the utility layer which shows the “excludability dimension” and the “jointness/rivalry dimension”, one can deduce the qualities of these dimensions from the following:

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Chapter 2 Typologies of public goods and commons

PRIVATE DOMAIN

Figure 3: An Advanced Approach of the Basic Properties of Goods. Source: Kaul and Mendoza 2003, p. 83.

QUADRANT  a Non-rivalrous goods made exclusive – Patented knowledge of manufacturing processes – Cable/satellite television 2b Non-rivalrous goods kept or made nonexclusive– Public television – Property rights regimes – Norms and standards – Non-commercial knowledge – Respect for human rights – As yet unknown “bads”, (undiscovered pollutants) QUADRANT  Pure public goods – Moonlight – Peace and security – Law and order/ anarchy – Financial stability/ – financial volatility – Economic stability/ flagging growth – Growth and development potential (such as educated workforce) – Effective/inefficient markets – Communicable diseases spreading controlled or eradicated – Knowledge embodied in pharmaceutical drugs

NON–EXCLUDABLE

QUADRANT  a Rivalrous goods made (partially) exclusive – Atmosphere; air pollution permits – Fish stocks/fishing quotas – Toll roads 4b Rivalrous goods kept or made non– exclusive – Atmosphere – Wildlife, fish stocks – Public parks and nature reserves – Basic education and healthcare for all

PUBLIC DOMAIN

EXCLUDABLE

QUADRANT  Private goods – Milk – Land – Education

Chapter 2 Typologies of public goods and commons

– – – –

29

If the good is part of a common resource, this would indicate non-rivalry. If the good is non-subtractable (it cannot be depleted), there is jointness or sharing. If the benefits from the good are restricted to a selected group, we have exclusiveness. If the good allows for market-based transactions, and supply and demand will determine its prices, we also have exclusiveness.

Figure 4: Distinguishing between Supply Layer, Utility Layer and Conversion Layer. Source: Laudal 2019.

In the supply layer, the two dimensions of excludability and of jointness/rivalry can be determined as follows: – If the suppliers of the good compete for the same customers, this would indicate rivalry. – If the suppliers are threatened by suppliers of a substitute or by new entrants to the market or, we have rivalry. – If the need for the good is limited to a fixed quantity per consumer/user and the options to differentiate are scarce, this would indicate low rivalry. – If the good addresses a basic human need and there is no big need for suppliers to differentiate, we have low rivalry. If we stay with the example of healthcare and we assume that hospital treatment is a private good (exclusive), the provision of this good might will mostly be non-excludable. In going further, Laudal (2019) notes that changes in the qualities of healthcare (the utility layer) are often due to technological change, while it is primarily changes in the do-

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mains of organization and policy that produce changes in the supply layer. So, there are distinguishing differences between the two supply layers, and they will very often determine the value of the good’s provision. Shifts between the various statuses are possible in various public goods also (Laudal (2019, p. 27): 1. Hospital care: For U1 the trajectory is S1 + S2 => S3 through growing turnovers of private hospitals. 2. University education: For U2 the trajectory is S2 => S3 when more private universities come up. 3. Accommodation: For U3 the trajectory is S3 => S4 when Airbnb challenges the hotel business. 4. Electricity distribution: For U4 the trajectory is S3 => S4 when smart grids substitute traditional power grids. Changes in the conversion-layer are mostly caused by changes in the level of material efficiency or energy (“efficacy”). Their consequences may affect the utility of supply, but they would not trigger trajectories because increase in efficiency is usually exploited within the ownership structure where it was developed. The utility/supply/conversion-concept adds substantially to the question how to adapt the format of policies for providing, managing, and expanding specific public goods. Another way to format policies can be based on ownership and space determinants. It is from these where the standard typification arises both for public goods and commons. This will be explored in the next sections with the non-exclusiveness and non-rivalry dimensions, followed by the issue of collective spending, then with differentiations through space (level and time), and from there with manageability. Manageability is an important ingredient in the commons concept, the discussion on which will be given the final section of this chapter.

2.1 Fully or not fully non-excludable and non-rivalrous: Pure, impure and club goods In their purest form, public goods are those that can be provided to an unlimited number of users (with the marginal cost of that provision for any additional user being zero), and where no person can be excluded from its use. When enumerating examples of “tangibles”, like clean air, fresh water and unspoiled natural habitats, and “intangibles” like safety, security, peace, general knowledge, access to law systems and markets we uncover one other characteristic: Those who use these good cannot possibly be charged for their use, and if there were such charges, it would be impossible to exclude non-payers from enjoying the good. Technology can change this as was the case, e.g., with TV. In the 1950s, when television started, a television signal could not be encrypted because there was no apposite technology around. TV was purely public. As soon as encryption technology was developed, exclusion became

2.1 Fully or not fully non-excludable and non-rivalrous: Pure, impure and club goods

31

possible, and private firms that invested in television could then set a price for it and earn a return on the investment (Demsetz 1970). However, technology was an issue before modern times already as shown by Ostrom’s (1990) famous irrigation provision example where members had the option and the technical means to exclude others. When only a small group of consumers is able/is allowed to use a public good, it becomes an “impure” public good as was first specified by Buchanan (1999 [1968]). An impure public good has a limited capacity and hence cannot be used by all: Roads or public parks may become congested; therefore, some users need to be excluded from them. Congestion determines exclusion here, but it may also result from the necessity for protecting the natural environment. Whether because of potential congestion or from the need to preserve a resource, rationalizing becomes necessary. There is a tipping point, a threshold, beyond which negative consequences occur from over-usage. This extends beyond the local sphere of a park to wider natural resources. Fish stocks, which were already mentioned above, which may be doomed to collapse, are one issue, as are grasslands or the rainforests. If they vanish, human wellbeing vanishes. The case of public parks and grasslands can also serve to demonstrate the case of rivalry in consumption. When a national park gets overcrowded, latecomers are not admitted or are charged a higher fee (Case 2008). Beyond this local level, an expanse of frontier land or outer space may also be subject to rivalrous behavior. The solution would be varied zoning of land, and when there are too many satellites up in space, those who send new ones will have to pay a higher cost (McNutt 1999). Exclusivity also governs when a price is charged for the use of a good or service, like, for instance, a membership fee or an entrance fee to prevent the good from becoming congested. Then we have club goods. The cost of their supply is not borne by the public, it is distributed over a finite number of users, and the (infinite) divisibility of benefits becomes restricted. The other logic behind this, apart from crowding, is depreciation. Depreciation affects the carrying capacity of the respective good. The most often used examples to illustrate this are public swimming-pools, tennis courts, golf courses and museums. Other than with commons, where all members care for protection and maintenance, caring for club goods is entrusted to the owner/owners of the good. There are transitions between the various types of goods as has been shown above within the topic of and potential and enabled utility. Another example is given by Dawson (2007): A farmer protects his herd against a contagious disease by vaccination. This it is a private good, protecting his cattle and securing his livelihood, but it will also contribute to preventing an epidemic. Hence, it is a public good as well. The example of protecting the health of livestock exhibits that any classification of goods is dynamic: It depends on market conditions, and also on the level of technical development. When the market does not work – e.g., in providing vaccines at an affordable cost – a public authority will have to step in. Then, protecting the health of livestock will become a public good and all farmers will identically benefit from this public good. The downside here and in quite a few other cases will be that some people would be tempted to benefit as much as possible and to contribute as little as possible. In the

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livestock example, this freeriding can be prevented because the farmers need to hire a veterinarian. But, in other cases, like a dam being constructed to protect a village against flooding, every inhabitant will benefit from the dam, and no one can be excluded from its usage, irrespective of who shares the cost. Here, at first sight, no investor will offer a market solution:11 People know that they will be able to consume this service for free, and they will not reveal if and how much they would be willing to pay for this. The dam will have to be paid for collectively, i.e., from public money, which may constitute the dam to become a public good. In this context, it is worthwhile to make an excursion to the arena of public budgets where decisions on collective spending also determine what is a public good. After this, the non-exclusivity, and the nonrivalry issues at the various levels of local – regional – global will be discussed in detail in section 2.3.

2.2 Collective spending The legal denomination of collective spending plays into the typology of public goods. Research on legislative policymaking and government spending (see, e.g., Battaglini, and Coate 2008) discerns between legislative preferences for collective spending and the amount of the budget actually allocated to the public goods it wishes to provide. Legislators are often confronted with partisan preferences at regional levels to direct more collective funds for particularistic programs which leads to deficiencies in other public goods (Volden and Wiseman 2007). Particularistic programs are targeted to politicians’ preferred locale or constituency. Even as they may serve some social or economic purpose, they are pursued primarily for political benefit with a key constituency (Díaz-Cayeros et al. 2003). The pejorative expression in the U.S. for this is “pork barrel spending”.12 When the term was first introduced in 1863, it was just a reference to any money a government spent on its citizens. But the meaning shortly changed to describe spending by a politician that benefited certain constituents in exchange for their support, either financial or via the ballot box. With a view to how define what is public and what is not, collective spending funding (which would comprise all moneys expensed by a government, whether local

 Still, there are market solutions: The communities alongside the area that is exposed to flooding can sell the terrain and the adjacent land to an investor who builds the dam. He will be able to recover the investment from the increase in land value that shall occur when the dam has been built.  The pork barrel metaphor supposedly originates from one of many unsavory practices of slave owners. Without refrigeration in the late 19th century, people preserved pork by brining it in barrels. Slaves, who all had their access to food restricted, would rush to the pork barrel to receive their rations. The theory is that someone likened the slaves stampeding to get pork to congress members getting their local appropriation items into bills. Pure chaos! (https://study.com/academy/lesson/what-ispork-barrel-spending-definition-examples.html).

2.2 Collective spending

33

or state or federal) cannot be a denominator for its provision of public goods: As per the discernment made above, the budget which a government allocates to public goods is lower than the whole of collective spending. But if particularistic programs serve some social purpose, they might still serve some social group’s wellbeing, if only within a small community. There is nothing wrong with this if the community pays taxes to the authority that spends money for a particularistic purpose in that particular community (e.g., property tax that is paid to the county in the U.S.). We would call the pertinent issue a local public good. The problem arises when taxation is centralized and spending decisions are decentralized, i.e., where the taxpayer cannot see the fiscal cost-benefit. So, as the voters do not fully internalize the link between higher taxes (the costs) and more particularistic spending (the benefits), they may only see the higher taxes and not recognize the addition to their wellbeing. Collective spending for other than public goods financing may run into excessive government expenses when decision makers are fragmented along partisan lines. This can only be remedied by disciplining mechanisms through the ministry of finance or some other institution in other ministries (Bawn and Rosenbluth 2006). Díaz-Cayeros et al. (2003) gave the example of Japan, with its strong oversee mechanism through the Ministry of International Trade and Industry (MITI). Their numerical analysis13 examined government construction investment – in railways, roads, bridges, housing, and community centers, which has historically been the object of particularistic programs in the Japanese budget. In 1998, which was the focus of the study, Japan spent 626.5 billion US$, or 15.2% of GDP in construction; the U.S., despite having 24 times the land mass, spent 651.6 billion US$ (only 4% more than Japan), which is 8.1% of GDP.14 Between 1984 and 1998, private sector construction in Japan grew at only 1.1% per year, while government investment grew at 3.6%, and the relation between public sector spending to overall spending increased from 38.7% to 46.9%. But profitability in the industry decreased from 3.4% in 1990 to 1.6% in 1998. So, when the government knowingly spends money in a non-profitable sector, there is room to suggest that this has political background. There is a proof: The share of expenditure in public works increased as the ruling party’s vote share decreased. To secure its majority in parliament, the party engaged in heavy construction investment, particularly in rural areas where it has a hard voter base and where the effect of public works on local economies becomes clearly visible. Still, with 39% of the tax revenue raised directly from local political entities, there is some fiscal cost-benefit nexus on the local level, and when transfers from the central government become necessary, this has always been tightly controlled by the MITI and the Ministry of Finance, showing a coincidence with changes in the electoral system (Horiuchi and Saito 2003).

 All numerical data in this paragraph are taken from Díaz-Cayeros et al. (2003).  Engineering News Record 1998, https://www.enr.com.

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The Japanese case not only sheds a light on the pros and cons of including all collective spending in public goods investment; it also shows that fiscal oversee on the national level can impede expenditures that are only made to please the electoral base. Only when particularistic programs contribute to wellbeing in the community where they are executed, they should be labeled public goods. Anyhow, it is on the community level, the local level, where citizen enjoy most of the benefits from public goods – which leads to the next section.

2.3 Local – regional – global Citizens enjoy most of the benefits from public goods on the local level – at least visibly (there are exceptions: clean air, though breathed in by anyone wherever staying locally, should be available anywhere, and hence it would be considered a global good). And the locals also suffer the most when supply of public goods is inadequate, such as poor rural transportation, insufficient supply of electricity, drinking water, education, and internet access. This often limits regional communications even in a developed country like Germany where, as of 2023, there are quite a few regions where is not up to date (Thomä 2023). There is another aspect in the usage of public goods on the local level: it is not just the locals who benefit from local public goods, like, e.g., city streets and pedestrian areas. They may also provide benefits to users from outside the local community. So, what develops is an “impure” local public good. The communities might charge their usage, but if the users are mobile, they will be able to choose between different communities which offer different public goods schemes. And they may decide that they want to be offered a determined package of public goods in a determined community. There would be more users in that area, which could raise this community’s (and these goods’) efficiency. The other communities, however, might then offer a lower price for their services (e.g., lower local taxes), and this could end up in a race to the bottom, leaving the public entities with inadequate resources for attending to the needs of many of their citizens. There is a paradox in this which was first revealed by US economist and geographer Charles Tiebout (1956): If various local jurisdictions differ in the packages of public goods they offer and the local taxes they raise, he said, this will lead to an optimal partition within the citizenry through a process of voting with the feet (people leave the community, or they do not come for visits). So, there would be fewer users, and it would be from this smaller number that efficiency would rise (Cornes and Sandler 1996, p. 9). The linkage between the offer of local public goods and fiscal competition between local governments affects wellbeing, or to be more precise, both influence ecological and social sustainability: Local governments will raise the attractiveness for (new) citizens and businesses and can then choose spending policies that increase the value of their public goods – tangible ones like environmental protection and intangible ones like social coherence. A proof is the outcome of tax competition between Belgian

2.3 Local – regional – global

35

municipalities which was investigated by public goods researcher Henry Tulkens over a period of 15 years (Richard, Tulkens and Verdonck 2006). By adapting the rate of the supplemental income tax and the property assessment factor to each other’s rates settings they effectively altered the preferences of businesses to remain or to move away. Where businesses moved in, tax revenue increased, and the municipalities offered more and better public goods. In the end, what matters are not tax rates and tax incentives but the provision of public goods. Sweden has a high tax burden for individuals of an average (!) 57.2%.15 Her citizens, though, do not emigrate to low-tax countries because they feel that the delivery of public services and public goods is to their satisfaction. When a public good is provided locally, the beneficiaries can closely collaborate with the goods provider in shaping the scope and the qualities of the service. For instance, education in public schools has largely been left to local units in most states over a system governed on a state or federal level. There are exceptions – in Austria, secondary schools are federal as opposed to the system in Germany where homogenization of curricula, exams and working conditions of teachers is sought through inter-state ministerial committees (with mixed results – see Huisman 2003).16 But for primary schools, the most common model found anywhere is local jurisdiction, and funding is from (local) taxes. However, when the need arises to accommodate a larger number of students, to hire more teachers and to build larger schools, this often goes beyond or county budgets or municipal budgets. The consequence is private schools – so, from the “production side”, schooling is not a pure public good. On the consumption side, however, one would conceive and consider schooling as a pure public good because returns from education produce benefits not only to those being educated, but to all society. However, evidence shows that the more schooling remains a pure public good, the smaller will the return be to the student compared with the return to all society (Barzel 1973). From there, it may be deduced that private investment (business involvement) in education contributes positively to the outcome of schooling. If there is a well-balanced blend of public and private schooling, the advantage for society may even reach beyond local boundaries. This across-borders effect can also be found in other local public goods. E.g., climate change adaptation only works within a certain region, but as it affects climate change mitigation, it promotes a global public good. When expanding the scope from the local to the regional and global levels, the benefits provided by public goods reach farther, and we also touch the critical link to

 This entails taxes and contributions for health care provision, unemployment and old age pension: https://tradingeconomics.com /sweden/personal-income-tax-rate.  Paradoxically, the French education system while it claims to have uniform curricula still creates inequalities to the advantage of those who come from families who care for childhood learning and who often live in well-off neighborhoods (Tirole 2017, p. 56). Likewise, the educational levels at state schools in the US and in Britain simply reflect whether they are in a poor or in a wealthy neighbor neighborhood (see, e.g., Dreier et al. 2014). More on the issue of education will be discussed below in section 3.2.

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globalization. The nexus between global public goods and globalization requires an understanding that is not “shaped by disjointed political pressures and jurisdictions – which are likely to favor the emergence of public bads that might hinder the development of public goods” (Kaul et al. 2003, p. 2). But it is not only that we see disjoint public policies; the same goes for public responsibilities. There is also a deep division in the general attitudes towards globality. Globalization is often connected to increased influence of the private sector which affects the workforce, consumers, citizens in general, and, last not least, policy makers. Therefore, lawmakers, elected officials, and heads of government agencies need to address the topic without ideological prejudice, and whatever efforts they develop in the context of globality, their undertakings must include the private sector. Otherwise, they will hamper international interdependencies and disable them from producing the goal of advancing people’s wellbeing. On the other hand, they must intervene when people feel that the global activities of the private sector cause negative consequences (“public bads”), like ecological calamities and financial crises. But this must not induce politicians to think that it is solely them who can provide the avenues for managing globalization and global public goods in an orderly fashion. A proper way towards solving the problem is reflected in the European Union’s definition: “Global public goods refer to the advantages to society from the provision of certain utilities and from satisfying particular wants and needs such as the eradication of disease or the elimination of pollution. Broadly, they can be classified into five main types: environment, health, knowledge, peace and security, and governance” (European Commission 2002). Examples are given in Table 2, and it becomes apparent that for providing the utilities and satisfying the wants and the needs as per the EU definition, the private sector is indispensable. On the global scene, provision of public goods raises two main concerns. One is governance, the other is financing/financing mechanisms. These concerns are intertwined: Public goods issues on a global can only be managed and overseen effectively through inter-state cooperation and international institutions. And it is mainly international institutions and inter-state agencies that provide or procure finance. When the good is not fully public because only a few institutions are concerned with the issue, as with, for example, satellite communication networks, we have global commons. They will require specific forms of funding, but the main difference from public goods is that they require a specific form of governance. The difference can be gleaned from a statement made by Boonen et al. (2019) who studied the formats of power in global ventures. Whereas the provision of public goods may necessitate coercive powers for avoiding action dilemmas, they say, commons depend on stakeholder agreements and ad hoc rules. Commons “reflect the ideal of self-governance of social movements and communities wary of market logic and state hierarchy” (Boonen et al. 2019, p. 570). “Wary of market logic and state hierarchy” might be a strong expression, especially when talking of the global level. But the logic behind this is that some topics can better be addressed by smart self-governance rather than by strict economic effectiveness and efficiency or high-level specialization. This will primarily apply to the topics within the category of the environmental public

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Table 2: Types of Global Public Goods.17 Environment:

Health:

Knowledge:

Peace and Security:

Governance:

Clean air Ecological land development Reduced exposure to harmful ozone layer exposure Preservation of rain forests

Providing public health infrastructure Limiting the spread of epidemics

Satellite communication network International standards Education Science

Deterrence through peacekeeping Intelligence Law and order Nondiscriminatory law and order agents

Trade Agreements Investment treaties Functioning institutions Transparent and effective courts

Source: Adapted from European Commission 2002.

goods as shown in Table 2. Approaching these challenges globally will be more complicated than on the local and regional levels. But there are quite a few ventures, e.g., in ecological land development or the preservation of rain forests, that have a successful outcome on the global level as well. Their management and governance features will have to be more horizontal than vertical. An in-depth analysis on this will be given in Chapter 4 of this book.

2.4 Intergenerational public goods The term ‘intergenerational’ leads to the temporal dimension. When actions or decisions on public goods have an effect into future, the stakeholders of these goods or their representatives are accountable for the impacts on the next generations. In principle, all public goods have that repercussion. For instance, when a community by the sea or by a river builds a dam, this would be an ‘intergenerational club’ – the members of the club will be the present and the future beneficiaries form the protection that the dam provides. If one member of the club is a government institution, it may be supposed that this institution will last beyond generations. It will have a say in determining that the layout of the dam is strong enough to subsist. If the club is owned

 It takes wonder that the categorization of the EU Commission does not include cultural goods of which the global manifestation would be the UNESCO World Heritage List (https://whc.unesco.org/en/ list). But the context in which the Commission gave this definition of global public goods was the international efforts to achieve sustainable development. Still, there is a EU policy on culture, where the main actor is the European Parliament. As early as in May 1974 it passed its basic resolution on the protection of the European cultural heritage (OJ C 62, 30.5.1974, see: Prutsch 2018)

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through equity stocks, they will be traded between generations. From this, a strong incentive exists that the founding members act with foresight: They will build the dam in a way that it subsists, because otherwise the value of the stock drops prematurely. When they act carelessly, they will pay for their shortsightedness by incurring a loss because the next generations will buy the stock at a reduced price (Cornes and Sandler 1996, p. 239). Conversely, if the present generation increases maintenance expenditure for the dam, this will increase the value of this public good. This has been called ”intergenerational social efficiency” by Nobel laureate Robert Merton Solow: If a society invests in the maintenance of its stock of capital, it can benefit from a consumption stream over time and time (Solow 1986). Social efficiency will rise when an intergenerational club has many (small) owners who enjoy its benefits – like the dam of the example that was given above, or a tollroad. Widespread ownership will guarantee that a status can be reached where it is impossible that some people are better off than others. The economists’ term for this is Pareto-efficiency, named after the Italian civil engineer and economist Vilfredo Pareto (1848–1923) who was among the first scholars who used mathematics to explain economic phenomena. He proved that the distribution of incomes and wealth follows a consistent pattern in most societies, ending up in a status where a change in the allocation of wealth would make no one better off without making another worse off.18 In the public goods sphere, Pareto-optimality does not only apply to a status of social efficiency but to economic efficiency as well: The consumption or production of public goods can give rise to externalities, which implies that those who consume or produce the goods reap benefits that would obliterate a Pareto optimal distribution of wealth in an economy (Buchholz et al. 2018). But if all externalities are internalized, i.e., the cost which they produce for other players in the market are borne where the extra benefits arise, optimality is restored. In a situation with positive externalities, e.g., where property owners benefit from a new road built nearby without paying for it (as with the toll road, our other example, where it is only its users that pay), the beneficiaries would have to participate in its cost, too. Politicians will rarely make decisions of this kind. Generally, governments favor the present generation by charging current users less than full cost. Highways will thus deteriorate quickly, leaving a torn-up infrastructure for future generations – an “intergenerational myopia” (Sandler 2013). The main discussion on intergenerational public goods is not about toll roads, river dams, or other club goods, it is about global public goods. Global public goods provide benefits across borders and across generations. Whether by the forecasts of the Intergovernmental Panel on Climate Change (IPCC)19 or by simply observing nature, there is

 With a very high degree of simplification, this is related to what John Rawls, about 100 years later, claimed to be fair justice in wealth distribution: Inequality in a society is acceptable if it works to the benefit of the least–advantaged members of society (Rawls 1971).  For more on the forecasts of the IPCC see section 4.5.3.

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clear evidence that limiting carbon dioxide creates benefits for the near and for the distant future. Preserving natural habitats, providing means of communication, accumulating knowledge, etc.: All are efforts that will improve the wellbeing of future generations. Politicians and social activists always point to the responsibilities which the present generation has to that effect. Very rarely do they mention the benefits that the elderly have produced for the young. The prevailing topic is the harms caused by the present generation – to the atmosphere, to the biosphere, to the natural resources. No one comments on medicines that were developed, for example, in the early 1900s and which still cure diseases; similarly, it is the present generation that improves access to fresh water and sanitation, to name one of the SDGs. This will amend health and human development for all generations to come. There is more in the SDGs to raising life expectancy and the standard of living in future times, and there are many other very ambitious collaborative arrangements that promote developments with long-term effects. One example which is much less known than the 2015 Paris Agreement on Climate Change is the “Sendai Framework for Disaster Risk Reduction”, which was also signed in 2015 (UNISDR 2015). The objective is to reduce risks from natural and man-made catastrophes through scientific and technical cooperation for research and development in the field. This will prevent losses in lives and livelihoods, and it will contribute to preserving the assets of mankind – physical, economic, social, environmental, and cultural ones, whether owned by individuals, businesses, communities, or nation states (Aitsi-Selmi et al. 2016). Sadly, the Sendai framework is included in the Paris Agreement by just one brief reference, and it has almost never been covered in the media. A similarly low coverage is given by the media to advances in nuclear technology. While intensive public debates have been conducted on the intergenerational burden from nuclear waste, technological progress on the issue is almost being negated. The press very scarcely mentions technology that uses recycled nuclear waste, and only after quite a few plants and research reactors had been in operation in the U.S. for several years, media coverage started (Taylor 2015). The same goes for advances to eliminate the most critical technical process, which is the loss of coolants from conventional power plants, by pebble bed reactors. They have become active in China in 2021 – again, without being reported in the press. Their design is such that they can gradually dissipate heat just by continuing the operation, and it would not matter if coolants were lost.20 It seems that Western media are biased against nuclear energy. There was only one article on new types of a nuclear reactor in the New York Times when it came up in 2011 (Bradsher 2011). China, where several plants use the new technology, is confident that this will substantially contribute to cutting China’s CO2 emissions per unit of GDP by 60 to 65% from the 2005 level by 2030 (World Nuclear

 A similar effect is attained by dual fluid reactors that are presently developed by German scientists. The first pilot installation due in Africa in 2024 (https://www.sciencedirect.com/science/article/ abs/pii/S0306454915000730).

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News 2019) – and if this is in fact achieved, it should, with all due reservation, be rightly called a sign of intergenerational concern. Caring for the needs of future generations should influence today’s political decisions in a way that promotes innovation and not through restrictions. For example, the German parliament, in its total ban of nuclear energy, has barred future generations from research (and international cooperation) on the topic.21 The decision will diminish the capabilities of upcoming scientists and engineers; it will potentially deprive the German society of far-ranging benefits, and, contrary to the politicians’ intention, nuclear research in other countries will be subsidized by German taxpayers’ money because the system of finance within the European Union will add it to interstate payments for new developments in energy production. One-sided perceptions on technology negate that all research produces joint outputs (e.g., the microwave is a by-product of NASA’s research on aeronautics). With joint products, more positive external effects will occur that produce future public benefits. There is another example: Excluding carbon dioxide capture and sequestration from development programs that consume steel dust produced in steel plants will also bar a constructive way to use this waste (Ibrahim et al. 2019). Intergenerational equity with public goods will not happen through taboos. The concept of public goods needs fruitful argumentation, and successful technical approaches will provide good additions s to the theoretical discourse. The intergenerational attribute and the local/interregional/global attribute also apply to commons. Of the attributes “non-exclusivity” and “non-rivalry”, the first one does not apply in general, because commons usually have specific members who manage them – like in the case of a club good. The second only applies where the good in question is not depleted by over-exploitation. The main difference, though, lies with manageability and governance.

2.5 Club goods of a specific type: The commons The way in which communities self-organize common-pool resources deviates from a management solution that would be deployed for an exclusively public or an exclusively private good. It comes close to a managing a club good – again, the most illustrative view here is Ostrom’s famous example of farmers collectively providing irrigation. Beyond small-scale institutions on the local level, like the irrigation scheme, today’s

 It was not the parliament only which seems to have a wrong judgment on what to do for the future generations and what not. In 2021, the German Constitutional Court, giving in to complaints raised by young climate activists, declared the German Climate Protection Act unconstitutional because it does not regulate emission reduction pathways from 2031 (https://verfassungsblog.de/the-constitutionspeaks-in-the-future-tense). Asking for this regulation, however, is equal to demanding that the lawmakers foreknow all technologies that may arise in the future.

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commons applications concern a wide range of multi-size self-government arrangements on interregional and international levels. There are three elements which make the commons solution unique: How they deal with power, which consequences the power of the stakeholders to a commons has for the role of the state, and how they find the most appropriate spatial scale of governance (Boonen et al. 2019). All three may change over time. Also, getting the operation rules right on the first try or even after several tries mostly is impossible (Ostrom 1990). The institution, however, if it is robust will find an institutional equilibrium, meaning that if changes come about, the partners will “transpire according to an ex-ante plan” (Shepsle 1989, p. 142), i.e., following to the collective-choice rules of the institution. An ex-ante plan, collective-choice rules, monitoring, and continued commitment are three major ingredients to the specifics of commons governance. Commitment can prevent that members reap isolated benefits, even without harsh restrictive rules for exclusion and sanctions systems. There may be a high cost of negotiating the régime that governs a commons. But it is indispensable for its functioning that all parties affected by a resource regime participate in making and modifying rules, either in person or through their representatives. The result will be a horizontal contract among the commons members that lasts almost forever. A study by Harvard historians Maass and Anderson (1978) has proven that this has made many rural commons (irrigation systems, grazeland, etc.) most efficient in using all their input factors compared to other forms of management. It has been met with skepticism that a horizontal contract among the members of a commons can work on the global level because no sovereign state would allow that its sanctions – against, e.g., free riding – are executed by another state (Kaul et al. 1999, pp. 6–13). This alludes to the element of power that is one component of commons governance. But when supranational institutions like the World Trade Organization can deploy mechanisms to coerce defectors, why should inter-state cooperation not be able to “design punishments that are sufficient to induce compliance?” (Trachtman 2012, p. 161). One example is the human rights provisions contained in American and European preferential trade agreements. Statistical evidence has shown that they have a more significant effect on human rights performance than the United Nations Human Rights treaties – so, the power of coercion in these commons is stronger (Hafner-Burton 2009). The factor of power – be it the power of the state or of a potent member of a commons – constitutes a challenge: When not all partners that procure public goods are equal economically, thorough diligence and careful negotiations will have to be performed before the institution is built. Solutions to this challenge will be exhibited in Chapter 4 which deals with how to manage collective efforts.

Chapter 3 Sources for providing public goods and commons The typology of public goods draws a landscape that shows destinations; for a full picture, the routes which lead to these destinations need to be added. If all public goods were provided by the state, one route would remain only. But human need in all its facets cannot be satisfied in one way only. Creating benefits for humans is a societal concern, and the state must take account of this. Adam Smith has already described to which extent the state can create benefits: He speaks of “erecting and maintaining those public institutions and those public works, which though they may be in the highest degree advantageous to a great society, are, however, of such a nature that . . . any individual or small number of individuals should erect or maintain it” (Smith 1981 [1776], p. 723). So, economically, any individual, i.e., the private sector, needs the state, and the other way round, the state must account for the needs of the private sector: Public goods are not correctives to the sovereignty of private preference but simply a particular instantiation of it (Brennan and Lomasky 2006). And this instantiation sets out from the question which benefits – which wellbeing – can be created by which sector of a society.

3.1 Who creates benefits to society? Wellbeing is a term that connotates benefits both to single individuals and all society – it is satisfaction of human needs. Ancient Greek philosophy suggests that satisfying the basic human needs (i.e., natural desires for real goods – food, clothes, shelter, health) is a matter to be left to the capacities of all humans, but that their true fulfillment depends on fair treatment and cohesion within society (i.e., acquired desires for goods of fortune – respecting others, respecting the laws, self-realization, access to education, etc.). Aristotle further demands that satisfying these “higher” needs and making the goods of fortune available to all is the duty of the state (Adler 1996, pp. 8 ff.). Over all the centuries, this doctrine has remained valid: The state secures the base for the private sector to create benefits for society, and the private sector is supported in this by state intervention where needed. Intervention can reach from regulation to taking on ownership of a good or service (for which the argument mostly is market failure; this will be discussed below in section 4.2). In in between these ends lies partnering with other stakeholders to jointly deliver a service (and jointly create benefits). There is a complementarity between the market and the state. They do not compete, and they can combine their forces in public-private partnerships or in commons. What has been stated by the ancient Greek thinkers was refined later. There are two contemporary philosophers who further developed Aristotle’s concept of a need being an end in itself – implying that it is not about ‘we need some X in order to provide https://doi.org/10.1515/9783111134611-004

3.1 Who creates benefits to society?

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for some Y‘, but about ‘we employ certain of our own functions that allow us to create what we need’. Harvard professor Amartya Sen’s famous proclamation is that functionings (i.e., what makes things work) connect resources and capabilities, and so, ultimately, we can generate our wellbeing ourselves (on Sen see, e.g., Binder and Coad 2014). From this, Law and Ethics Professor Martha Nussbaum, together with World Bank researcher Narayan, suggests six categories of wellbeing that span from the individual to the collective level both with regard to the ability to create them and to enjoy their benefits (Narayan et al. 2000): – Material wellbeing, including food, assets, and work. – Bodily wellbeing: being and appearing healthy and living in a decent physical environment. – Psychological wellbeing: having peace of mind, happiness, and harmony. – Social wellbeing: being able to care for and bring up children, having self-respect and dignity and having good relations with one’s family and neighbors. – Security: enjoying civil peace in a safe environment with personal physical security and access to the means of justice, with security in old age and confidence in the future. – Freedom of choice and action. The lower part of the list is cataloguing what must be procured by the state, in the middle we have what can very well be provided by commons, and for the upper part any individual, at least in today’s societies, needs to resort to the markets. This mix generates benefits to all if all parties stay with their limits: The state defines the rules and responsibilities, the players in the market (those who offer goods or services and those who buy them) must pursue their self-interest – Adam Smith’s prerequisite for the invisible hand: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest” (Smith 1981 [1776], p. 14). And while the term benevolence is often used in relation to governments’ concern for the welfare, the reality is that decision-makers in public authorities cannot be just benevolent; they must cope with the constraints of voter expectations, countervailing interests, tight budgets, and restricted access to advanced technology. It may be far-fetched to say that only dictatorships can remove all those barriers (Acemoglu et al. 2008), but even well-intended sociologists would call it a “myth that government acts out of a primary concern for the welfare of all its citizens, or that its policies represent an effort to find solutions to all recognized social problems” (Marcuse 2017). This provocative argument was made with regard to the public housing policies in the U.S. which have always been under the stress of all the constraints mentioned above. But the core meaning is that “all citizens” and “all social problems” can never be satisfied and solved by the state through the provision of public gods. So, what, then, is the role of the public sector?

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3.2 The role of the public sector Whether from the Aristotelian viewpoint (‘the state needs to make the goods of fortune available to all’) or from that of contemporary sociologists, the habitual stance is that the public sector is substantially committed to the main issues of public health, public education, infrastructure, and social security. This applies to developed countries and the developing world, but there are very notable differences in scope and quality. One reason for the difference is that the tax revenues are higher in developed countries,22 the other reason is the quality of institutions, which means, above all, bureaucratic efficiency, political stability, respect for the law and absence of public officers’ corruption. These are essential public goods that constitute government effectiveness – a public good which in turn enables provision of other public goods. So, above all, it is institutional quality that allows to levy taxes effectively, spend them prudently (on public goods) and enable free markets to thrive. This is an outcome that, according to renowned World Bank economist Hernando de Soto explains “why capitalism triumphs in the West” as per the title of his most famous publication (De Soto 2000). There are weaknesses in capitalism, all the same, that may jeopardize a wellbalanced provision of public goods. The big advantage of capitalism is that it promotes equality (i.e., equal opportunities) for all members of the society by giving a chance to everyone, that it creates vast openings for innovation, and that its rules of supply and demand enable self-regulation of the markets (for advocating capitalism see, e.g., Meltzer 2012). But just because capitalism offers everyone the same (first) chance this does not mean that it is a completely fair system. If there are breakdowns in consumption and production, even compensating this through a process of “creative destruction” (Schumpeter 1942), i.e., new and better ventures, will not suffice to compensate all losses. Another downside is that big businesses can build monopolies that restrict fair competition. They can overpower governments. Also, when they get “too big to fail” they must be bailed out by the community of taxpayers. So, the capitalist state must find remedies to improve fairness for all, to appropriately counterbalance losses of productive capacity that cause losses of wellbeing (a suitable but highly contested measure would be subsidies for the respective industries) and to harness overpowering corporations. The instruments to achieve these remedies lie within the public goods which the state can provide. They require astute political wisdom because they are interdependent, i.e., their effects are systemic, they comprise all levels from the deep local to the high spheres of international cooperation, and they require diligent planning and implementation.

 The average for central government spending as a share of the GDP between the years 1996 and 2000 was almost 40% in the high-income group of countries and less than 15% in the low-income group of countries (authors’ calculations based on the World Bank Development Reports). In countries for which data are available, the share of the GDP collected through tax revenues in those years was about 30% in high-income countries, but only around 10% in low-income countries (Arora and Chong 2018).

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On the topic of multilevel systemic governance of public goods there is high-class research coupled with discussions on policy considerations for the European Union and the global levels. The research and the discussions are carried out in various institutions like the Robert Schumann Centre for Advanced Studies at the European University Institute in Badia Fiesole, Italy (see: Petersmann 2012). The range of this research is beyond the scope of the book; the following section will merely demonstrate how some features of these investigations also apply to the local communities and state levels.

3.2.1 Providing systemic governance for societal concerns Societal concerns are interwoven – health with security, education with access to job markets, etc. The author of this book, when working with students in Northern Ghana, had a stunning response from a youth group who had never heard of the SDGs, but they immediately found out that access to water would help children to spend more time in the schools because they would not have to walk long ways to fetch water, that security on the streets would allow the women to walk home from evening classes where they could train for jobs, and so on. It is commonplace that the SDGs are systemically interrelated, but one has to experience this type of responses to clearly grab what this means for even a small and remote location. So, to stay with this example, if there is a nexus between providing access to water and security on the streets with other public goods, this clearly explains why the effectiveness of public goods provision by the state depends on policies that are carefully coordinated. There is another nexus which is between wellbeing and innovation. If the state wishes to achieve that as many people as possible enjoy a high level of wellbeing, societies have to be innovative. Public authorities must establish an environment for visionary entrepreneurs, inspired employees, and smart researchers. On the other hand, a high level of wellbeing is, in itself, a fruitful basis for innovation. However, the impact of innovations on society depends on the way it deals with them. This is where innovation policies merge with social policies where the state does not hamper novel undertakings by the private sector but instead supports them. According to a reference from Mariana Mazzucato, founding director of the Institute for Innovation and Public Purpose at University College, London, governments in the Western world have done just this in the last century and up to the beginning of the 21st century: They stepped in with the necessary investments along the entire innovation chain where the private sector has been reluctant to put money afraid to make (Mazzucato 2015). There is hope that this continues despite the new challenges which states face from warmongers, climate change and pandemics. State authorities will prevail if they address the challenges in a way that sustains political participation and the interaction with businesses and citizens. There is a field in which this is almost preordained: Digitization. Increasing digitization of the society and the economy only

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works when all sectors participate. Then it will not only improve living conditions and reduce social inequality, but it will also help to cope with warfare tactics that use the internet, with improvements in the analyses of global warming, with securing health and other public goods in times of the pandemics, etc. The immense power of the internet raises the concern whether this omni-present device can be controlled at all. With global availability of the internet, the issue of governance reaches new dimensions: The internet, at least from how it can be accessed, is certainly a public good; internet usage extends beyond borders; monetization of the internet affects the balance between individual rights and public good. Can the traditional foundation of public goods aptly encompass all these phenomena? From whichever viewpoint, there is a shared responsibility of businesses, governments, and individuals in governing the Internet, and they must collaborate on a global level. A first focus in internet governance is on technology-based approaches. Technology, here, comes from institutions, and each of them delivers a specific contribution. Two of these institutions have a dominant role: the Internet Engineering Task Force (IETF, https://www.ietf.org), a large international community of network designers, operators, vendors, and researchers, and the Internet Corporation for Assigned Names and Numbers (ICANN, https://www.icann.org). Their work is supplemented by government authorities worldwide. And almost all countries, in some way, use their state power to regulate the internet’s physical infrastructure and the activities of the firms that provide internet content. The most effective approach is to address guiding rules for regulators on different levels: Bottom-up, the ‘regulator’ on the user level would be the actor himself/herself, and the rules would follow or come from the individual’s personal/institutional ethics. On the next level up, contractual provisions would guide trade partners. Following further up, social, and other non-governmental organizations would apply norms of conduct, and on the uppermost levels state- and international authorities would issue laws and enforceable ordinances. There are technology-based and regulation-based solutions for each of the levels (Ang 1997): – Regulations on the user level are mostly based on code-architecture, communications protocols and other software that determine how the internet operates. – On the level of interpersonal and inter-organizational agreements, market forces drive the fundamental decisions about the technology of the internet. – Social groups and collective clusters would regulate themselves through what has been called spontaneous ordering of the cyberspace which is premised on the idea that the internet is a self-governing realm of individual liberty, beyond the reach of government control (Johnson and Post 1996). – The level of national governments and law which issue regulatory decisions on fundamental concerns (national security, protection of human dignity and health). – The level of transnational institutions and international organizations which operate through quasi-private cooperatives based on treaty arrangements between national governments.

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Specific challenges lurk behind all this. But finding solutions has become more urgent – there is cyberwar, there was the pandemic and the consequences it has caused. The combined efforts to improve internet governance must end up in an arrangement of user-based regulation models and multidisciplinary approaches based on engineering, economics, law, and social choice. In the COVID-19 pandemic, with many fake information that endangered public health, the urgence of internet control has risen (see, e.g., Bardy and Rubens 2022). Best results will be achieved in states where social policies are in place which foster their citizens’ innovative capabilities: A ranking of the EU countries according to their innovative capability shows that the Scandinavians which are welfare states by tradition have the highest positions (Buhr 2020). But this needs good governance also. In the following, two exemplary cases will be exhibited where benefits for society can best be reached through systemic governance: Health and education.

3.2.2 The example of public health How can health for all be secured? On a world-wide scale, the ambitious goal of “Health for All in the Year 2000” was promulgated at the United Nations Alma Ata conference in 1978. The first paragraph of the declaration read as follows (Birn et al. 2009, p. 177): Health is a fundamental human right and the attainment of the highest possible level of health is a most important world-wide social goal whose realization requires the action of many other social and economic sectors in addition to the health sector.

This is a call for investments in people and in primary care as well as in economic and social development, and the hope to achieve that goal shortly was based on concrete worldwide successes in public health of the 1960s and 1970s. Also, the declaration clearly refers to the social determinants of health on which topic the World Health Organization (WHO) convened a new commission in 2005 which bears this name.23 In the United Nations Sustainable Development Goals of 2015, a reference to the social perspectives can only be found indirectly, because Goal # 3 mainly sets “outcome targets” like reduction of maternal mortality and infant death, reduction of communicable diseases, access to and achieving universal health coverage including financial risk protection and access to essential medicines and vaccines. But in the context of SDG # 3 it is also mentioned that all this requires social policies, management, and governance. The list entails (see Bardy et al. 2020):

 WHO Commission on Social Determinants of Health; see https://www.who.int/initiatives/action-onthe-social-determinants-of-health-for-advancing-equity

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–

– – – – – – –

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improving the working conditions for employees by paying a “fair” and “livable” wage, by providing minimum social protection which prevents the poverty trap and malnutrition of the family members (elder, children), ensuring a safe and healthy physical environment of the workplace and preventing occupational hazard and health risks as well as road deaths, providing health education to employees and their families including on nutrition, healthy diet, and primary healthcare practices, organizing regular sport programs for employees to foster physical stability including events for their families, minimizing pollution and emission, engaging in education campaigns in the communities regarding infectious disease, personal hygiene, and environmental conservation, building partnerships for healthcare provision between the public and the private sectors, including co-regulation, coordination, and monitoring, securing finance, human resources and know-how for target setting, definition of progress indicators and milestones.

SDG # 3 sets numerical targets for these goals to monitor implementation. They have a standing or their own and are only loosely connected to public health statistics.24 The pertinent social policies and the management require that the state closely cooperates with the private sector – entrepreneurs who invest in corporate responsibility, businesses that finance private hospitals, the pharmaceutical industry, and, last not least, the medical profession and civil society organizations that represent the interests of patients. Leaving all medical services to the state will overburden the government agencies as the fate of the British National Health Service has shown (see, e.g., Bevir and Waring 2018). Public health is a common venture pursued by all members of society. An appropriate governance of this common venture must specify a clearcut division of work, a workable monitoring system and exit strategies in case of mishaps. The officials in public agencies must be able to apprehend the close intertwinement of all actions and all actors. A good example that shows the range of interconnected social and economic effects of healthcare is the impact of vaccines (Figure 5). The figure shows some effects that warrant further exploration – which will also elucidate why the term “systemic” is a fitting denomination for the governance issues that follow from these effects (and, similarly, from the nexus between other health care measures and social/economic policies). One nexus which the Figure exhibits is that women are empowered by vaccination schemes in a two-fold sense: When they learn about and have experience with vaccines, they will become autonomous in making health-related decisions; and they acquire knowledge that can make them less dependent on their male part-

 Health data in public statistics will be dealt with in section 4.5.

Reduce diseases that complicate vaccinepreventable diseases

HOSPIT AL

Health

Strengthen health and social care infrastructure

Equity of healthcare

Prevent antibiotic resistance

Induce herd immunity

Social

Impact of vaccines

Cost savings

Impact of life expectancy and opportunity

Empowerment of women

Cost-effective preparedness for outbreaks

Figure 5: The health impact, the social impact, and the economic impact of vaccines. Source: Rodrigues and Plotkin 2020, p. 1528.

Prevent cancer

Eradicate infectious diseases

Reduce infectious disease morbidity and mortality

€

¥ Rp

£

Establish programmes for vaccine development

₱ ₩ ₤

$

Economic Minimise the impact on family

Productivity gains

3.2 The role of the public sector

49

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Chapter 3 Sources for providing public goods and commons

ners. Hence, social programs like health education that was mentioned in the above list may have a repercussion on vaccination campaigns and vice versa. What Figure 5 also shows is that the impact of life expectancy is coupled with improvement of opportunity: When ill-health and mortality from an infectious disease no longer determine one’s life chances, the degree of social mobility rises – travelling gets safer, people who need to flee from war and conflict in their home countries will be protected against contagious organisms that differ from what they find in their own world. In the economic benefits, since vaccines are very cost-effective in comparison to other public health interventions, governments can reduce the pressure on their budgets when they acquire state-of-the art medication. Apart from the cost of purchase, the infrastructure to run a vaccination program can be tailored to the specific needs, healthcare and administrative personnel can be reduced. Economic breakdowns can be minimized, some treatments can be spared, so that patients and their parents need less time off work. All the above effects depend on the efficiency of public agencies – e.g., in the COVID-19 crisis, governments whose administrative processes were highly digitized, fared better than others (Mukoyama 2021). Some developing countries were better off with this than, e.g., Germany, whose authorities did not recognize this interconnectedness and were unprepared for online reporting and analysis of COVID-19 cases (Tucker and Yang 2021). As there are social determinants of public health, states should have policy agendas that take account of the systemic relationship between these determinants and public wellbeing. One policy is to foster by welfare programs. The WHO Commission of Social Determinants of Health proposes a ‘package’ of policy measures accordingly (WHO 2008). Above all, it acknowledges that the goals of public health go beyond (merely) the absence of illness in general and that it must also confront socially determined inequalities between population groups in measures of health – life expectancy, premature mortality, rates of disease, disease burden, disease risk etc., for which the term is ‘health inequity’. The policy agendas, hence, must extend into a space of broader political values and build the capacity to deliver the goods for human wellbeing jointly. Social and economic disparities cause disparities in health, and this is where systemic intervention has been asked for since social research and social economics came up. But when it has been known for decades that people in the lower social classes have the highest morbidity and mortality rates, and that there must be more reasons for this than inadequate nutrition, unavailability of medical care, substandard housing, unhealthy work circumstances, and lack of education (Syme 1998), where are the measures to access these sets of inequalities? Is it not that the moral legitimation of the political system is lost when it neglects this compound of issues? The problem is that politicians tend to think in silos – there is very often no mechanism to approach a compound of issues that run across the various jurisdictions of responsibilities. But inter-institutional synergies are fundamental to the provision of public goods – in terms of resources, knowledge, negotiation abilities, and rulemaking. Whether

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on a local level or in the international scene, this “helps to reduce transaction cost, to create links across issues; and to diffuse ideas, norms, and expectations” (Binger 2003, p. 8). The quote is from a background paper prepared for the United Nations Development Policy Committee, but the benefits it points out from cross-sector collaboration can be produced in any other context, especially in a field like public health with its numerous ramifications. On a state level, whether in managing public health or any other public good, the formats and the outcomes of this collaboration will be ultimately governed by parliaments and citizens. Citizens also have another role: With active community participation they can raise synergies to access inequalities and contribute to diminish disparities in the availability of health services and health treatments (comparative results of various participatory schemes are given in Falleti and Cunial [2018]). But it will remain the role of the state to warrant broad access to health services – and also, at least in advanced industrialized democracies, to guarantee health insurance. In this regard, it may suffice here to mention the three types of systems commonly used in these democracies: the single-payer system that provides universal access through one state purchaser of health services (the NHS in the United Kingdom); full proprietary provision through universal health insurance (as in Japan, in France, the Netherlands, and Germany); and a system that both subsidizes and regulates private markets (as in the United States and in Switzerland).25 The systems feature very different types of state intervention. Very often, therefore, the question is asked why there is no universal health insurance in the United States. The answer is a pointer to what “public” really is: It is the people. So, when American voters and politicians, based on the historical distinctiveness of the United States and its political culture are not willing to accept the concept, well-minded advisers from outside will not be able to change the United States’ (complicated) system.

3.2.3 The example of public education Like public health, education is a prerequisite for societies to flourish and to progress. Economically, the availability of a well-educated labor force raises the effectiveness and efficiency of labor; socially, being well-educated promotes equality and unity among the citizens. So, what is “well-educated”? Does it suffice to say, as U.S. colleges have done, that when an individual is well-educated, he or she is “able to rapidly adapt to and compete effectively within a changing worldwide labor market?” (Gordon 2013, p. 1). It does not, because this only points to an output. The ability to adapt and compete must be built on an input that shapes the mindset of a person. When aspiring that the mindset of college students must be suited for a worldwide labor

 There is no room in this book to cover the ongoing discussion among health politicians about the advantages and disadvantages of health insurance regimes. An overview to is given in a pivotal WHO study (WHO 2005). Follow-ups are to be found on the WHO Website https://www.who.int

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market, it must be a global mindset. The Najafi Global Mindset Institute in Phoenix, Arizona, lists the following components/sub-components of a global mindset (Javidan and Teagarden 2011). – Psychological: Self-Assurance, Quest for Adventure, Passion for Diversity – Social: Diplomacy, Intercultural Empathy, Interpersonal Impact – Intellectual: Cognitive Complexity, Cosmopolitan Outlook, Entrepreneurial attitude Except for the cosmopolitan outlook (which can be interpreted, on a level that does not look for the global, as openness for what lies beyond one’s immediate environment), these components would as well fit into the requirements for any type of education everywhere and at all levels. But it is up to each country to figure out the appropriate way to educate, to train, and to develop their people. And each country must find the best avenue to integrate into education programs what (future) employers need – whether public agencies, businesses, universities, or the armed forces. This starts with basic education: Children in Sub-Saharan Africa may need more intercultural empathy and selfassurance, children in the United States may need to be confronted with more cognitive complexity, etc. – yet one will rarely find these subjects in curricula for schoolteachers. Still, a look at schoolteacher profiles, e.g., in Canada, the UK and Australia, reveals that there are ingredients of mindset-building in the three main categories of what they should deliver to students and which are (1) knowledge, (2) skills, (3) values and attitudes: Providing knowledge not only includes particular disciplines but also the build-up of an intellectual framework, skills provision entails elements of interpersonal and intercultural communication, and teaching values to shape attitudes offers a range of moral conceptions (Darling-Hammond 2012). Selecting the proper content for educating schoolteachers, hence, is a primary task that governments must fulfill. It is often left to specialists, and what they recommend and why they recommend it rarely enters into public dialogues. In the public, the issue of how to train the trainers is heavily overshadowed by discussions that focus on the question whether governments should run schools and whether or not private schools are endangering equity in society. Equity in society, with regard to schooling, should not be about a school system that is fully controlled by the state, it is about equitable learning outcomes. The outcomes of education are what the Sustainable Development Goals (SDGs) spell out, in the first place (SDG # 4). The emphasis is on all children and young people equitably acquiring basic numeracy and literacy skills. How best to organize education systems to achieve this is a question that comes second place. The contentious debates over public versus private that are often held in the U.S. on dogmatic, ideological, and partisan grounds and which will not be dealt with in this book,26 detract from the mutifaceted problems in low- and lower-/middle-income countries. In these countries, as

 From a public goods perspective this debate is relatively irrelevant because what constitutes the public good is not ownership of schools, but outcome of education. In spite of what many U.S.

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well as in the U.S., private schooling has proliferated over the recent decades. And they have certainly brought some learning gain to those who attend private schools – but the same is valid, especially in the U.S., for public schools that offer tailored curricular programs and that draw students from across the school zones in which families reside (“magnet schools”; see Riel et al. 2018). In the low- and lower-/middle-income countries, the learning outcomes may be better, in some cases, in private schools, but this effect misses the goal of producing equal opportunities by equitably acquired basic skills in the primary level as spelled out in SDG # 4. Evidence from Tanzania, Kenya and Uganda show that even when expanding access to private schooling via voucher programs to children from disadvantaged households, the gaps between rich and poor are maintained and at best the proportion in the public school sector of the poor children learning the basics versus the wealthier children is raised (Alcott and Rose 2019). As with access to health, access to schooling – whether to private or public – is not only a matter of one social policy area. Learning inequalities also reflect extent disparities in various fields of access and choice between the rich and the poor who live in different parts of each of their communities. And there are the issues of child labor and the need for sending children to fetch water or firewood. What needs to be developed are policies that bring children to the school from their home. If we go two levels up from basic to tertiary education in Africa, there are local colleges and universities offering outreach programs to the communities which improve knowledge and attitudes of the adults towards the essence of schooling for their young (Bardy et al. 2018). This way of making the parents aware should be proliferated wherever a college or a university is located. The public good of education has a production perspective, as, e. g., the question of whether it is provided by the government or not, but there is also the consumption perspective. Decisions on how much money to spend on schooling are made by households (they are part of “the public”). They will base their spending on cost-benefit assessments, looking at factors like pupil to teacher ratios, school terms, and qualification of teachers (Angrist and Lavy 1999; Krueger 2003), and, last not least, at the school fees and other schooling expenditures they must pay. One additional aspect that comes from a very different perspective is property values: They may reflect how potential residents value schooling in a particular area: Home buyers are willing to “pay” for their preferences to locate close to schools. This would add up to the difference between benefits and cost: They obtain a private net benefit (Barrow 1999; Black 1999). There is a public net benefit also, which comes from balancing the public investment in schooling (or the social cost of schooling) against the public gross benefit (Riddell 2004). Figure 6 shows how the structure of social cost for schooling could look like:

academicians and politicians see as a provision of privileges to educational institutions that serve white upper- and middle-class Americans only (e.g., Kitzmiller 2019), it has been shown that the existence of private schools and private funding for public schools has a negligible effect on the learning environments within primary and secondary schools (Jerrim and Sims 2019).

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Recurring Staff Running cost

Capital Land and buildings Equipment

Student aid

Opportunity cost

Scholarships

Foregone earnings associated with additional school years or from renouncing alternative investment

Stipends Endowments

Maintenance

Figure 6: Social cost of schooling. Source: Author, adapted from Ridell 2004.

Determining the social benefit of schooling is less simple. Social benefits (benefits at the societal level) have been defined as “outcomes that accrue to individuals or groups of individuals other than the person or family making the decision about how much schooling to acquire” (Riddell 2004, p. 15). In economic terms, these are increases in growth, productivity, and income. Figure 7 shows some of the effects.

Financial benefits at the individual level

Estimated Financial benefits at the societal level ROI ✶

Estimated ROI ✶

Higher income

Higher income from labor taxes

%

Higher probability of being employed

Higher income from consumption taxes

%

Better health and knowledge about health conditions

Lower social benefits costs (e.g., unemployment benefits)

–%

Higher productivity

Lower cost of healthcare

–%

Spillovers (increase in productivity of coworkers and business partners)

%

Total return per additional year of schooling ✶

% ✶✶

Total: –%

Return on investment in education expensed by the individual/the public authorities. Aggregate return measured by the Mincer earnings function.27

✶✶

Figure 7: Financial benefits from education. Source: Adapted from Wolfe and Haveman 2001.

 The Mincer earnings function, named after Jacob Mincer, a founder of labor economics, explains wage income as a function of schooling and experience. It has been examined on many datasets (see, e.g., Grossbard 2006).

3.2 The role of the public sector

55

At the end of this section, a brief glance shall be shed on privately-owned universities.28 Their effectiveness can be measured by the outcome of both education and research at, for example, MIT or Stanford University (see, e.g., Antony 2014). But state-run universities may also perform well; however, the privately owned have better financial resources from bequests, donations, and high tuition fees. It is often argued that the high tuitions asked for by private schools can better be afforded by rich families and that the result is discriminatory selection of students. This may deepen societal divisions, especially those that are based on ethnic or class origin. So, here is a field for the state to set the rules of the game for the competition between public and private universities, e.g., by granting support to students or by attracting private funds to state-owned educational institution. There are notable differences across countries, but higher education on the average stands closer to the “state pole” than to the “market pole” even in richer OECD countries as exhibited on the OECD Education GPS website (https://gpseducation.oecd. org). While there were changes towards “more market” all over the world, they have not been so critical that they could undermine the weight of a welfare-state-inspired model with funds for higher education being largely collected from taxpayers; also, the model where students in the U.S. need bank loans to support their tuition has become under scrutiny because of its adverse economic effects. This has caused the U.S. government to introduce schemes of student loan forgiveness (Yannelis and Tracey 2022). There is, however, the question if across-the-board forgiveness is a good method to eliminate the racial and socioeconomic wealth gaps which the loans have exacerbated, and whether these inequities can be better addressed by (Looney 2022). They would not only access the consequences of indebtedness of students but other causes for disadvantages of students from less well-to-do families – these are, once more, systemic issues that demand systemic governance of state policies. Across-the board measures are rightly criticized anywhere. They often come in situations where the state believes it needs to quickly subsidize a mass of beneficiaries in an urgency. During the energy crises of 2022/2023 the German government gave money to all households, including the very rich29 (Anghel and Jones 2022). The other way round, when the state cuts welfare costs across the board, for which a frequently used denomination is “welfare-state-retrenchment” (Levy 2021), it will hit the poor. However, it is more frequent that the welfare state, as it aspires to secure wellbeing for all its citizens, will tend to overdo the dimensions of public goods. This will be discussed in the next section.

 For public-private collaboration in education see section 3.6.1  Germany’s strict privacy laws do not allow transfer of data between different state agencies, and therefore the agencies who paid out the subsidies could not retrieve information on household incomes from tax authorities. This is a case where the public good of privacy is ranked higher than expensing public money.

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3.3 The welfare state Caring for the welfare of its citizens through a bundle of varied support programs was first practiced, in modern times,30 by the government of German chancellor Otto von Bismarck in the 1870s. He launched a series of conservative reforms for workers, like unemployment protection, health insurance, and old age pension (see, e.g., Briggs et al. 2006 on Bismarck’s Sozialstaat). The term “welfare state” was coined during the Second World War by Anglican Archbishop William Temple in his book Christianity and the Social Order (1942) – most likely because the literal translation of the German word Sozialstaat (“social state”) did not catch on in the English language. The objective has been widened beyond Bismarck’s policies to support workers: The main entry on Welfare State in the Britannica Online Encyclopedia says that it is a ”concept of government in which the state or a well-established network of social institutions plays a key role in the protection and promotion of the economic and social wellbeing of its citizens” and that it is “based upon the principles of equal opportunity, equitable distribution of wealth, and public responsibility for citizens unable to avail themselves of the minimal provisions for a good life”.31 If any country wherever in the world would try to finance this objective on its own, many of the other objectives, like safety, economic progress, law and order, etc., would have to be truncated. The choice, therefore, is to either secure wellbeing through finance and provision of public goods from the private sector (for which there often are ideological barriers) or to fulfill parts of the objective inadequately (which might cause civil unrest). In between these lies the tendency to overextend and overstrain the public sector and public sector spending. When the public sector is overextended, and when the state attempts to do too much with insufficient resources, the claim to cut back is directed at all public expenditure, all public goods. For obvious reasons state officials who want to be re-elected will hesitate to cut welfare programs (to the detriment, often, of investments that are not so visibly related to citizens’ wellbeing, like, e.g., digitization of the public administration). Any business firm, when confronted with scare resources would set up a business plan that enables the firm to survive. But when government agencies are asked to develop a business plan that identifies their product, their customers, their suppliers and their strategic objectives, outcries will be heard that blemish all this as neoliberalism (e.g., Abramovitz and Zelnick 2018). But without these instruments, poorly organized structures, irrational decision-making processes, mismanagement of staff, and weak accountabilities may be maintained, and public goods provision may

 In ancient times, India under emperor Ashoka and China under emperor Wen established a variety of measures which resemble modern welfare policies (Bhatta 2005), and the free distribution of grains in the Roman Republic and Empire (coupled with free access to entertainment, a policy of panem et circenses) was a form of welfare policy, too.  https://www.britannica.com/money/topic/welfare-state

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get deteriorated. Even if these deficiencies are not showing, due diligence is needed regularly. And even if it does not seem that the public sector programs are poorly designed and public services are poorly delivered: Why not deploy organizational tools that have been successfully applied in the corporate sector? A response to this was given through public sector reform attempts across Europe, for which the United Kingdom went ahead with its New Public Management (NPM) as early as in the 1980s (Lægreid 2017). There was the fear that NMP would do away with public welfare and with the welfare state. But a recent stock-taking gives proof that despite ongoing postNPM public sector reforms all changes were placed within a larger socio-political order and a system of governance where history and context matter. Also, most of the reforms were implanted in more technical and economic policy areas and not in the “softer” welfare state areas (Christensen and Lægreid 2022). This was the case outside the United Kingdom as well, but for making comparisons, one has to bear in mind that there are at least three different types of welfare states. Welfare states differ, depending on the respective political and social history and the political power relations. These shape the quality of social rights, social stratification, and the relationship between state, market, and family. From there, distinct clusters can be deduced for the Western (capitalist) world: ‘liberal’, ‘corporatist’ and ‘social democratic’ – a categorization made by Danish sociologist Gøsta Esping-Andersen in 1990 (Esping-Andersen 1990) and which still typifies the formats of welfare capitalism/ welfare states (Powell 2015). Capitalism here, refers to allowing for institutional settings that may allocate public goods and welfare provision to entities that are independent from the state as would not be the case in communist systems where the labor market, social investments, and material support to people are all centrally governed. After the fall of the Soviet Union, only Russia and China and a handful of smaller countries like Venezuela are the remaining centralized command economies. For the other parts of the world, the typification would be as follows (Buhr 2020, p. 32–33). – The liberal (or Anglo-Saxon) model focuses social policy on the neediest, it supports the market mechanism of providing public goods through the public and the private sector, and it leaves decision-making to the family/to the individual. Country examples are the United Kingdom (even though health provision is fully entrusted to the state), Canada, the U.S. and Australia. – The conservative (or continental European) welfare states assume a strong sociopolitical role for the governments, while the socio-political role of the market is generally low; the locus of decision-making, though, in accordance with the principle of subsidiarity, is the family level/the individual level. The principle of subsidiarity also confers the power of influence to trade unions and churches, which, on the other hand, may lead to the preservation of status and group differences. Archetypes of this form are Germany, France and Austria.

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The social democratic (or Scandinavian) model is characterized by social policies that are based on universalism, ambitious ideas of equality and full employment, and it seeks to minimize dependence on the market. Examples are Sweden, Norway, Denmark, and Finland.

Globalization and the growth of international competition have nourished concerns that each of the models may fail or may at least have to resort to cutting corners in welfare and public goods provision. In this context, warnings have been expressed early on, like, e.g., by Alan Greenspan, chairman of the U.S. Federal Reserve System from 1987 to 2006, that a rising number of employees in major companies were fearful of being laid off, and that even those who seem more secure in their jobs think they will not be able to finance their retirement. Countries with a more generous support system for the poor, the sick and the elderly would be forced to dispense with some of their munificent social regulations (WSJ 1997). Otherwise, they would lose their competitiveness. But the systems have mastered the 2007/2008 financial crisis as well as the COVID-19 pandemic, and it seems that what also worked was their resolute policies to protect households and businesses from the toll which Russia’s war against the Ukraine had wrought on their economies. Sweden, the flagship of welfare provision, did not relinquish its welfare, and it still is the 4th most competitive nation in the 2022 edition of the IMD world competitiveness ranking; Norway is 9th.32 Sweden’s and Norway’s competitive positions may as well be due to their abundant natural resources and their many relatively large businesses that operate world-wide. But, as stated above, their citizens are willing to pay high taxes for the exchange of receiving a full and satisfactory set of public services and public goods. Taxes, certainly, pay for public goods delivery by the state, and so do excise and toll levied on specific services and for granting specific permits and for rights to enjoy specific benefits. Specific benefits are those which are only enjoyed by a limited number of individuals and business firms and which others do not enjoy. A river where a manufacturing firm may enter its effluents (after, hopefully, the wastewaters have been treated) gives a benefit to a firm, which, while not taking away benefits from other users of the river, is specific. Depositing waste in a landfill is a different situation: Both require a permit. But while the users of the river will not be affected in most of the cases, the property owners around the landfill will not be able to fully benefit from their dwellings. The effects of discharging wastewater and of depositing waste are examples for externalities: One party earns a benefit from public goods usage and another party may receive a loss. So, demanding that the party that benefits should pay for its portion of usage is very plausible. But there is the outer way round as well: Should parties who finance a public good receive a contribution from those who benefit from its usage?

 https://www.imd.org/centers/world–competitiveness–center/rankings

3.4 Externalities: Who pays for public goods usage?

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3.4 Externalities: Who pays for public goods usage? The first mentioning of externalities in this book quoted British economist Arthur Cecil Pigou 1877–1959). In his time, Great Britain was economically deprived. So, public welfare, and providing fundamental public goods was of primary interest to the government, and in the interest of social justice, parties who benefitted to the disadvantage of others were in focus. After Pigou, not only did the progress of economic theory further develop the concept, but it was that numerous cases came up where appreciable benefits are conferred on some party (or appreciable damages were inflicted) without this party contributing to what produced the benefits or the damage. The main damage that came into focus was pollution, and the title of the book which another British economist, Nobel prize winter James Edward Meade, wrote in 1973 says it all: The theory of economic externalities: The control of environmental pollution and similar social costs (Meade 1973). Damages from polluting the natural environment have risen considerably in the decades after Meade draw attention to the issue, and the cost of ecological impairment is in the center of the externalities debate. The discussion is about social cost/social value and about environmental policies; for positive externalities there also is the question of how to compensate businesses or private parties for activities that produce benefits to others without them being able to charge them. Which policies can be adopted to encourage those who provide such benefits and to discourage those who cause damages? While maintaining a clean environment is expressed as a fundamental interest by all, there is no unanimous consent on who will bear the cost. For example, when the German government spent about 4 billion € to recompense the owners of coal-fired power stations that they were forced to shut down by law, it was not the German energy consumers who had to bear the cost, but the taxpayers (Baudisch and Fouquet 2019). The argument is that the money shall serve to develop new jobs in new, innovative industries. However, forced shutdowns like those that were also practiced for the nuclear power plants in Germany are not likely to foster innovation on the whole; they discourage research and development in those fields and in adjacent ones: As per 2022, the Federal Statistical Office of Germany shows that, even though 35% of all Master’s degrees were in a STEM subject (science, technology, engineering and mathematics), university enrolment in STEM subjects has been declining year per year by an average 6%.33 One might say that this is a negative externality caused by Germany’s energy policies. There is another perspective of the payments which businesses have to expense for compensating an externality: If a public authority levies an excise on emissions and effluents, this is equivalent to dropping off a budget constraint (Hellwig 2003): When the cost of a public good – in this case, clean air or decontaminated water near

 https://www.destatis.de/europa/EN/Topic/Population-Labour-Social-Issues/Education-Culture/MIN TFaecher.html

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a production site – is covered by the excise, this lowers the expenses the authority would have to make. This, then, is a benefit for all citizens, including the businesses that are not charged with the excise even though they contribute to the emissions indirectly. If the authority wishes to capture them all, the alternative would be a scheme of what is called mixed bundling, i.e., levying a fee that covers several facets of the production activity. Mostly, municipalities do this through a manufacturing license (Niessink and Uslu 2018). Licenses by which a public authority confers the right to perform a productive activity shall be tied to clearly defined characteristics of that activity, like energy consumption, output, or the volume of emissions. This should as well include levies on production waste if not charged otherwise, and it also applies to nuclear waste from power plants, including the contaminated materials that result from reactor decommissioning – a highly dangerous externality. In the U.S., there is the Nuclear Waste Policy Act, which places the authority for permanent disposal of commercially spent fuel to the federal government, whereas the states are responsible for securing proper disposal of low-content waste (Holt 2010). Both raise a fee for this on nuclear power production. In the EU, the respective responsibilities are defined by the Nuclear Safety Directive.34 Japan has the Nuclear and Industrial Safety Agency of Japan with updated regulations following the Fukujima catastrophe; China has the Long-Term Nuclear Power Development Plan with specific rules for waste disposal (Lyman, Schoeppner and von Hippel 2017). All these regulations expressly consider the long-term perspectives of nuclear waste.35 One aspect is regulated outside these decrees, and this is the responsibilities arising from the bankruptcy of firms that are active in nuclear power. These bankruptcies involve a risk from contaminated waste. In the United States, the risk is mutually covered, in some countries, by nuclear plant operators through the so-called joint and several liability rule which mandates all operators to jointly contribute to the payment of damages caused by one of them (Zweifel 2017). The question is whether this contribution, like other fees levied from the nuclear industry, can fully factor the cost of all storage and security measures required to protect future generations from radioactive waste. The effects of emission and pollution cause social externalities beyond the ecological: Thousands of people suffered from the oil spills in the wake of the Shell drillings in Nigeria (see, e.g., Takon 2014), and in Myanmar, indigenous populations were expelled from their homesteads by a gas exploration and pipeline project (see, e.g., Smith 2010). Making the respective companies pay for the impairments – ”internalizing” those effects – cannot fully compensate the losses in cases like the afore mentioned. A better way might have been to offer incentives for relocation – provided that there was space, that those who are affected, accept, and that those who offer them are

 http://www.ensreg.eu/nuclear-safety-regulation/eu-instruments/Nuclear-Safety-Directive  https://www.iaea.org/ topics/radioactive-waste-and-spent-fuel-management

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powerful enough to make sure that the objectives of the incentives are achieved. On the local level this can be successful as has been proven in China where the central government has incentivized urban officials to pay more attention to environmental challenges. The incentives were based on the performance that would lead to more “greenness” in their cities (Zheng et al. 2014). On the global level of public goods, a universally effective regime would have to warrant the success of incentivizing. The foremost requirement here is mitigating climate change, and low carbon investment could be one decisive dynamic. Incentivizing low carbon investment is a task for international agreements that would serve as drivers for influencing investors. Figure 8 depicts which role governments can play, how these and civil society pressures impact business decisions, and how all this can be supported through international organizations by a framework of measures. Multilateral Environmental Agreements (MEAs)

International Organizations: WTO, UNEP IMF, World Bank UNCTAD

Low-Carbon Investments

Governments Regulations, laws, decrees Sanctions/Incentives Subsidies for green technologies Subsidies for green jobs

CSOs, e.g.: Carbon Allowance (Oxford Model) Green Cities

Businesses Market price mechanism Dealing with public pressures that create consumer backlash Partnerships and Joint Ventures

Figure 8: Incentivizing low-carbon investments. Source: Arquit, Gage and Saner 2011.

The framework (see Figure 8) would be built by concretizations within the Multilateral Environmental Agreements (MEAs) of the United Nations Environment Program (UNEP), the Climate Change Conventions (Kyoto/Paris/Doha), and the World Trade Organization’s (WTO) policy schemes on carbon tax. Another instrument is WTO-compatible domestic and export subsidies for providing competitive advantage to countries with restrictive environmental standards.36 By calculating the accumulated returns from these investments, one would have to valuate the externalities that will be diminished by low carbon investments. This could  On the contradiction between WTO rulings and MEAs see, among others, Bermejo 2014, pp. 60–62.

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be used to determine the magnitude of fees to be levied on negative environmental externalities (where investments are not made), or to determine which prices should be set in trading schemes for greenhouse gases. While valuation of carbon credits is a topic that has various dimensions which have been extensively discussed (see, e.g., Watt 2017), uncertainty remains, e.g., within the European Emissions Trading System, about how to arrive at a CO2 allowance price that is sufficiently stable and high to provide incentives for investing in low-carbon technologies (Capozza and Curtin 2021). Valuating positive externalities is often easier than valuating negative ones. The toll levied on a public road internalizes the externality associated with its use. Using a basic accounting instrument, one can hold that the toll reflects the marginal cost of depreciation and maintenance; capitalizing the cost gives the monetary value of the road. Even in cases that are much more complex, the accounting instrument of costbenefit analysis will attain valuation results. The first attempt to valuation of an externality is that of a nature park. Robert K. Davis (1963) assessed the benefits of outdoor recreation by asking what users would be willing to pay (their cost) for its usage. In the case of a negative externality, the survey would ask what they were willing to pay for having an externality removed. If the respondents to the survey are asked to choose between alternatives that incur different levels of cost, the outcome will be an alternative that is contingent on a specific condition favored by the respondents; hence the method is called contingent valuation.

3.4.1 Contingent valuation Contingent valuation (CV) is most frequently used on the local level. An example is the public park which was quoted above. For almost all goods and services that have no ‘market’ and cause externalities, a monetary value can be derived by the method. With this, passive use is introduced into economic analysis. As it is based on surveys, the practice has met considerable controversy because it may deliver arbitrary results. Still, it has found wide application, and there were some enhancements to the technique, for instance through giving the actors in environmental decision-making an opportunity to scrutinize the survey before it was employed (Stigka et al. 2014). Another fact that speaks for the method is that it incorporates elements of costbenefit analysis. Implicitly, it introduces benefits from maintaining environmental use of resources and compares this usage to the opportunity costs for alternative uses. This would allow to determine the social cost of an environmental project which is very important for a public agency that must decide on the viability of a project (Ahmed and Gotoh 2006). Generally, a CV survey develops scenarios that encompass a range of actions to be chosen by a government. Then it asks the participants of the survey to select their preferences. Their answers are then analyzed – like choices that consumers make when buying a good in a real market. With this, the survey creates a hypothetical

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market, and it attaches an economic value to the respondents’ choices. The question format which is most used in a CV survey allows two alternatives of responding: One is the environmental policy that the government presently applies (e.g., charging a fee on plastic bottles), the other is a substitute policy that would cost more than that of the status quo (e.g., a system where consumers can return the empty bottles to the seller). The participants are told that they will be charged the cost for the alternative policy if this alternative is pursued. The consequences of the alternative, how much it will cost and how it will be regulated, must be very clearly specified in the survey questions (Carson 2000). If the respondents chose the policy that produces a higher cost, the outcome is their “Willingness to Pay” (WTP) for this policy (for this environmental good). WTP can be an appropriate measure in a situation where potential users want to acquire a good. The opposite is “Willingness to Accept Compensation” (WTA). WTA would be an appropriate indicator in situations where owners of a good are asked whether they would voluntarily give up the claim to the good. But where consumers or businesses do not own a good (like an environmental good) and do not have a legal entitlement to them (for instance, the right to use a river), the correct measure is WTP. However, if a business has, for instance the permission to introduce sewage into a river, it may be asked to give up that right. Then, WTA is the correct denominator. Over 50 countries are said to have conducted CV studies (Carson and Mitchell 1993). It is either government agencies or international organizations which use it. CV is the preferred method applied on a global scale by EVRI (Environmental Valuation Reference Inventory; https://www.evri.ca). EVRI is a large online database assembled for policymaking purposes by prominent agencies like the U.S. Environmental Protection Agency, the , Environment Canada, as well as similar agencies in Chile and Mexico, and the Economy and Environment Program for South East Asia (Carson 2000). Hence, one might assume that the method produces highly reliable outcomes. The optimism on WTP’s reliability is tempered by newer publications (Hausman 2012). The criticism primarily holds that the hypothetical response can lead to a bias that would result in overstatements of value, of which the proof is that the survey often shows large differences between willingness to pay and willingness to accept. Another critique is that, generally, the scope offered in the surveys is too narrow (Hausman 2012). Some of these criticisms are not new – CV has been criticized from the onset. Kahneman and Knetsch (1992), in their overview of the method, argue that WTP varies depending on whether the preference for a specific good is evaluated on its own or if the good is part of a more inclusive category. Also, the respondents may rather express their moral satisfaction from personally contributing to a public good and not give an account of its economic value: The main deficiencies of CV, critics say, lie with WTP being elicited such that it shows non-economic motivations and, therefore, it cannot represent monetary value (Szabó 2010; Cooper et al. 2004). Willingness to pay reveals the use-value of a good. This distinguishes from nonuse value. Use value includes the value of recreation in a forest as was the case in the

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first application of CV performed by Davis (1963), or, opposed to it, the value of timber production the proceeds of which represent the forest’s value (these two uses preclude each other: Timber production makes enjoyment of the forest impossible). Nonuse values are those that are not dependent on the good being actually used. There are three types that often add up to each other (Dott et al.1996): – Option value, which represents the value associated with securing an option to use the good at some future time, although the buyers of the option may recognize that they will possibly never use the good; – bequest value, which represents that the good will be maintained for future generations; – contributory value, which measures the contribution of the good to the overall functioning of the system by which it is encompassed (like a nature park within a large woodland. Within the cases mentioned in use-value and in non-use value we have seen monetary terms (proceeds of timber, buying an option). Other methods to arrive at monetary valuation for public goods will be taken up in section 4.5 below. Apart from the debate on whether monetary values are acceptable or not for the majority of public goods,37 there are two directions into which value consideration is moving: One is towards more monetization (see section 4.5), the other is complementing monetary values by non-monetary ones, e.g., through the “Beyond GDP” alliance.38 One methodology in the latter is surveys on distinct levels of “happiness”, or “subjective wellbeing” (Levinson 2012). For instance, surveys on the value of cleaner air or better weather information can be linked to demographic characteristics and incomes of the participants, and with the specific air quality on the location where they were surveyed. This would result in a relation between annual household income and an air quality that would leave respondents happy (Levinson 2012, p. 879). Analogously, more factors “beyond GDP” can be construed by linking demographics and surveys on preferences. The relation of this to wellbeing measurement has been shown in section 1.6 of this book. There is a completely different topic that also relates to the externality issue: What about parties that benefit from measures to curb external effects without paying for these measures? In many cases these are free riders. The question is how to make them pay or how to avoid that they can reap a benefit at all.

 See section 1.6 of this book.  The effort to measure progress beyond GDP through the dimensions of environmental, social, and digital assets (see section 1.6 of this book) has received momentum when the United Nations set up its High-Level Committee on Programs (HLCP) on Beyond GDP. See: https://unsceb.org/topics/beyond-gdp

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3.4.2 Free riding The debate on externalities is most intense if there are beneficiaries that escape from being charged with the cost they cause – whether through abuses of the welfare state (which often shuns prosecution of the culprits) or through other forms of free riding. From Hardin’s example of shepherds sharing common land who overgraze to the detriment of others (“The Tragedy of the Commons“, Hardin 1968, p. 244), to free and open access on all sorts of documents on the internet there is an increase in the incentives to abuse (see, e.g., da Silva et al. 2012). The same happens when emitters of carbon dioxide bypass cap-and-trade systems because there are no sanctions (Nordhaus 2015), and when the use of common-pool resources in urban developments is distorted – like spaces in park-and-ride systems that are blocked by people that do not use public transport (Ostrom 2010). There are remedies to some of these issues. For example, in the case of the trade system for carbon dioxide emissions, the global community might set up “Climate Clubs” to put pressure on countries to participate in transnational agreements (Nordhaus 2015, p. 27). On the local level, free riders can be detected much easier, and they can be blocked out from the usage of a public good; local communities may be able to short-circuit the incentives that invite to take a free ride, as, for example, in public transport. If they are successful, they will restore the trust that needs to reign in the public field. If they are not, the tendency to more cheating and free riding will destroy the belief that all are playing by the rules. Tolerance of free riding comes close to tolerance of corruption: it threatens the very basis of an open multilateral society. Is free riding a case of corruption? Free riding is an abuse of a public good and it should be seen as a crime. The abusers enrich themselves, but one might say that freed riding works one way, while corruption works two ways: One person benefits from an abuse committed by another. The issue of corruption will be discussed in the policies chapter (Chapter 4) of this book which will also take up more on policies to fight free riding.

3.4.3 Philanthropy Philanthropy is perceived as the use of private resources for public benefit and social change. Historically, there is a long line of wealthy individuals who contribute to citizens’ social needs and wellbeing (Sulek 2010).39 There is also a long history, from the

 Public benefit and social change are the objectives of millions of NGOs as well. It is estimated that in the U.S. alone there are 1.6 million NGOs (including religious congregations). They engage in numerous activities: arts, culture, and humanities; education; environment and animals; health; human services; international and foreign affairs; civic and public benefit and religion, as per a classification by the U.S. Internal Revenue Service. Out of these, a 2003 survey lists 56,600 that are registered as philan-

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provider of first resort in pre-modern times (the 12th and 13th century Italian nobility funding hospitals or almshouse developments in 15th century England and the Dutch Republic; see Jung and Harrow [2015]) to modern welfare donations that complement or upgrade public goods provided by the state. Philanthropists and governmental institutions often intertwine. A case is the city of Leipzig, Germany, where in the early 1900s about two thirds of all philanthropic assets were entrusted to endowments managed by the city government (Adam and Lingelbach 2013). In other cases, the state supports charities by offering them public land or conjoining in administration. From the 19th century onwards, it has been wealthy entrepreneurs, like, in the UK, business pioneers such as the Lever Brothers or Cadbury and Rowntree (Bush et al. 2008) who provided housing, medical support and schooling to their employees and their families. Fundamentally, they felt that they should act responsibly towards the communities where they had business. In the U.S., Andrew Carnegie’s interest in science motivated him to build local libraries and to promote education and scientific research on a very large scale.40 Then there is the Rockefeller Foundation which advanced a new concept of global health after WW I, when philanthropies were the only way to take on tasks beyond state boundaries (Weindling 1997). This continues with the Ford Foundation’s development of green technology (Stansfield 2002) and the Bill & Melinda Gates Foundation’s funding of new drugs, vaccines, and diagnostics development (Jamison 2006). While all the finance had its origin in corporate profits, the actions were led by individuals, not by their firms. Another format is corporate philanthropy, where corporate funds are devoted to social needs. Corporate philanthropy works in two ways: One is giving donations to non-profit organizations (routinely or at special instances); which public good or service will benefit from the donation would largely depend on the institution which receives the donation. The other format is direct provision of a public good: Whether engaging in community service, educational or cultural projects or volunteer initiatives, quite a few business firms achieve significant, lasting societal impacts. There are innumerous cases where small enterprises are reaching out to the boroughs or to the municipalities around them; they feel this to be their duty as good citizens. Large corporations act similarly and also on a broader scale: In the “Best Corporate citizens list” which surveys societal activities of big firms, Fannie Mae, the U.S. mortgage company, and the multinational consumer goods producer Procter & Gamble Co., were ranked first and second (Bruch and Walter 2005). Their impact is very favorable for the beneficiaries, but it would be wrong to see this as pure altruism. They certainly act out of selfinterest: The firms expect to create win-win opportunities for themselves and for the recipients of their social activities.

thropic foundations, holding total assets of 486 billion US$, distributing 27.6 billion US$ per year to further their missions (Foundation Center 2003).  Carnegie gave away around 350 million US$ (roughly 5.5 billion in 2023 terms), over only the last 18 years of his life (https://www.carnegie.org/about–us).

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Win-win situations were always created when firms deployed social activities. Going back in history, when the German chemical industry chose locations in the mid-1800s that were far away from communities which offered a civic and cultural environment, the companies built kindergartens, lecture rooms, concert halls and medical centers, and they founded and sponsored sports clubs. Bringing these services as well as arts and culture to those locations attracted well-educated technicians and scientists to areas that they may have not chosen without this. The philanthropic activities of the chemical industry in the 1800s improved competitive advantage through higher attractiveness as an employer and created good relationships with governmental and nongovernmental organizations. The range goes beyond communities that are directly impacted by a firm’s manufacturing or service activities: Deutsche Lufthansa, to take another example, enhances its relationship with communities in which it operates by running a series of community-involvement programs (Bruch and Walter 2005, p. 50). This is still a form of philanthropy, and it differs from producing a specific public good directly, e.g., provision of healthcare, building and maintain roads and running private educational institutions. But contribution of these – tangible – public goods by private business has become one of the main achievements in modern history.

3.5 The private sector providing public goods Public engagement means all activities that unites citizens, for-profit and non-forprofit institutions as well as the public administration in an effort to foster citizenship, democracy, and citizens’ wellbeing. With this, the concept of “public” is extended to all who are part of the private sector: Engagement is possible for everyone – the ‘poor widow’ quoted in the Bible (St. Mark, 12, 42), who shares a good cause, wealthy individuals who engage in philanthropy, as well as associations and private business firms. They all partake in public goods provision. Contributions by the private sector may have no economic intention at all, as with philanthropy, or they may connect profit-seeking to the delivery of goods that serve a public purpose. There is a difference: Philanthropy often is directed to a smaller group of beneficiaries; the delivery of public goods purports to benefit the populace as a whole; it serves a public purpose. Conjoining public purpose with private investment can result in completing mega-projects like the construction work for the 1996 Atlanta Olympic Games 1996. Andrew Young, who was the mayor at the time, created the term “Public Purpose Capitalism” for this and other undertakings in his town which stimulated the economy and put people to work (Sehgal 2010). There is a moral sentiment in this, similar to philanthropic action: doing good for the other. This raises the question if a business firm can be “moral” (doing good). Some answers to that will be presented here before passing on to the topic of philanthropy and the specific contributions of private business to public goods provision.

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Whether a business firm is “moral” can be seen in its business practices. Moral business practices come from moral culture, from moral culture comes a moral organization. In the 1980s there was a view on this that restricted the means for creating a moral organization to “corporate credos, programs such as training, ethics audits and codes tailored to the specific needs of a functional area“ (Murphy 1989, p. 81). But the spectrum is much wider nowadays. Milton Friedmann’s dogma that “only people can have responsibilities; a corporation is an artificial person, and in this sense may have artificial responsibilities, but business as a whole cannot be said to have responsibilities” (Friedman 1970, p. SM 12) has long been surpassed. Business firms, today, have accepted a double responsibility for “doing good” and for “avoiding bad”. Most of them prevent corporate social irresponsibility, such as cheating customers, violating human rights, or damaging the environment not just in their own firms but far beyond (Lin Hi and Müller 2013). The corporate scandals of the 1990s (Enron and Tyco and WorldCom) were thought to have ended – still, Volkswagen was reported of squeezing small suppliers in 2015 and became a forerunner in the Diesel scandal; see, e.g., Rauwald (2016) and Mansouri (2016). But there were always “high-ethics, highprofit” firms – Motorola, 3M , Cadbury Schweppes, Northern Chemical, Apple, to name just a few recorded by Pastin (1986) – not to speak of the myriad of small enterprises that are firmly embedded their local communities. They are the leading examples of “business in society” – a term that reflects their connection to caring for the wellbeing of all their stakeholders and which is the title of two professional associations which pursue real life dissemination of the concept: Business in Society LLC (http://businessinsociety.net), and the Academy of Business in Society (http://www. abis-global.org).41

3.5.1 The contribution of private business Business firms have partly replaced state agencies and/or state-owned firms in public goods provision for quite some time. One background is the reversal of post-war policies in Europe, beginning in the late 1960s. After World Word II, many countries had extended government ownership in a wide range of industries. They shielded these industries and their secure jobs from international pressures by high tariffs’ and imposed high taxes to fund their investments. When the economies slowed down, many political leaders, whether conservatives or socialists, started to reduce the role of government. This was connected to opening the economies for trade with the wider world. In this, entrepreneurship had shown to be more successful than the officers in state-owned firms. People would see that private firms were more efficient, and even

 For more on morality and ethics in business see, among others, the Ethical Economy book series, Springer publishers, https://www.springer.com/series/2881

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though many would think that the state should engage in public goods like healthcare and utilities provision, the general opinion would be that the government should own less economic resources. Studies of public opinion in Europe have shown that people who live in market-societies perceive private enterprise as more efficient, in contrast to what people believe who grew up in the time when their societies were transforming (Sikora and Kelley 2005). Outside Europe, where communism still prevails, e.g., in Southeast Asia, people accept that new management methods are implanted in the state sector as they felt the progress that was made when state-agencies were converted into state-owned enterprises (Kim et al. 2010). So, it is the efficiency and effectiveness that makes the difference. Another background for the involvement of the private sector in public goods: More and more, businesses have recognized that their responsibilities extend beyond the corporate borders and that the purpose of businesses is creating value, not maximizing profit – which assigns them a greater role in society. Increasing shareholder value alone cannot not sustain their existence. This wider perspective has been defined with terms such as ”public purpose capitalism” that was mentioned above, and “moral capitalism”, “conscious capitalism”,42 as well as “social entrepreneurship” and “social business”. These terms refer to systems and businesses that create a social good and do it profitably (they create “social and ecological wellbeing” [Coretcaia and Grosenbaugh 2020]). This has not been accepted without skepticism, most frequently from civil society organizations (CSOs). Their reproach is that corporate social responsibility, which expresses this expanded entrepreneurial conscience, is just to enhance reputation. They often oppose collaboration with the business sector,43 but there are also CSOs which understand that fostering societal progress is a common concern and must be based on mutual respect, mutual accountability and equality of all partners. In the end, everyone is a beneficiary. There needs to be a give and take of inputs between businesses, CSOs and governments, and the more visible outcomes are produced, the more acceptance will occur. Illustrations are Pepsi-Co’s WaterHope, a community-driven venture that makes clean drinking water available to poor communities in the Philippines and supports local development (Brown 2011), and the Merck-Nicaraguan Ministry of Health RotaTeq® Partnership which helps to improve children’s health (Murninghan 2018). And there are Chevron’s and Unilever’s community engagement initiatives in Africa. They have widely proven that this give-and-take mechanism works, and they have often changed attitudes of public institutions and local authorities in a host county (Kolk et al. 2008). This also includes changes in the way governments see collaboration with CSOs, which has paved the way for multisector efforts to jointly address conflicts. One exemplary case is Chevron’s Angola  Sisodia, Raj,and Mackey, John (2012):Conscious Capitalism – Liberating the Heroic Spirit of Business. Brighton, MA: Harvard Business Review Press; Stephen B. Young (2003): Moral Capitalism – Reconciling Private Interest with the Public Good. Oakland, CA: Berrett-Koehler.  For more on the role of CSOs see section 3.5.4 below.

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Partnership Initiative that was launched in 2002 together with U.S. based Search for Common Ground,44 one of the largest international NGOs whose main objectives are peacebuilding and improvement of living conditions. It has helped this country in going through a ‘triple’ transition phase: from war to peace, from state controlled to market based economy, and from devastated country to developed country (Kolk and Lenfant 2012). This contribution to wellbeing of a whole nation is outstanding. One fine description for businesses that are acclaimed for their contribution to social wellbeing is ”Firms of Endearment”, i.e., firms that view society and their workers as the ultimate stakeholders (Sisodia et al. 2014). This engagement, as it meets wide recognition, has contributed to their share value having increased about ten times more than that of the S&P 500 companies over the 15-year period ending in 2014. Examples are Johnson & Johnson, Patagonia, UPS, BMW, Honda and Toyota (Bhatt 2021). What makes a firm a moral organization – “a firm of endearment”? Sisodia et al. (2014, pp. 8f.) list the following: – They subscribe to a purpose for being that is different from and goes beyond making money. – They actively align the interest of all stakeholder groups and not just balance them. – Their executive salaries are relatively modest. – They operate at the executive level with an open–door policy. – Their employee compensations and benefits are significantly higher than the standard for the company’s category. – They devote considerably more time than their competitors to employee training. – Their employee turnover is far lower than the industry average. – They empower employees to make sure that customers leave every transaction experience fully satisfied. – They make a conscious effort to hire people who are passionate about the company and its products. – They view their suppliers as true partners. – They honor the spirit of the law rather than merely following the letter of law. The list exhibits the fundamental content of conducting stakeholder relations responsibly. It addresses the public goods of decent job conditions, social coherence, and transparent market relations. And it shows how corporate social responsibility (CSR) works. The effects of CSR will be discussed in the next section. First, CSR will be contrasted to ill behavior (Table 3). So, what guides an irresponsible business, and what guides a moral business?

 https://www.sfcg.org

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Table 3: What guides the irresponsible corporation and what guides moral business. The irresponsible corporation

The moral corporation

Ideal

Greed, disregard of others

Human dignity, stewardship

Principles

Maximize shareholder wealth irrespective of consequences to others

Respect for all stakeholders, including nature Sincerity, candor, truthfulness Abiding by rules, abstaining from and eliminating illicit operations Contributing to justice and social development; promoting free trade

Standards

Stock price, total compensation

Self-assessment of strategies Reflection for improvement of results

Stakeholder “Caveat emptor” (buyer beware), Benchmarks concealment of liabilities, bullying suppliers, destroying competitors

Customer and supplier sovereignty, treating employees as moral agents, protecting owners’ assets, giving back to the community

Source: Adapted from Young 2003, pp. 38 and 88.

Irresponsible behavior may produce a short-time advantage – but the advantage will not last long neither for the firm nor for the managers that act ill-behaved. There is a long list of executives who committed criminal acts at Enron and Tyco and WorldCom, to name the most notorious cases in the U.S., and which cost shareholders and customers billions of US$. They were all taken to justice, as were the managers who used bribery schemes at Siemens and who frauded authorities and customers at Volkswagen on diesel emissions. The media played an important role in this. The millions of honest businesspeople, however, never make it to the news. Irresponsible corporations diminish their shareholders’ worth in the long run, but they also destroy public goods. They may have accomplices: Some states, not only in the developing world, adopt a policy of competing against each other for foreign investment by very leniently regulating observance of economic, environmental, and social human rights, and this can trigger a ‘race to the bottom’ (see, for instance, Rudra 2008). Foreign investors, their managers and their local supply chains are at least morally obliged or bound by international law to respect all those rights, but low standards in the host country may induce them follow local practice or even benefit from it personally. The way out may lie in the legislation passed in 2022 in Europe which rules that enterprises have to watch over all tiers of their global supply chains

 Standards for the moral corporation were developed by the Caux Round Table, an international network of principled business leaders, founded in 1986 in Caux, Switzerland, by Frederick Phillips, former president of Philips Electronics and Olivier Giscard d’Estaing, Founding Dean of the INSEAD business school. The Caux Round Table Principles for Business were formally launched in 1994 and presented at the UN World Summit on Social Development in 1995.

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in regard to obedience of human and environmental rights regulations.46 In the U.S., the Dodd-Frank Act on corporate due diligence is applied to the issue, and several states have legal requirements on their own like California’s Transparency in Supply Chain Act of 2010; new lawmaking has been discussed on the federal levels (Franken and Schütte 2022). Another instrument has been put in place by the Guiding Principles on Business and Human Rights established by the Human Rights Council of the United Nations in 2011. They provide access to remedy for victims of business-related abuse through judicial, administrative, and legislative means for which each member state of the UN needs to introduce effective grievance mechanisms (Ruggie 2017). All this cannot prevent criminal minds to try abuse, but it can take them to justice and will bring down irresponsibility. Corporate social responsibility is on the rise.

3.5.2 Corporate responsibilities: Social returns and market returns Entrepreneurial ventures are not meant to be altruistic. When they produce social returns, there always is a market return also: profit, increase in reputation and attractiveness for high talent. This connects to an economic rationale; as such, it differs from corporate philanthropy. For instance, reducing negative externalities produces both a social return (by, e.g., increasing a county’s income through fees on pollution) and a market return: 3M , for example, saved over 500 million US$ from 1975 to 1989 through its “Pollution Prevention Pays” program while preventing 500,000 tons of pollution. As of 2004, the company reported total cost savings at 1 billion US$ and pollution prevention at 2.2 billion tons. The “trade off” for them was an increase in market value: Between 1975 and 2004, split-adjusted stock price rose from US$ 1.96 to US$ 77.86 (Calia and Guerrini 2006). The 3M example of reducing negative externalities is matched by many more cases in various sectors of industry worldwide (World Economic Forum 2017). But the social and the market benefits go far beyond externalities reduction. Firms create value not only for their customers and their other stakeholders, but their value creation process is intrinsically aligned with the wellbeing of society and the environment. This can very visibly be absorbed from a statement by George W. Merck (1894–1957),

 The German government, like what it did when transferring the EU Directive on Privacy into national law (see section 4.3.2 of this book), has adopted severe limitations in its Supply Chain Due Diligence Act that are more restrictive than the EU legislation. When the act came into force in January of 2023, Strabag, one of the largest European construction companies, announced that it will discontinue all its undertakings in Africa because it says it can just not comply with the requirements of the act. The building industry, in all countries of the world, works with many tiers of subcontractors, and one can surmise that in developing countries it is practically impossible to oversee whether the very strict rules asked for by this law are followed in even the most remote activity tier (Schäfers 2022). The damage done by this act might be considerable – Europe will possibly lose more terrain in Africa against China.

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president of the pharmaceutical giant Merck & Co. and a member of the Merck family: ”We must never forget that medicine is for people. It is not for the profits. Profits follow, and if we have remembered that, they never fail to appear” (Gibson 2007, p. 39). This has been said long before the infamous 1970 Milton Friedman essay in the New York Times whose headline was: “The Social Responsibility of Business Is to Increase its Profits.” The modern theory of the firm rates value creation as the highest business objective, with profits not an end but an effective result (Laffont 1975). This meets with what we are seeing in praxis: Firms aim at accounting for people, planet, and profit in a Triple Bottom Line, they disclose their contribution to public goods through Sustainability Reporting and they seek to secure responsibly use of resources in the Circular Economy. The triple bottom line and the multiple capitals concept The “Triple Bottom Line” is a scheme which incorporates social and environmental performance into financial reporting of firms. The term was coined by the British business consultant John Elkington (1998). He argued some years later that his idea was not about numerical measures (Henriques and Richardson 2013), but there have been numerous attempts by business firms to assign monetary values to the effects their activities cause to stakeholders (see, e.g., Savitz and Weber 2006). An illustrative case is South African Breweries which set up the format shown in Table 4. The company values all items shown in the format by the net outlays expensed in each year; many of them relate to public goods. E.g., in the fiscal year 2022, the net cash that flowed out to the community and the public sector (the net benefit produced from corporate social investment and environmental and regulatory charges and taxes) was 865 million US$ compared to the total value added of the firm which was 2119 million US$ (Richardson 2013). It may be questioned whether the amount of 865 million US$ represents the firm’s contribution public goods, but at least it shows what the firm ’pays’ for public goods usage. Critics argue that this is just to show data for making a company look good without producing genuine positive change, and that corporate financial accounts can serve to reveal the financial cost of pollution, but not the social cost they cause to families who are forced to move away from dangerous production sites or who suffer from long-term health problems (Slaper and Hall 2011). Another critique regards comparability. But even the advocates of the method agree that there is no universal standard to calculate the triple bottom line, and that each company will value completely different factors (Milne and Gray 2013). But comparison between firms is not the main objective: A firm that has chosen the factors which it evaluates can very well prove the progress it makes from year to year.

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Table 4: South African Breweries Corporate Stakeholder Relations. Examples of External Costs and Benefits Environmental

Social

Economic

Customers

Environmental costs or benefits in the use and disposal of products

Ethical, social and health costs or benefits associated with the product

Consumer surplus over and above the market price

Suppliers

Environmental impacts associated with the processing of purchased goods and services

Ethical, social and health costs Stimulation of economic or benefits associated with the growth through the processing of purchased goods supply chain and services

Employees

Environmental benefits or risks Workplace social costs (such as Employment creation associated with the workplace unpaid overtime) and benefits through the economic (such as training and multiplier effect development)

Community Emissions, effluents and waste to land, air, and water (local, regional, national and international)

Community health impacts; wider social impacts of redundancy and plant closure; nuisance and disturbance

Urban and rural regeneration; infrastructure (e.g., transport links and congestion)

Public sector

Environmental benefits from public-sector investment of corporate taxes in environmental health education, and health protection

Social benefits from publicsector investment of corporate taxes in education and social programs

Public-sector economic multiplier effects

Investors

Risks to investors from poor corporate environmental reputation

Risks to investors from poor corporate social and ethical reputation

Risks to investors from poor corporate economic reputation

Source: Richardson 2013, p. 38.

On a standalone base, the method can very well quantify ecological and social impacts of isolated projects outside the realm of a business firm. There is a wide range of applications for, e.g., sports events, water gardens, fisheries, or landscape resilience (Coffman and Umemoto 2010). A special methodology has been suggested for the tourism industry, and the results are promising: There are ten factors that were chosen, from Community Health, Safety and Security and Community Charity to Green Building and Infrastructure, Water, Energy, Material Consumption and Waste Reduction. These factors are measurable across the industry and might serve to enhance the industry members’ dealings with natural and social public goods (Tyrrell et al. 2013).

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Despite the conflicting opinions, the Triple Bottom Line tool has become an accepted accounting technique,47 and even critics admit that the firms who employ the framework invest in building value chain resources and focus on expenses or investments that do not make short-term but long-term economic sense (Glavas and Mish 2015). An important sign of recognition is that the Triple Bottom Line concept is reflected in the reporting standards of the Global Reporting Initiative (see section 4.5.2 of this book). The Triple Bottom Line concept not only associates with performance; its objective to determine the impact of business activities also connects to value created, to value creation and to the capital created and consumed by value processes. The three prongs of the economic, the natural and the social effects point to the construct of multiple capitals: Capital comprehends more than the financial capital that is reported in the books of a firm. There also is natural, social/relational, and human capital. They are the total of “sustainable capital from where we derive the goods and services we need to improve the quality of our lives” (Coulson et al. 2015, p. 301). The notion that businesses employ multiple capitals was first conceptualized by the SIGMA Project of the British Standards Institution in 2003. “SIGMA” stands for Sustainability Integrated Guidelines for Management, emphasizing that it is a manager’s personal duty to address all facets of sustainability at the workplace. The key feature of SIGMA is that it aligns sustainability objectives to established management processes (Sigma Guidelines 2003). Its five forms of capitals (natural, social, human, manufactured, and financial) build on the triple bottom approach. In 2009, an initiative by the name of Forum for the Future suggested the same approach. The Forum is a collaboration of large companies, accountancies, banks, think tanks and NGOs.48 Accounting firms also played a major role in founding the International Integrated Reporting Council (IIRC) which initiated the International Integrated Reporting Framework, Launched in 2013,49 it introduces a categorization of capitals into six denominations, adding the mark of intellectual capital (with the components of the structural and the organizational) and connecting the mark of relational capital to human capital. It is from the accounting terminology (where total assets equals capital) that the financial profession has taken the term of “capital” instead of “assets” for labeling the source of value creation. However, connecting the terms “capital” and “value creation” has raised the question if one can turn all assets (i.e., all what humanity possesses) into transactional goods and services for which prices can be determined (e.g., Kolomiiets and Petrushenko 2017, Gowthorpe 2009). Pricing of values is crucial for decision making in all spheres of society, and there is no justification to the claim that using the term ‘human capital’ will end up in putting humans for sale. But the debate must be taken seriously as it still permeates the discussion about value creation.  A “New and Extended Balance Sheet for Sustainable Business” that builds on the Triple Bottom Line was suggested by Fagerström et. al. (2017).  https://www.forumforthefuture.org/the-five-capitals  https://www.integratedreporting.org/the-iirc-2

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In the human capital debate, one criticism argues that the predominant meaning of capital, quite literally, is “money or assets bought for money, and that which is owned” (Coulson et al. 2015, p. 292), and that the components of human capital (labor, education, skills, teamwork, and labor markets) are not commensurable with components of assets in a balance sheet. Other critics accentuate that inclusive conceptions of capital as “stores of value or wealth” are mere metaphors that help one to understand one “thing” in terms of another (the relation of one from of capital to another), but that this aggravates the complexities of accounting and does not solve them (Young 2001). The proponents hold that drawing upon the economic relationship between capital and income helps to expound that managers are very often under the illusion that production is solely about employing labor and machinery and that they do not account for the “irreplaceable capital which man has not made, but simply found in the environment and without which he can do nothing”, as per a quote from German-British statistician and economist Ernst Friedrich Schumacher. Schumacher made this statement in his seminal work Small Is Beautiful: A Study of Economics As If People Mattered (Schumacher 1973, p. 11) which he wrote in the aftermath of the energy crisis. He highlighted the lack of insight for maintaining natural capital which mankind cannot afford to lose as a source to economic income. Human capital, he wrote, is an indispensable source for a society’s economic wellbeing like natural resources, and when it is not treated in the same way as the other capitals value and viewed at as a readily available input for value creation, three major perspectives are neglected: One is that its contribution to economic output is underestimated, another one that it may get severely over-exploited, and a third is that it gets detached from the individual level (Okeke 2016). Responsible businesses will pay attention to all three, but there is always evidence of firms acting irresponsibly by destroying human capital. Cutting jobs for good, while it may not be irresponsible when it serves to avoid the total loss of a business, always destroys capital that is irreplaceable. But there are many cases of outright irresponsibility: When the COVID-19 pandemic caused major textile firms in Europe to cancel all orders placed with manufacturers in Bangladesh and to even deny the fulfillment of running contracts, millions of workers were sent home without their wages. This triggered factory closures that eradicated the livelihood of more than almost half of the labor force in the country’s apparel industry (Sen et al. 2020). Much less direct jobs (about 10,000) were lost when telecommunications conglomerate MCI-WorldCom collapsed in what was to be largest bankruptcy in U.S. history with assets of 103.8 billion US$, but the eradication of human capital that resulted in the industry was still enormous. It was estimated that with all subcontractors about 100,000 jobs were destroyed (Heracleous and Werres 2016). A major reason was fraudulent undertakings of the CEO who was later sentenced to 25 years in prison. Shareholders lost all equity. They would recover a part of their capital when Verizon Communications acquired what was left from WorldCom. This met with wide coverage in the news. The fate of the employees was not covered by the news extensively, but it became known that many of the former MCI employees, when the firm

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was purchased by Verizon, were placed in a lower-tiered operation by the name of Verizon Business outside the main holding (Verizon Telecom). While they performed virtually the same work as their counterparts at Verizon Telecom, they were denied the higher wages, fully paid health benefits, and a pension plan; they were also lacking job security (Johansson 2007). Respecting human capital seems to not have been in the minds of the managers who completed this merger. For responsible managers, embedding human capital into responsibly designed business processes is equal to conscientiously dealing with the human side of enterprise, as per the title of a landmark publication by Douglas McGregor. In his book, McGregor (1960) breaks managers into two groups: In one group, the managers are focused almost solely on tasks; in the other one their focus is on people and how to motivate them. One might hope that the two generations who became managers after this title was published will follow what McGregor recommends and that cases like WorldCom/Verizon become rare exceptions. There is another aspect in the value chain perspective. When businesses use all the available assets (their own and those of society) in their productive processes, they may comprise relationships which should be peer-to-peer a priori. They need to avoid this by accounting for the less powerful stakeholders and more vulnerable members of society which contribute to the processes. It is the management’s responsibility to ensure that all stakeholders are treated peer-to-peer. A special responsibility must be dedicated to business processes that are directed to humans, whether in the workplace or outside the firm. These processes not only create value for the firm but they also create the values which individuals derive from their work – a living wage, a safe and harmonious work-climate, transparency, fellowship, empathy, and loyalty both from above and below. If “wellbeing is not procured for all members of an organization, there is no wellbeing for that organization” (Lepeley 2017, p. 22). Any model of value-creation will have to be placed under the prerequisite of adequate working conditions for all labor contracted by the firm. Value processes create outputs and outcomes that can be tangible and intangible (where outcomes are, e.g., the changes which process participants’ experience – suppliers, customers, employees and other stakeholders), and they produce value changes to the various communities affected by the activities of a business. A part of the outcomes and outputs (know-how, contracts with new partners, intermediate goods, etc.) return to the organization and serve as new inputs. This is illustrated in Figure 9 which is taken from the International Integrated Reporting Council’s (IIRC) “Octopus” model. The exhibit shows how capitals create value and, the other way round, how value creates capital. On both ends, the capital which is involved represents public goods. As can be seen, the IIRC has chosen to delineate the process through six forms of capital. IIRC’s choice of six capitals can be considered as having been condensed from various subtypes. A comprehensive typology which compacts 20 subtypes into IIRC’s six categories is the following (Castillo 2016): With financial capital they are money, debt, equity; with physical capital they are natural and built; with human capital they are

Outlook

Outputs

External environment

Performance

Business activities

Outcomes

Strategy and resource allocation

Business model

Governance

Mission and vision

Value creation (preservation, diminution) over time

Inputs

Risks and opportunities

Figure 9: Value creation from six types of capital input. Source: https://integratedreportingsa.org/faq-the-octopus-model

Natural

Social and relationship

Human

Intellectual

Manufactured

Financial

Natural

Social and relationship

Human

Intellectual

Manufactured

Financial

78 Chapter 3 Sources for providing public goods and commons

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physiological, creative, intellectual, psychological, and moral; with relational capital they are social, political, spiritual; with symbolic capital they are cultural, reputational, temporal, spatial; and with structural capital they are organizational, rule of law, and processes. Many of these represent public goods. It is not just accountants who use the term capital for all assets that create value. One prominent founder of the IIRC was King Charles III, then Prince of Wales, with his Accounting for Sustainability Project.50 In his 2010 book Harmony: A New Way of Looking at Our World, Charles touched on the multiple capital perspective: “Money is not wealth, but only the measure of wealth and a means of exchange. True wealth consists in good soil, unspoiled forests, clean rivers, healthy animals, vital communities, satisfying food and human creativity. If this capital is not available and responsibly employed, the many social problems we try to solve through economic growth – poverty, stress, insufficient health, etc. – will increase” (Charles 2010, pp. 100f.). Integrated Reporting (IR) is voluntary, but many prominent business firms and some public entities employ it. European corporations use it to comply with the EU’s Non-Financial Reporting Directive.51 The directive requires what the EU calls ‘large public interest entities’ (listed companies, banks, and insurance companies) to disclose nonfinancial information in a consistent and comparable manner. The directive gives rules, but they are non-binding in detail; so, the IR guidelines may be used further on. As all information given in corporate reports under IR is audited by accounting firms, investors, policy makers and consumers have a reliable means to evaluate a corporation’s non-financial performance and may exploit this to push companies towards widening their responsible to business approaches. In consequence, the business contribution to public goods and public wellbeing will become measurable: IR reports value-creation as an increase or decrease in the six capitals. The intended audience of the IR is not providers of financial capital only; any stakeholder is entitled to inquire about a firm’s report on those capitals, including the extent and the form of changes in natural capital and social capital (Albertini 2019). Creating value to customers, suppliers and to the internal stakeholders, which are the employees. has replaced, for quite some time, the “profit maximization” canon. There is a simple logic for enhancing human capital in a firm or an institution: It serves both the employees and the employer if capabilities are built (‘intellectual capital’) which then also affects social capital. These three types of capital have portions inside and outside the corporate border like all the other ones: Businesses are ‘in’ the society (as has been enunciated by ABIS, The Academy of Business in Society, a global network of over 100 companies and academic institutions who are pooling expertise, commitment and resources to invest in a more sustainable fu-

 https://www.accountingforsustainability.org  https://finance.ec.europa.eu/publications/commission-guidelines-non-financial-reporting_en

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ture.52 If businesses create value for the society by carefully pursuing their mission, they are also able to create value by partaking in public goods provision. The multiple capitals proposition, before having been introduced as a business concept, was set forth as a concept for the creation of wealth by David Pearce, a pioneer of environmental economics, who was closely connected to the set–up of the Millennium Development Goals.53 Pearce (2005) believed that it is not depletion of resources which affects wealth, but that wealth is destroyed by under-valuing these resources. As for natural resources, Pearce’s assumption that we under-value their contribution to growth rejects an infamous conclusion made by ecological economists. They purport that nations first surrender environmental quality in the name of economic growth and then improve it later when average incomes are higher (the Environmental Kuznets Curve, EKC54). But if natural resources are included in the wealth of a nation, and if they are assigned a proper value, the EKC does not make sense anymore, because “growth” gets a different meaning (Pearce 2005, p. 31). Table 5 depicts the categories which Pearce defined for wealth assets – of which the majority are public goods. Notably, Pearce talked about assets, not capitals, as he was aware of the division within academia on whether it is appropriate to apply the term “capital” beyond finance and economics to social issues and nature (see above for the debate on the term “human capital”). In his view, the usefulness of the multiple assets/multiple-capitals perspective does not lie in better approaches to monetary valuation, but it points to the heterogeneity of resources in which organizations are embedded. Anyhow, like Triple Bottom Line accounting and sustainability reporting,55 the multiple-capitals concept is a tool that visualizes what businesses contribute to environmental and social improvements. A concretization of this contribution is the circular economy. The circular economy Businesses using environmental resources have not always felt the need to give back to the environment. In the industrial revolution, the business model was that of a linear economy with a single-use philosophy (‘take, make, dispose’). Production worked

 https://www.abis-global.org  UN Member States have agreed to the United Nations Millennium Development Goals (MDGs) in the September 2000 Millennium Summit at the United Nations headquarters in New York City. The eight goals commit to combat poverty, hunger, disease, illiteracy, joblessness, environmental degradation, and discrimination against women, and to foster global partnerships. The aim was to achieve the goals by 2015.  This hypothesis follows what was advanced by economist Simon Kuznets in the 1950s for incomes: As an economy develops, market forces first increase economic inequality. Likewise, it is hypothesized, market forces first neglect the environment. The title of Pearce’s publication says why this is wrong: Managing environmental wealth for poverty reduction refers to natural capital being a source of growth.  More on sustainability reporting is given in section 4.5.2.

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Table 5: Types of capital assets. Household level

Community level

National level

Physical assets

Housing Tools Animals Machines

Schools Hospitals Local infrastructure

Major infrastructure

Financial assets

Cash

Access to credit/insurance

Access to credit/insurance

Human assets

Labor Education Skills Health

Pooled labor

Labor markets

Environmental assets

Land Soil fertility Woodlots

Common land Fisheries Forests Water, Watersheds Sanitation Air quality

Rivers/seas/lakes Large watersheds Minerals Fuels

Community trust Security Governance Participation Cultural assets Justice systems

Inter–community links

Social assets

Family trust Solidarity

Global climate

Government trust Political freedoms Rights, Justice Markets

Source: Pearce 2005, p. 32.

unidirectional: Natural resources provided factory inputs, used them to create goods, producers disposed of production waste, and consumers disposed of what they had bought – quite often, after a single use. The increase in world population has driven the demand for resource-intensive goods such as vehicles and other conveniences. Warnings have been expressed that as we are consuming resources at a 50 percent faster rate than they can be replaced, our demand will require more than three planets’ worth of natural resources by 2050 (Esposito et al. 2018). This is not new, but the demand for a careful use of resources is not new, either. Treating the environment as a regenerative system (‘reduce, reuse, recycle’) has been promulgated since the early 1900s: US philosopher and pedagogist John Dewey (1859–1952) is said to have been an early environmentalist with his statement that “Renewal of Life by Transmission” will save natural resources for future generations (Gadotti 2002). Also, scholars of the 19th century, while often referred to as only thinking about safeguarding open space for recreation (which led to the Foundation of National Parks system in the U.S.), strongly

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warned about industrialism’s negative effects on the biomass and called for consciousness in industry’s relations to the environment (Hall 2014). Advocating for an economic system which dissociates environmental pressure from industrial growth is the primary concern of a circular economy’s pursuit. The following list of principles for a circular economy lays the focus on how to treat productive resources (Table 6): Table 6: 16 Principles for a Circular Economy.        

Design with a purpose Design for longevity Design for resource efficiency Design for Biodegradability Design for recyclability Source/produce more locally Source/produce more without toxicity Source/produce with efficiency

       

Source/produce with renewables Source/produce with good ethics Provide services to support long life Reuse, recycle and compost all remains Collaborate well and widely Use, wash and repair with care Buy quality as opposed to quantity Consider rent, loan, swap, second–hand or redesign

Source: Bermejo 2014, p. 277.

The principles of the Circular Economy are applied in many industries. An important forerunner is the 1985 Responsible Care initiative of the chemical Industry, a worldwide self-regulation program. Its objectives are:56 – Continuously improve the environmental, health, safety and security knowledge and performance of our technologies, processes, and products over their life cycles so as to avoid harm to people and the environment. – Use resources efficiently and minimize waste. – Report openly on performance, achievements, and shortcomings. – Listen, engage, and work with people to understand and address their concerns and expectations. – Cooperate with governments and organizations in the development and implementation of effective regulations and standards, and to meet or go beyond them. – Provide help and advice to foster the responsible management of chemicals by all those who manage and use them. Many other industries as well as several government agencies have embraced Responsible Care as a role model. Responsibility, as also comes out from the list of the initiative’s objectives, expressly speaks to concerns and expectations of people. The initiative as well as the circular economy Circular Economy concept produce environmental and socio-economic benefits. They challenge the technological, organizational, institutional, and social status quo. This should lead to strategies, policies and pro-

 See: https://cefic.org/our-industry/responsible-care

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grams which turn economic activities into “loops of care for people and the environment” (Pla-Julián and Guevara 2019, p. 66). Not all members of the corporate community may have followed this allegiance whole-heartedly, but they will gradually be forced into the right track. E.g., Davos 2020 and other similar events demonstrate the new role of businesses (Schwab 2019). Figure 10 shows the numerous sectors of society affected by this role. Businesses who work towards a circular economy model (and generally towards environmental and social responsibility) will contribute to the wellbeing of all societal sectors listed in the diagram shown above. This was already recognized in the 1960s by Peter Drucker, world famous author and consultant, who countered the sole attention to the shareholders which some economists and industrialists held at the time: “An organization is not an end in itself. An organization is an organ of society and fulfills itself by the contribution it makes to the outside environment” (Drucker 1967, p. 32). What is pronounced by the Davos conferences and others is also becoming the practice of business education: In April 2016, AACSB, the international the accreditation body for business schools, announced a new “collective vision”: The vision highlights that the schools must commit to add value, create market differentiation, and better serve society globally: “. . . business schools and businesses will act as: catalysts of innovation, co-creators of knowledge, hubs of life-long learning, leaders in leadership, and enablers of global prosperity” (AACSB 2016, p. 4). Enabling global prosperity was afterwards expanded to say: “business is now expected to be an active participant in addressing broad societal goals and social challenges” (AACSB 2016, p. 5). Beyond this, many other international institutions have aligned to issue guidelines for responsible behavior of business, from the UN Global Compact57 to the Earth Charter (The Earth Charter Commission 1992), and to the SDGs, to name the most prominent. So, businesses have their agenda to work on and to collaborate with the other sectors of society. One player in this collective effort is civil society organizations. Their role needs to be redefined from antagonists to partners of industry.

3.5.3 The role of civil society organizations (CSOs) Citizens are recipients of the benefits provided by public goods, but they can also engage in the production of public goods. Philanthropic activities of wealthy individuals, as exhibited above, promote the common good, and so do contributions by associations of citizens – CSOs. CSOs are, as per a definition by the United Nations, “nonstate, not-for-profit, voluntary entities formed by people in the social sphere that are

 The Global Compact is a non-binding agreement between the UN and businesses which commit to adopt socially responsible and environmental policies, and to report how they implement them. It was launched in July 2000. See section 5.2.3 below.

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Figure 10: Diagram of the Circular Economy . Source: World Economic Forum 2020.

separate from the state and the market, and which represent a wide range of interests and ties”.58 Civil society organizations (or non-profit organizations), also defined as “charity organizations”, “non-commercial organizations”, “non-business entities”, if measured by the total of their turnover, would rank as the world’s eighth-largest economy; estimations give figures between 1 and 1.3 trillion US$ (Salamon et al. 2004). They can only exist in free democracies because an authoritarian regime and a centrally planned economy which do not allow independent actions of individuals, cannot allow free associations of citizens either. This can be seen from what happened in  https://www.ungpreporting.org/glossary/civil-society-organizations-csos

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the late 1970s and during the 1980s in Eastern Europe where organizing civil society was a way to fight the communist regimes – whether it was through independent trade unions or independent academic circles. One case was Poland where Solidarność (“Solidarity”) started in 1980 as a broad anti-authoritarian social movement for advancing workers’ rights and social change. Attempts by the government to destroy the union through imposing martial law failed, in part because the movement got significant financial support from the Vatican and the United States, and the regime was forced to enter into round table talks with Solidarność. This led to Poland’s first pluralistic election in 1989. The authoritarian repression against which the Polish wrestled a heroic fight sharply contrasts from the permissive society in Western democracies of today which accepts a myriad of objectives for which CSOs engage. The downside is that the governments also tolerate all sorts of abuses by CSOs. There are thousands of CSOs in all parts of the world which operate in multiple spheres (local, national, provincial, international) with numerous points of contacts with the state or the business sector. Some CSOs choose to collaborate and to build pragmatic partnerships, others may adopt an oppositional approach and keep a distance. There are a few (but they get wide coverage in the media) which incite violent protests in the street and criminal acts like those committed by the “Last Generation” in Germany, “Extinction Rebellion” and “Occupy Wall Street” in the US, the UK, and elsewhere. They openly destroy public goods. When the state continues to tolerate this, coherence in society will break apart. Coherence in society is a public good in itself. It requires respect for the other, truthfulness and open participation. Collective provision and maintenance of this public good and others only works through comprehensive stakeholder cooperation between all actors – where ‘comprehensive’ means that individual freedom, including a free market and private property rights, are firmly upheld, and that all actions are consistent with the intellectual and affective capacities of human nature (Struhl 2014). Otherwise, public goods will be abused by special interests or hijacked by so called “activists”. If society organizations uphold that a free state guarantees freedom of action, they very often claim this freedom for themselves only. By opposing the attitudes or activities of another party, sometimes with force, they not only limit this party’s freedom, but they also risk that the state excludes them from decision-making on public goods matters. Those who demonstrate in the streets and claim that they represent “people”, tend to not respect others. But “people” always comprises all people. If we take the case of pollution prevention, the chemical, and the oil-producing businesses as well as their employees must also be heard, plus the businesses who fear that their crops or their livestock feed are damaged by pollution. Then there are those who do not go to the streets but to courts. An outstanding case is that of the “German Environment Aid Aid”, a CSO that specializes in taking municipalities and car manufacturers to court for alleged failures to fight climate change without acknowledging the progress that is under way. Their actions trigger situations of mutual distrust, and with a rhetoric that is full of confrontational naming

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and shaming, the CSO’s representatives destroy all willingness of the other side to cooperate (Reiners and Versluis 2022). The paradox is that the state provides finance for all this: The German Law on Charitable Purposes rules that financial support, apart from tax exemption, is given to institutions whose statutes petition that they “benefit the public” through “socially useful objectives”, like, in this case environmental protection. There have been attempts to remove “German Environment Aid” from this preferential regime, but they failed. “German Environment Aid” claims that being a member in the Transparent Civil Society Initiative59 makes it a fully complying social group, but that is not the point. The point is that its mission aims at abusing judicial procedures to simply make money and attract plaintiffs who want to make money also. The scheme is to pile up class actions and to get paid by the plaintiffs which collect from their legal protection insurance if the cases are lost, which occurs almost all the time (Piller 2023). The “German Environment Aid” and other misbehaving CSOs misuse that they are shielded behind the strong societal acceptance of civil society movements by the citizens. They “capture the public” and do not really contribute to change. Change, rather, is aimed at by groupings that are not about violence and about making money by taking governments to court. They are often rooted in unremarkable networks, such as religious organizations, trade unions, and professional organizations from where they take and pronounce their objectives. These groupings have been called “quotidian civil society organizations” (Pinckney et al. 2022). Since they have stable preferences for democracy and cooperativeness and are embedded in larger quarters of society, they can generate mobilization and keep the momentum (Thurber 2019). Mobilization and momentum are what makes CSOs successful. The third success factor is societal acceptance. Only then will CSOs contribute to arriving at lasting agreements that satisfy all. The agreements must be based on common understanding of the issues in question, and on argumentations which respect all. This is the best way to achieve that “reasoned agreement becomes a way of life among equals” as put by American political philosopher Joshua Cohen (2005, p. 359). Equality also relates to equal accountabilities. In dealing with other parties, accountability not only refers to business firms who need to be sensitized to and internalize the cost which their decisions cause for their stakeholders, but to civil society organizations as well. One, there is their accountability towards society, and two, there is the accountability which a CSO has to its members. In this, CSOs are comparable to businesses which also have accountabilities to various stakeholders. And CSOs, even though not pursuing a profit, often operate like business ventures. With this, there is responsibility. But, as said,

 The initiative was founded by the renowned Transparency International organization and has about 1700 charitable institutions which commit to disclose their finance, but not all sources of finance are revealed (https://www.transparente-zivilgesellschaft.de). There is no mandatory disclosure in Germany for charities, other than, for example, in the U.S., where applying for tax-exemption requires organizations to file annual returns with data on their revenue, expenses, and assets.

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CSOs often are not open to accountability. Several important questions are mostly left unanswered (Onyx 2008): – To whom is the organization accountable, and for what? – How is this accountability to be demonstrated, and what compliance mechanisms are available and necessary to ensure that the organization remains within its accepted zone of conduct? – Put another way, isn’t it the state who has (or should have) the power to enforce that CSOs comply with law and order, and is such power sufficient to curtail excessive behavior of the organization? The wide range of activities that many CSOs pursue makes the need for holding CSOs accountable yet more important. They sometimes conflict or intersect with each other. All of them demand that it is businesses that must be held accountable because it is them whose activities affect society. And they repeatedly claim that businesses rank profits over the interest of all stakeholders. Only very few accept that this claim is outdated in general. And where there are those businesses, rather than smashing their office windows, the better way for CSOs is to make those abuses of corporate power widely known and to join with other stakeholders into a dialogue that leads to judicial enforcement. This would lead to societal control not only of business behavior but also of how the various sectors interact in providing public goods.60 Fruitful cooperation between CSOs, governments and business firms will ultimately help the beneficiaries of CSO activities. Partnerships of this type have a long history. Two less known examples: One is the efforts to give more farmers access to agriculture in developing countries (Ghatak 2003). The other is the endeavors to alleviate the situation of the underserved in the Palestinian regions of the West Bank and Gaza where about 1,200 CSOs, together with businesses, provide almost two thirds of the primary health care, most of the agricultural services, as well as microcredits and low-cost housing (Salem 2012). There are many partnerships between CSOs and United Nations agencies; they often start with informal information and may end up in formally binding contracts. While civil society was predominantly considered as the beneficiary when the United Nations reached out development and technical assistance programs in the 1900s, the declarations of the September 2000 Millennium Summit painted a new situation where civil societies and their organizations are recognized in a new role as active partners (Mezzalama 2002).61 The pathway goes from limited and sporadic consulta-

 See section 5.2 on societal control.  A very visible part of the UN’s engagement with civil society organizations, youth representatives and academia is its “Town Hall meetings with Civil Society”, where the President of the General Assembly partakes together with other UN representatives. It has an open format and allows participation of anyone who is interested. Ideas are exchanged on the transformations that are necessary for improving the implementation of the SDGs. The last such meeting was on 20 April 2023.

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tions to involvement of CSOs during the planning and execution process of United Nations activities. The format, here, is that of public-private partnerships.

3.6 Public-private partnerships (PPPs) Cross sector engagements for common purposes of which the most are public goods provision, are summarized under the concept of public-private partnerships (PPPs).62 The public is not merely meant to be a state authority, it is the people, represented by elected officials or by civil society organizations, and the private is individuals and businesses. There are partnerships where businesses are not involved, as in the cases mentioned above where CSOs engage with United Nations agencies; but that line of differentiation is blurred, because CSOs may very well take on the character of business ventures. Whichever composition they have, PPPs have become a key element of public policies worldwide; they have the potential to bring not only cost benefits in the implementation of policy programs like public construction and public utilities, but also in terms of developing “soft” public goods like building socially inclusive communities (Osborne 2000).

3.6.1 Models and content of PPPs PPPs are a concept which has evolved into many forms of organizational arrangements to provide public goods and services: One of the first applications was private participation in the provision of infrastructure-services. Other than traditional public procurement, which is a contract for purchasing an asset, the public sector, in a PPP, purchases a stream of services for which a detailed service agreement specifies explicit terms and conditions. This is mostly done via a concession contract where a government grants a license or concession to a private party.63 There are projects on economic infrastructure like road, rail and air transport, bridges, sewage treatment plants, drainage systems, and telecommunications facilities, as well as on social infrastructure like health, education, jailhouses, and recreational facilities. PPPs may have

 There are two concise definitions of a PPP. One is by the Canadian Council for PPPs: “A cooperative venture between the public and private sectors, built on the expertise of each partner, that best meets clearly defined public needs through the appropriate allocation of resources, risks and rewards”. The other is from the OECD, and lists the main fields where the concept is applied: “An arrangement whereby the private sector provides infrastructure assets and services that traditionally have been provided by government, such as hospitals, schools, prisons, roads, bridges, tunnels, railways, and water and sanitation plants”. See LaRocque 2008, p. 8.  Legal prerequisites and management issues of PPPs will be discussed in Chapter 4 on public goods management which will also exhibit the arguments on pro and contra PPPs.

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many forms – from privatization of previously state-owned industries to simply contracting out of services, but it is a few models that have become widely used. In the following, some typical examples will be exhibited which show the content and the most frequent formats of the undertakings. Construction In construction, the decisive success factor is to best utilize synergies from design, buildability, operability, and finance. From this, the advantages for the public sector (reducing budget strains and adding certainty to cost and delivery terms) and the private sector (client is reputable, operation is secured) can be clearly envisaged (Cartlidge, D., 2006). The ideal contractors, hence, will be those which combine design, construction, and facilities management in-house. The concept is by new means a new one: It was already used for the construction of the Suez Canal starting in 1858: Funding came from a mix of Egyptian and European finance support, and the concession to design construct/ operate the canal (and to earn the revenue) was awarded to a newly formed corporation, the Compagnie Universelle du Canal Maritime de Suez, owned by both French and Egyptian interests. The firm built the canal and administered it for 99 years after which time the ownership passed over to the Egyptian government

Contract Type

Description

Level of Risk

Management contract

Operator receives fee to perform operation and routine maintenance. Asset owner pays for repairs, extensions, etc. Little risk to private operator.

Asset holder

Lease contract

Operator keeps revenue but must pay specified operating and maintenance costs and lease fee, and possibly percentage of revenue. Operator loses money if costs and fees exceed revenue and thus has incentive to lower cost and increase water connections and bill connection.

Build-and-operate contract/ Build, Own, Operate, Transfer

Eventual operators construct or rehabilitate and sometimes design water system, then manage operations under either management- or leasearrangements.

Invest-build-and-operate contract

Contractor-operator is also required to provide portion of investment costs. Schemes are operated as concessions in which operators assume all costs and retain all revenue for extended period (e.g.,  years in Paraguay, Private operator  years in Bangladesh).

Figure 11: Common types of Public-Private Partnerships. Source: Kleemeier and Lockwood 2012, p. 4.

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(Montel 2018). Since then, thousands of PPP applications have come along, with roads, bridges, jailhouses, government buildings, among others, having been completed. Figure 11 shows the three formats that are most frequently applied. The model used in the Suez Canal (“Build, Operate, Transfer”), which passes ownership to the public entity involved in the project after a time in which the contractor performs operation, maintenance and upgrading, has been upgraded, and risks perspectives have been added. From a risk perspective, the Management Contract model leaves more responsibilities to the asset holder, which is the public entity. So, for precarious infrastructure, like kindergartens or asylums, this format would be appropriate. By contrast more risk lies with the contractor if the contractor also provides finance. A public good that is precarious as well is access to fresh water. Here, private sector participation is very often seen very critical. Water The criticism with private sector participation in providing water to households starts with the question whether access to water is an undisputable human right. What seems more important is the question whether the scarcity of water supply in developing countries can be effectively reduced through private sector participation. There is certainly no single, universal answer to worldwide water provision. In any case, the decision which system of water provision to adopt can only be made by each country independently. Technically, the Management Contract/Concession model is the most common scheme. In the concession model, public authorities, and not individual users, pay for services provided by a private contractor. The contract services extend from performing maintenance in the distributive system to fully investing in the system. This should guarantee that households continuously get water through a private contractor using public infrastructure. The only argument against this would be economic inefficiency. But apart from inefficiencies in the public sector there are other disadvantages which may include – in both developed and developing countries – systematic underfunding and corruption. The full spectrum of approaches to water management can be categorized as exhibited in Table 7. When looking at water issues in developing countries, another issue comes up: In rural areas, e.g., in Africa, infrastructure such as wells and pipes is missing, despite broad support having been provided for this from international CSOs. In the towns, unplanned urban zones are rapidly expanding, and quick solutions are sought to cope with peak load specifications. The solutions may quickly become outdated, and municipalities often cannot afford to bridge those technical difficulties (Bakker 2003). Worse even is political patronage that bars non-governmental actors from public goods provision. Political patronage in essence, is the transfer of wealth to constituents through the abuse of government-owned assets in exchange for political support, an everlasting problem not just in the developing world. As observed by Shleifer (1998),

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this explains why government provision is much more widespread than what is socially desirable from the efficiency perspective. In healthcare, the same reason, together with ideological bias, has prevented private-sector-involvement for many years. Table 7: Perspectives to the organization and management of the water sector. Public

Private

Private–Public Partnership

Cooperative.

Conceptual background

A human right and a social good

An economic good or a commodity

An economic good and a renewable natural resource

A socio–ecological good, an economic good and a renewable natural resource

Advantages

Protection against customers’ exploitation

Access to unserved areas

Voluntary and open membership Education, training and information

Equitable distribution of services

High level of competition

Increased competition during tendering stage Inflow of private capital Private sector knowledge, technology and capacity

Disadvantages Lack of political will to charge costrecovering tariffs Inefficient operation

Exposed to crosssubsidization to other government services

More Private monopoly expensive than can erode public network water power Inequitable supply Environmental concerns

Price fixing could occur

Lack of transparency with regulator Little voice for consumers.

Concern for the community

Lack of awareness of their business potential among governments and the general public Lack of access to loan finance to help them expand their business Lack of technical knowledge and access to new technology

Source: Saner, Yiu and Khusainova 2015.

Health Private intervention in public health has met with skepticism and criticism up to outright opposition. Part of this is accurate, because what often lacks is a clear-cut and transparent governance structure that defines the responsibilities and the division of work between the public and the private sector. Without this, the public sector may end up in absorbing the lion’s share of the risks and costs, while the private sector reaps a disproportionate share of the profit (Ollila 2005). Above all, the main reason of private sector involvement is the notorious dysfunctionality in public healthcare

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systems of which there is abundant proof, and which has been discussed for over 100 years.64 Inefficiencies are found in developing countries (see, e.g., Duru and Nwagbos 2007; Nwagbara and Rasiah 2015) and in developed countries like, e.g., the United Kingdom (Mudyarabikwa and Regmi 2016). They can be attributed to the shortage of professional (competent medical staff), financial and institutional resources, and they are often caused by underbudgeting. So, what the private sector should contribute, above all, is efficiency and finance. Apart from conjoining in healthcare provision through PPPs, private and public healthcare are operating independently from each other in many countries. Historically, the private sector was meant to provide services mostly to the wealthy, while the government served the poor. However, evidence has suggested that is not meeting with reality: The private sector often is the primary source of treatment for the poor while the government system often provides far more services to the rich in urban environments than to the poor (Mitchell 2008). The following table (Table 8) which is taken from a case study by the British medical journal The Lancet illustrates this evidence: Table 8: Relation between private and total health expenditure in Global South countries. Health expenditure  Private % of total

 Private % of total

         

         

India Nigeria Sri Lanka Thailand Argentina South Africa China Malawi Tanzania Nepal Source: Mackintosh et al. 2016.

Not all manifestations in these countries are public-private partnerships: In India and Nigeria there is a dominant private sector of individual practitioners who receive outof-pocket spending and also expenditure by insurers; in Sri Lanka and Thailand the private sector is active in both primary and secondary care in private clinics; in Argentina and South Africa private doctors and hospitals are at the top of a stratified

 Within the American Public Health Association, violent confrontations on the pros and cons of private involvement started as early as 1919 (https://ajph.aphapublications.org/doi/pdf/10.2105/AJPH.9.12.951)

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system with the public sector on the low level but which also relies on charges; in China the public sector is highly commercialized with a relatively high but now falling share of private expenditure; in Tanzania, Malawi and Nepal there is a stratified private sector with hospitals and clinics for the better off and substantial use of private shops particularly by the poor. The variations between 2000 and 2012 are due to a mix of factors, from populist policies and high inflation in Argentina to a rise of public spending for a universalist public sector elsewhere that channels private sector investment into complementary roles (Mackintosh et al. 2016). When it comes to setting up healthcare partnerships, the most common form is between a government and a for-profit company. There are several varieties:

Financing of Services

Provision of Services Public

Private

Public

Public health facilities Surveillance programs Health education

Contracts Social Insurance programs Social Marketing Fee for service

Private

Autonomous hospitals Drug donations Vaccine development

Regulation Participation in national Control programs (e.g., HIV)

Figure 12: Formats of partnerships in health service. Source: Mitchell 2008, p. 14.

The upper right and the lower left boxes in Figure 12 exhibit the two predominant types: The public sector provides finances while the private sector performs services, and the opposite, with the private sector financing while the public sector performs services. In the first type, contracting is used for a wide spectrum of services ranging from auxiliary services such as food, logistics and maintenance, to the private hospitals delivering care to patients directly. The latter is the format which comes into mind when viewing the hospital landscape in the U.S., but there is also the other type where the private sector just finances hospital buildings, and healthcare is provided by a municipality (Bindman 2019). There is more which the private sector can provide to public health outside the healthcare industry. Businesses can improve the working conditions for employees by paying a fair and livable wage, by providing minimum social protection, preventing the poverty trap and malnutrition of the family members (elder and children), by ensuring a safe and healthy physical environment of the workplace (preventing occupational hazard and health risks), providing health education to the employees and their families including advice on nutrition, healthy diet and primary healthcare practices. They can engage in organizing regular sport programs for the employees and

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their families, in providing sport campuses and other activities to the youth in the community, extending the company medical services to the families in the community, and in education campaigns for the community regarding infectious disease, personal hygiene and environmental conservation (see, e.g., Winterhalter et al. 2017). Whether through formalized collective structures or by private initiatives from businesses outside the healthcare industry, serving the public good of health needs intense collaboration, the co-creation of both ends and means (e.g., combining new practices with new infrastructure) and collective intelligence. Intelligence also comprises the utilization of what the digital economy offers, which includes state-of-theart handling of health data. This requires that digital services’ terms and conditions comply with certain ethical standards. But as public health is a common good, privacy concerns, while justified in the personal environment of a patient, should not stand in the way of research, drug trials and cohort studies. Observation research needs patient data from the health system for achieving insights, e.g., on incidents of cancer, survival from cancer, or on the interaction of treatment regimens with outcomes in this and many other diseases. These data are a highly important public good; it takes wonder that in Europe, which lives off a solidarity-based healthcare system, it has taken very long to balance the value of individual control that subjects are granted for ‘their data’ with the mutual dependency on health data needed by the everlearning system of healthcare (van Veen 2018). Data protectionists should use the positive experience which the Netherlands had with the use of a contract tracing app for containing the spread of the coronavirus. The discussion on this by the Dutch has led to a better identification of which public goods are at stake and how technology, ethically founded, can be of use in contested matters (Siffels 2021). Education In the ongoing debate about privatization of schools there is one argument which is always being brought forward: Social equity can only be brought about by a comprehensive public school system. On the other hand, it is widely acknowledged that the sheer size of education systems, when provided by one single entity, burdens them heavily with bureaucracies, multiple streams of policies, shortages of finance and of teachers and ever-increasing enrolment. Hence, the argument for privatization would be that it secures greater operational efficiency and productivity. But then it is also argued that a private enterprise entrusted with schooling can as well become overburdened with financial constraints, high turnover of teachers, low or excessive enrolment, etc., and will abandon the project. One way out would be a close oversee of the private schools by public authorities and integration of private education in existing regulation policies (which is practiced, e.g., in France and in Canada; see, e.g., Pons et al. 2015). Still, a risk of the private enterprise defecting from the obligations would always remain. However, as experience with the many private schools in the U.S. and in the UK shows, not one of them was ever abandoned (Reeves et al. 2017). But the

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U.S. and UK systems, with fully private schools at all education levels, cannot be a model for the rest of the world because they are outcomes of a long societal process which took centuries. In continental Europe, government authorities have a say in teaching programs for all schools at the primary and secondary levels, whether public or private (see, e.g., Arimoto 2014), and in developing countries the structures of society request formats which can guarantee that the ideals of social equity and education quality are not compromised. A good option for this is public-private partnerships. Public-private partnerships in education, similar to what was discussed for healthcare above, may either be funded by the private sector and run by the public sector or vice versa. In praxis, there is a mix of private philanthropy, private sector management initiatives, subsidies for funding school programs, vouchers to fund students, capacity building initiatives and school infrastructure partnerships (Patrinos et al. 2009). Local initiatives, when they are sustained by coalitions between civil society (parents groups, community organizations) and school boards would be the ideal arrangement for drawing in resources from the private sector. This is valid for all categories listed below (LaRocque 2008): – School boards or other educational authorities contract directly with private providers to operate public schools, while the schools remain publicly owned and funded; examples are Concession Schools in Latin America, government schools in the Punjab managed by the Cooperation for Advancement, Rehabilitation and Education NGO,65 and similar ventures in Pakistan. – Governments contract with private schools to deliver education at public expense; examples are to be found in several African states; another one is the Educational Service Contracting scheme in the Philippines. – Governments fund students (with “vouchers” to attend private schools. This is also popular in the U.S. – Private sector partners provide cash and in-kind resources to complement government funding of public schools or directly design, finance, construct and operate public school infrastructure under long-term contracts with the government. Examples are buildings projects in Pakistan, Malaysia, Egypt, and, also, in Western Europe and in Canada. – Private sector partners provide teacher training and curriculum enhancement programs; an example is the Cluster Based Training of Teachers and Quality Assurance Resource Centers in India (Sarangapani and Pappu 2021). These examples were presented because they show that the many voices that deny the validity of private intervention in schooling are simply overruled by what happens in the world, especially in the developing world. The advances in access to quality education achieved on a global scale since the late 1900s are mainly due to those

 See: https://www.researchgate.net/publication/247765392

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PPPs. Overall, the progress reports of the Millennium Development Goal No. 2 (“Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling”) show an increase of the net enrolment ratio in primary education from 83% to over 89% worldwide between 2000 and 2016. The rise in the proportion of pupils starting grade 1 who reach grade 5 was similar, with Middle East and Africa having made the most significant strides (https://data.un.org). One last aspect has to be mentioned: When actors from the public and the private sector partner with each other – even with the best intention to cooperate collaboratively – each of them will retain a look on its own interests. Rather than accepting that this may cause an ongoing tension, managing this “unity-diversity tension” (Carranza and Opsina 2011) is one of the foremost missions in the common effort. This and other management perspectives will be discussed in Chapter 4.

3.6.2 Beyond the local level Global partnerships for development (which mainly stands for development of public goods) have been built by multiple stakeholders, from international consumer associations, campaigns for responding to HIV, to youth organizations and environmental groups. They engage in advocacy and support for the underserved; CSOs are growingly networking with nontraditional partners in other segments like trade unions, faith groups, profession associations, and think tanks. Cooperation of CSOs with the public sector and with the corporate sector is often limited to special occasions, e.g., where consumer rights need to be enforced or disadvantaged groups of society need support in a particular case. CSOs have very rarely entered into formal, long-run partnering with government entities or with businesses. An exception is global partnerships for health, which is mostly because contemporary issues in health are “wicked problems” (i.e., difficult or impossible to solve because of incomplete, contradictory, and changing requirements that are often difficult to recognize; the term was coined by Mason and Mitroff 1981). Global health issues are complex and complicated – neither governments nor the private sector can resolve them on their own: As per a categorization of the World Health Organization (2000), they comprise elevating health in the climate debate, delivering health in conflict and crisis, making healthcare fairer, expanding access to medicines, stopping infectious diseases, preparing for epidemics, preparing people from dangerous and unsafe products, investing in the health workforce, keeping adolescents safe, and earning public trust. All of them are public goods per se, and they relate to public goods. There are over 90 global health-PPPs, all of them transnational arrangements, with the purpose of drug development, improving access to healthcare products, mechanisms for global health coordination, strengthening health services, public policy, health education and regulation and quality assurance. Some examples include Global Alliance for Vaccines and Immunization, Safe Injections Global Network, Global Polio

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Eradication Program, International Aids Vaccine Initiative, Concept Foundation (which works on improving access to sexual and reproductive health medicines), Global Alliance to Eliminate Leprosy, Global Alliance for Improved Nutrition, and Alliance for Health Policy and Systems Research (Babacan 2021). The enumeration shows that patients’ interest must be represented as well; so, in the partnerships we also find civil society organizations and philanthropic agencies. UN agencies may also be partners, but they must follow the guideline which the UN has set for partnering with the business sector. The guideline stipulates that “The United Nations should not partner with business sector entities that systematically fail to demonstrate commitment to meeting the principles of the United Nations Global Compact or the United Nations Guiding Principles on Business and Human Rights” (United Nations 2015). The positive effect is that this would motivate businesses to stay away from human rights violation. There has been a lot of achievements from global PPPs. Still, critics fear a rising influence of businesses and venture philanthropies on health matters and the weakening of the authority of nation-states (Romero 2019). However, the merits of the PPPs offset the risks. Risks are inherent in any PPP, but most of the global ventures are subjected to the strict regulations, close surveillance, and the many reporting requirements by which PPPs in the health sector must abide. Other than in the health sector, the number of transnational ventures is small in areas like education or poverty reduction. There is the Global Partnership for Education (https://www.globalpartnership.org), a multi-stakeholder platform of international organizations, civil society, teacher associations and the private sector. It aims to strengthen education systems in developing countries. The Global Partnership for Effective Development Cooperation (https://effectivecooperation.org) brings together governments, bilateral and multilateral organizations, civil society, the private sector and representatives from parliaments and trade unions, among others. Its objective is to maximize the effectiveness of all forms of co-operation for development. Both organizations are, above all, pursuing definite projects in various formats unlike the PPPs in health of which the most are dedicated to a specific purpose. There is another organization which also bears the name ‘Global Partnerships’ (GP). While the name may be misleading because this is a standalone impact-first investment fund manager, it merits to be mentioned in the context. Impact-first investing means investing in a way that seeks the highest possible social impact, and in the case of this institution it is about expanding opportunities for people living in poverty. As per the end of 2022, GP and its affiliated funds have deployed 678.5 million US$ to 189 social enterprise partners, with an impact that reaches an estimated 30.7 million lives in 32 countries (https://globalpartnerships.org). Impact investing is one form of financing public goods; PPPs need other forms, too, as will be exposed in the next section.

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3.6.3 Co-funding and co-production It is mainly on the global level where financing partnerships for public goods becomes a complex issue. Four mechanisms of funding are most suggested (Anderson and Reynolds 2016): Public resources, private resources, international organizations, and financial alliances. Private sources are businesses, not-for-profit organizations, and wealthy philanthropists. In many cases, the private sector initiates further funding from international organizations. For instance, the Rockefeller and the Ford Foundations’ development of green technology (Stansfield 2002) and the Bill & Melinda Gates Foundation’s funding of new drugs, vaccines, and diagnostics development (Jamison 2006) have sparked activities from various UN departments. But there is much more: If we consider the SDGs to represent mostly public goods, financing SDG implementation is synonymous to financing public goods. This is money that mainly comes from states and their citizens’ taxes. Budgetary prudence demands, in any state, will demand that decisions are made to only finance a goal which produces the greatest impact (i.e., the greatest effect on this goal and on all other goals) with the least resources. The intertwinement between health, energy, peace, and justice may not be clearly noticeable, but when living standards (which include health) are acceptable, when energy provision is sufficient and when people feel that the legal system works well, there will be no reason for political unrest or for going to war – except where the citizens do not have a say in such decisions. Health, access to water and sanitation are clearly interlinked, and so are education and job opportunities. All this has a cross-border dimension, and financing will require international mechanisms. International finance is a vast territory of which only the minimum can be reviewed in this book and only as it regards public goods. In this, there are a few main players. These are global finance institutions like the World Bank Group, the International Monetary Fund, several multilateral development banks like the Inter-American Development Bank (IDB), the European Bank for Reconstruction and Development (EBRD), the African Development Bank (AfDB) and the new Asian Infrastructure Investment Bank venture (AIIB) that was initiated by the Chinese government. Decision makers are the United Nations in its many branches and an array of regional organizations such as the European Union (EU), the Andean Community (AC), the Central American Common Market (CACM), as well as several African communities of which the largest ones are the African Union and the African Continental Free Trade Area (AfCFTA). Financing global partnership arrangements will often comprise temporary programs and includes coalitions between governments, international institutions, businesses, and private foundations. For attaining maximum results, these arrangements must be structured in a way which warrants that all partners absorb a fair share of the costs and the risks. The SDGs, which might be viewed as the supreme global public good of our time (Dill 2018), can only be financed if financial support comes from all sectors and is not limited to official donors like the World Bank. Providing finance from the World Bank only would end up in a reverse construction: Instead of caring

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for global concerns, states and private business would first consider their existing agenda and capacities, and only if an SDG is crucial for them would they adapt their priorities (Dill 2018, p. 2). The range of partnerships to be financed is wide: At the beginning of 2023, about 21,000 multi-stakeholder partnerships were registered at the online platform of the UN Partnerships for SDGs (https://sustainabledevelopment.un.org/partnerships); 4,622 referred to ocean conservation and climate change (Goals 14 and 13), while only 814 referred to Goal 9 which is “Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation” (https://sdgs.un.org/partnerships). There seem to be some “bestsellers”, which, however, might mean that institutions wishing to be involved in SDG partnerships are pondering which action they can best sell to their constituencies. This is of great disadvantage, because the institutions should rather look for what is most needed and consider the interlinkages between the SDG goals. Following the example from above, Goal 9 heavily influences Goal 13 and Goal 14. The UN partnership register does not reveal sources of finance. But it must be assumed that funding has been reduced because of the COVID-19 pandemic and the Ukraine war which have led to a sharp increase in government expenditure and to constraints in the fiscal capacity of both developed and developing countries. There was an increase in the global extreme poverty rate from 8.4% in 2019 to 9.3% in 2020 and a rise in the number of people affected by hunger by 150 million between 2018 and 2021 to 828 million in 2021. This has led budgeting priorities away from financing those partnerships. The challenge was to mobilize resources both from domestic and international sources to sustain the livelihoods, health, and basic welfare of people; finance for other SDGs missed out (Arora and Sarker 2023). The shortfall in financing the SDGs prior to COVID-19 was expected to be 2.5 trillion US$ for developing countries, but post COVID-19 it will reach 3.7 trillion US$ (OECD 2021). There are, though, other sources apart from donor money that can be mobilized. Solutions for financing the SDGs goals in the Global South can be found on the ground, i.e., within the states that need sustainable development. There are technological solutions for several SDGs that can be developed even in dire times, and these can directly produce benefits to the communities affected the most by, e.g., health deficiencies and climate change. Also, many developing countries are still lost in tax avoidance, corruption, theft from public authorities, mismanagement, and inefficiency. The magnitude is high: Data regarding SDG16 indicate that corruption, bribery, theft and tax evasion cost some 1.26 trillion US$ for developing countries per year (UNDP 2020). Technology can help here, too. It can provide digital solutions that toughen revenue accounting which will increase tax income. The states will thus be able to devote taxes to those SDGs that best fit their national interests. And there is another way for developing countries (and many other countries) to leverage taxes: Multinational online technology companies (together with some more from other industries), while generating revenue in those countries declare minimal taxable profits in those jurisdictions because their companies are structured in a way that enables

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this type of tax evasion (Truby 2019). Closing loopholes of that kind will also help to improve local finance, especially in the developing world. This should be a strong argument on whether taxation based on the destination principle is legitimate and enforceable. It certainly is, and a coalition among the good-willing should consider that the present system does not give the developing countries very much scope for negotiating within tax competition. The situation would change if taxation were to be based on sales’ destination (Schippers and 2018). Another means to increase state income is digitization of payments: When connecting customers digitally, money is saved, and GDP is raised. This can provide employment and business opportunities that go towards the achievement of SDG 8 (Digitization), and it can also help to find inclusion of women entrepreneurs, a key to achievement of SDG 5 (Demirguc-Kunt 2017). Technological solutions for improving revenue collection and reducing corruption will certainly alleviate the financial situation in developing countries. But they must be complemented by international finance. International finance should also consider which of the SDGs is ranked highest in those countries and which publicprivate- partnerships need the most support on the ground. For example, in Ghana and Benin “Infrastructure and Industrial Innovation” (Goal 9) is at rank one, while in Nepal, “Peace” (Goal 16) and “Responsible Consumption” (12) take the lead. Interestingly – or sadly – goals such as “Climate Action” (13), “Health” (3), “Education” (4) and “Gender Equality” (5), the favorites of many international organizations, are not at the top ranking for countries in the developing world (Dill 2018, p. 5). This imbalance needs to be rectified from both ends. It is hoped that developmental interventions mobilized from the private sector for PPPs66 have followed the priorities called for by the beneficiaries, and so should the Official Development Assistance (ODA)67 from donor countries to developing countries (Arora and Sarker 2023, p. 8). Balancing the needs of the recipients with those of the donors has always been a difficult and controversial task. E.g., Stiglitz 2006, has critically asked: Does global governance ensure that the global public interest is served? This question goes for all policymaking on public goods as will be shown in the next chapter.

 Private sources contributed 38% of the total annual average 50 billion US$ of finance for international PPPs during 2018–2020 as per the latest data released by OECD in June 2022.  Total ODA was 162 billion US$ in 2020 and 186 billion US$ in 2021. In average, 24% each went to the Least Developed Countries and the Middle-Income Countries (Arora and Sarker 2023).

Chapter 4 Policymaking and managing Policymaking and managing of public goods, whether by governments or within the many formats of cooperation that have developed over time between public and private actors, needs to be coordinated. This will ensure that the best mutual benefits can be obtained. On the global level, the United Nations have set new goals for a coordination of efforts with the 2030 Agenda for Sustainable Development; not only are all SDGs systemically intertwined per se, but it is preordained that the respective endeavors and decisions happen on all levels of society. So, holistic participation must be warranted for the whole set of activities. This starts with sharing all data on the agenda within all constituencies – citizens (represented by their parliaments as well as by CSOs), the state, international organizations, and businesses – and ends up with collaborative decision making, implementing, and monitoring of all the activities. The coordination will often start with the question if the status of a good (whether private or public) should be socially determined. Renowned public goods researcher Inge Kaul has called this “the triangle of publicness” – that is, complementing the concept of publicness in consumption with the concepts of publicness in decision-making and in distribution of benefits (Kaul 2001). Those who receive benefits from public goods would also be required to protect and to maintain them – whether individuals or businesses or other groups of society. It is the consideration of benefits (mainly of benefits allotted to the business sector) which causes fierce opposition in many political circles against participation of the corporate sector. The arguments spin around the question of who owns public goods. The standard answer to this question often is that the tax-paying citizens do, and that they elect public officials for management of public goods and stewardship. This answer negates that not all public goods are paid for by taxes because there are private institutions that partner with the state in providing and maintaining many public goods that society enjoys. Theoretically, the construction must be such that best results are secured for the partners: The partners jointly secure financing and management expertise, with which the state gains efficiency and the private partner gains income or at least, status. However, this cooperative model is flatly contested by opponents who say that “when you orient society toward economic goals, then human development is seen as a private good that will add value for the private partners to better compete in their market, and, consequently, these goods become subject to market forces and managerial governance” (Lipman 2013, p. 559). It may be rightly claimed that there are many societal issues where the economic perspective places private interests above the interest of the community. But a downright hostility towards the corporate sector’s involvement in public goods provision not only lacks theoretical validity but also obstructs societal progress and prevents prudent policymaking. This will be shown through the discussion on the “commonstock”, the dis-appropriation and the market-failure argumentahttps://doi.org/10.1515/9783111134611-005

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tions. The chapter then continues with policies that lead out of ideological resentments (4.3), and with frameworks that unite private and public actors for collective efforts (4.4), followed by a brief view on the database on public goods (4.5), and with monitoring procedures (4.6). The chapter ends with a section on policies to fight free riding (4.7).

4.1 The commonstock and the dis-appropriation argumentations The idea that public goods need to be commonly owned, and that involvement of the business sector must be seen as dis-appropriation of this “commonstock” is a political one, not even a social one, nor has it economic elements. There is ideological bias – anti-capitalistic or neo-Marxist, but apologetics of the market-economy must accept that there are concerns which must be dealt with through arguments. An early warning came from the Austro-Hungarian economic anthropologist and politician Robert Polanyi, best known for his book The Great Transformation (1944) that he wrote at an age of 30 years while the second world war was still raging and in which he questions the conceptual validity of self-regulating markets. He feared that democracy and its institutions are not capable of preventing “the market mechanism to be sole director of the fate of human beings and their natural environment (Polanyi 2001 [1944], p. 3). Seven decades after that statement, critics of the market economy still believe that it is valid: They deplore the erasure of the social state and say that “the social contract has become a distant memory and the ‘corporate state’ distances itself from minorities and workers who become disposable in a new age of uncertainty and manufactured fear“ (Giroux 2015, p. ix). However, Polanyi’s statement never described a real situation, and the erasure of the social state has not taken place anywhere in the West. Still, there may be businesses who misuse the market system, and there may be politicians who do not intervene. But they do not represent the total of the corporate or the public sector, just like the Stalin massacres cannot be seen as a direct outcome of socialism. The worldwide efforts that are pursued nowadays to accomplish inclusive and equitable sustainable development along the 2030 UN agenda show convincing evidence to the contrary. This, and the power which trade unions have in many Western states also counter the criticism that the capitalist system excludes workers through the enclosure pursued by the capital owners – i.e., prohibiting full access to the rights and opportunities that democracy should offer to all (e.g., Lindblom 1977; Anton 2000). But the critics of the market system still uphold that businesses have a tendency to commodify assets which are owned by all society (commonstock) and convert them into market inputs: “Many parts of nature that have been considered the common heritage of mankind are transformed into feedstock for global markets. Wildlife and local ecosystems are threatened by the property-rights movement; global water supplies are being commodified for transport across vast distances” (Bollier 2001, p. iv). The critique extends

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to non-tangibles: “One of the most persistent illusions of neoliberalism that fly in the face of the sociological concept of ‘cultural capital’ is that individuals with the same talents and abilities would be equally productive independent of the social resources available to them and, thus, owe little to the society that provides the context for their achievements” (Anton 2000, pp. 23–24). There is sufficient proof to offset this statement: Talented individuals can use any societal context to their advantage. Over history, yes, their chances for success were different. However, this was not because of their social environment, but because they made use of it differently. Those who took their chances owe a lot to society, and many of them have given back, whether the industrialist Cadbury in 19th century Britain, or Carnegie and Bill Gates in the U.S. (Zhulina 2018). The notion of commonstock would only be plausible without the concept of stakeholders. The stakeholders of statal decisions are all groups in society. If they are not allowed to pronounce their interests and get actively involved in the decision-making processes, the use and enjoyment of collectively shared resources would be administered by the state only. This would be government for the governed. Then it would be the government only which has the authority to limit or grant access to resources, and this leaves no space for the governed to assume any responsibility. But in a modern democracy, both governors and the governed share responsibilities. For this to become practical, public goods need to be managed and administered in a way that stakeholders can make the providers accountable. The commonstock-logic postulates that neither a private property regime (which would constitute rights of access) nor a market regime (which would set prices) should rule public goods because this could entail the right to exclude others from “social property” (Anton 2000, p. 4). Resorting to the idea of social property is dangerous. It provokes a sequence which ends up in producing a final stage where private property is collectively expropriated. And the idea is myopic as it does not look at the many facets of the concept denoted by the term “property”, i.e., the “complex relations between people that regulate access to things and ideas that a society considers to be useful, valuable, or desirable” (Ince 2014, p. 208). So, when society decides how to define and regulate these relationships, it will look for the proper regime to deal with a shared resource-base. And it has always found it: In 14th-century Britain the resource was game and firewood, and in the 21st century it is tribal lands that are allocated by the local leaders in Africa or in Polynesia. No expropriation is conceived in those cases. Social property thinking, though, and the commonstockphilosophy, would need to overturn a proprietorship regime handed down through centuries and democratically installed in legal systems. In the dominion of laws and lawmakers the phenomenon of how to distinguish between different types of property has existed for centuries, and it has been adapted

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to new necessities.68 An important new application is ecological law/natural resources law which determines property rights in natural resources conflicts. Legal doctrine and legal solutions for those conflicts (U.S. statutes and U.S. case law) are based on the constitutional concept of Takings Law. This is laid down in a government directive that “limits the use of private property beyond the government’s legitimate police power (as, e.g., the power to enact safety regulations) and for which the owner may receive compensation. Here we have the only legal instrument for llectivizing private property”.69 In the context of collectivization or expropriation, ecological law defines three types of property arrangements: a core human property which may be taken away upon the terms of the holder only; private property or entitlements that may be taken only with compensation; and a social or provisional property interest which may be redefined to the detriment of the holder without compensation (Rodgers 1982, p. 207). The commonstock-argumentation would also not help with issues that regard ownership of land in natural environment that is worthy of ecological protection. Everywhere, changes of ownership in the context of natural resources exploitation may come with ambiguous results. In some cases, the practices are downright unlawful. One case is the ongoing point-blank thefts by state officials of indigenous land in Brazil who claim “public interest” (see, e.g., Burton 2010). There also was the infamous Myanmar gas project where “public interest” (foreign investors collaborating with the host country’s state officials) drove hundreds of citizens from their homesteads (see, e.g., Lawrence and Tolley Jr. 2003). The other way round, we are seeing new cases of silent expropriation in Southeast Asia which originated in resource nationalism policies that are used as a pretext for avoiding Foreign Investment Settlement Disputes (Junita 2015). Closer to home, citizens in the Austrian Alps claim violation of their rights when the government establishes national parks on what used to be their property (Hansen and Clausen 2004). None of these cases is comparable to another, but all are minor or major attacks on society. Beyond land ownership cases, silent expropriation may apply to car owners whose user rights are sacrificed against the public good of clean air in the city centers, or to shop owners whose businesses are closed to avoid contagion of the customers in a pandemic. It is alright that public health, here, ranks higher than freedom rights. But then, the state must also compensate losses. Coming back to government practices of forced land ownership change and leading over to the topic of appropriation and dis-appropriation, there is the proclamation of the African National Congress (ANC) in South Africa which declared that the country’s resources, including its minerals, belonged to all the people (Maduna 1989). In consequence, when the ANC became the ruling party, all lands that white settlers had taken away from the tribes during Apartheid and before were given back to the local

 For a sociological view on property rights Table 11 in section 4.4.5 which lists Ostrom’s conception on the topic.  https://www.merriam–webster.com/legal/regulatory–taking.

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communities. But this came with the responsibility of the new owners to cultivate the land. If they could not abide by this regulation, they were to hire the former white owner for land administration. It was hoped that this would end a story of duplicate dis-appropriation and re-appropriation.70 As shown by the South African case, a diligent analysis each situation needs to prove whether dis-appropriation is a suitable means for expanding a public good. Generalization is not appropriate. Likewise, it makes no sense at all to generally speak of appropriation when the private sector involves into in public goods provision. To the contrary, there has been a discourse coming up both among politicians and academia whether appropriation of public goods by the private/the business sector can be a way to better serve society. This has to do with the decline of public investment. Public investment began to decline in the late 20th century and with this, reregulation of public services and public spaces rose. It was feared that this would result in a less equitable distribution of resources with negative socio-economic side effects for low-income groups (Aernouts and Ryckewaert 2015). But there also were positive views on this reorientation right from the start. It was seen as a way from “publicness” towards “the common” through a new interpretation of the marketversus-state paradigm which sees appropriation of public goods by the civil sector as common purpose (Mattei 2012). The negative view has been upheld, though: “Appropriation of public assets by the private sector spreads market values to areas of life where they should not go and ends up with businesses enclosing the commons” (Bollier 2001, p. iii). This line of reasoning negates that there has always been cooperation between sectors (the “community”) and that this has often generated substantial social and economic progress. Excluding the corporate sector from “community” is remarkably narrow-minded. Businesses are a part of society, even though one will always find examples of businesses that disregard their obligations as what has been called ‘corporate citizens’. There is no conflict between the sectors if each party respects the rules. A simple illustration is from Hoppe (2011, p. 4): How is it possible that formerly unowned common streets can be privatized without thereby generating conflict with others? The short answer is that this can be done provided only that the appropriation of the street does not infringe on the previously established rights – the easements – of anyone else to use such streets “for free.” Everyone must remain free to walk the street from house to house, through the woods, and onto the lake, just as before. Everyone retains a right-of-way, and hence no one can claim to be made worse off by the privatization of the street. Positively, in order to objectify – and validate – the claim that the formerly common street is now a private one privately owned, the appropriator (whoever it may be) must perform some visible maintenance and repair work on and along the street. Then, as its owner, the appropria-

 In the end, however, the results appear mixed because ownership after restitution often changed rapidly with many parcels of arable land ending up in the hands of the newly rich from the urban elite with strong ties to the government which withheld them from cultivating the land (Khunou 2016).

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tor – no one else – can further develop and improve the streets as he sees fit. This would be an investment that benefits all users.

It may be argued that this is a simple example of limited local dimension and that it cannot be compared to issues of a higher scale like the cases of airwaves and of higher education that were quoted above. However, speaking of an enclosure by the private sector when the state invites specialists form the industry to improve the service (of airwaves or of education), comes close to utter nonsense. For airwaves to be effectively used, commercial firms (and not the government) need to invest in the development of new technologies, and if privately-owned universities compete with state-universities, the outcome of both research and education will reach high levels. This is not to neglect that private schools have more financial resources and that only well-to-do families can afford their high tuitions without support from the state. But in a free society, competition between different systems must be permitted. If the state cannot assure equal conditions, both the private and the public systems will not work. This can be exemplified by contrasting two regions where policymaking produced different outcomes: From the 1980s, Brazil quasi-stagnated while East-Asia continued to grow. In East-Asia, private ventures were carefully monitored by the governments, while in Brazil too much laissez-faire was allowed for the private sector (Bresser–Pereira 2021). Brazil’s laissez-faire regime limited fair competition between the public and the private sector and thus limited the capacities of the state to provide public goods. There was no room left to the state sector. The argument against laissez-faire, however, is often used in favor of the state-sector and against excessive freedom of the private sector.

4.2 The market failure argument Laissez-faire has been equated, in the theory of economics, with a competitive model where market exchange is based on the fundamental principles of exclusion, of revealed preferences, free flow of information, and self-regulating mechanisms (Allan 1971). In practice, though, laissez faire is understood to be characterized through situations where companies fix prices and limit competition, where consumers have no access to sufficient information for selecting adequate products and services, and where some industries are structured in a way that blocks new firms from entering business (Lehne 2006). It is true that situations like this exist or have existed, at least in some markets. But nowhere has a government not succeeded in eradicating this type of abuse through strict and specific intervention policies. What most governments – in the West as well as in the democracies of Asia – have mostly refrained from, is unrestricted interventionism. Still, many governments have overstressed their capacities through excessive state-provision of goods and services. But they were forced to cut back by outside influence like the oil crisis of the 1970s and what followed: The Western economies plunged into recession, with mounting budget deficits that forced them to reduce public

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goods provision, from welfare to research support to infrastructure (Kethineni 1991). The pendulum moved to the other side, and the states adopted monetarism which led to privatization, new public management, and highly liberalized financial markets. If there were interventions, they were through market-based regulatory instruments driven by information flows rather than hierarchical or collective decision making within national or international institutions (Busch et al. 2005). This led to the import of potential economic and financial malaise, and when the 2007/8 financial crisis broke out in 2007/8, the United States, West European nations needed to expense bailouts as well. As of November 2008, a total of 4.1 trillion US$ in rescue aid was assigned to the US and European financial institutions (Anderson et al. 2008). Given the enormity of the crisis, it was agreed by most bankers, regulators, politicians, and lawmakers that only government intervention could turn the global economy around. But what is right for an enormous global crisis cannot be applied to cases where specific public goods or services are successfully provided by non-state actors. Are there any reasons to replace the commitment of these actors? There is one public good on which it can be exemplified that, even on a high level of procuration, provision by the state or the private sector may lead to the same effect. This is security. In the U.S., most prisons are run by private contractors (see, e.g., Pozen 2003), while airport security is handled by public officials. In many European states it is the other way round. There are arguments on both sides to keep it like this. One is that only if a public good’s provision costs exceed the benefits for those who are concerned, they would have to provide the good collectively. So, in the case of airport security, the U.S. view is that the benefits go to all – in Europe, the view is on the travelers, and the airline fees contain a charge for security. From a more general standpoint, history shows that exclusive domination of either the free market or a state economy has disastrous consequences. In both cases, the main cause is failure to establish institutional safeguards and control mechanisms. This relates to an economic system as a whole and, also, to distinct partitions of a market. So, when tax dollars cannot ensure a satisfactory level of welfare, e.g., when tax-financed public healthcare needs to be enhanced, the private sector will take over. And in a system of checks and balances it is the duty of the state to regulate private sector involvement (in healthcare this happens almost anywhere). The ‘private contribution’ will certainly accrue a benefit to the contributor, but there also are positive consumption externalities through spillovers that lead to improvements, e.g., in the overall health sector (García-Prado and Gonzalez 2007). With regard to market failure, if we take the example of healthcare in Germany, where regulation is strong, and where the German Cartel Office will curtail takeovers when they threaten to monopolize the relevant markets, institutional safeguards and control mechanisms were in place at least from the early 2000s (Hess 2005). And the government has pledged that it will watch whether further hospital privatizations are the appropriate way for securing the optimal use of the scarce resources in the health sector.

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The market failure discussion often overlooks that government depends on business and business depends on government. Business investment creates employment and improvement of the standards of living – all this creates government revenues. On the other end, one of the foremost activities of governments is to secure a competitive operating environment, ensure a level playing field and enable profitability. Such coexistence benefits society, and with the view on benefits, all sectors will accept that correcting specific market failures is a necessity. But, as referred to above, governments have more instruments at hand than just taking on a centralized provision of all public goods and services. Beyond the pure instrumental, scholars increasingly emphasize the notion of socioeconomic factors in the context of public versus private (see, e.g., Aikins 2009). The boundaries of the two spheres are tenuous: Social processes shape economic activity and economic activity affects social processes. The “market is merely one of a number of collective decision-making mechanisms” (Bürgenmeier 2012, p. ix).

4.3 Policies that lead out of the antagonistic public-versus-private resentment In democratic states, it is social collaboration that defines what and how much of public goods (how much of contribution to wellbeing) is to be provided by which mechanisms. The policy challenge therefore is to achieve a balanced policy-mix recognizing the societal roles of all sectors. There are two prerequisites: One is that a public entity, before it sets out to formulate what it wants to achieve by a certain policy, executes deep analyses and due diligence, and the other is participation of the relevant partners in society before any process of legislation or regulation begins. This has been called the “morality of a cooperative society” (Schmidtz 1988, p. 185). Policies on public goods (or all policymaking), hence, are aggregations of prerogatives and correlate restrictions: On the first, is there an exclusive power to command, decide, rule, or judge? There are public goods for which the answer is affirmative, like national security; in many other cases, this power must be shared. On the second, restrictions of the right to use public goods may have to be correlated with scarcity issues and with social or economic development. Most policy arrangements have developed incrementally; they often have been stacked upon each other and may contain counterproductive instrument mixes (Howlett and Rayner 2007). This will, even if the decisions on the policies were made collaboratively, inevitably lead to dilemma situations: politicians cannot know how public goods users/providers will react to government policies and policy changes, while the users/providers of public goods cannot be sure if their choices will lead to corrections of government policies.

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4.3.1 Solving the decision makers’ dilemmas Dilemmas are situations in which a conflict of interest will prevent that a specific goal can be reached. In a societal context this translates into common interests not being brought to their fruition. Solutions to a dilemma can result in win-win situations, though. The classical paradigm for this is the “prisoner’s dilemma”, a setting that is based on specific incentive conditions for a prisoner to get free when guessing the right answer to questions on his accomplice (see: https://en.wikipedia.org/wiki/ Prisoner’s_dilemma): Two prisoners are in solitary confinement with no means of communicating with each other. The prosecutors lack sufficient evidence to convict the pair on the principal charge, but they have enough to convict both on a lesser charge. Simultaneously, the prosecutors offer each prisoner a bargain. Each prisoner is given the opportunity either to betray the other by testifying that the other committed the crime, or to cooperate with the other by remaining silent. The possible outcomes are: If A and B each betray the other, each of them serves two years in prison; If A betrays B but B remains silent, A will be set free and B will serve three years in prison (and vice versa); If A and B both remain silent, both will serve only one year in prison (on the lesser charge).

Positioning this into a societal issue, the analogy is that one of the two parties (the government or the public goods user) may suspect that the other party exploits the contribution which the cooperative one makes for accomplishing the common goal. This presumption of each actor on how the other will behave is the pivotal point of the prisoner’s dilemma construct. Regrettably, the cooperative party will lose: For instance, when decisions need to be made about the quantity in which a public good is to be offered, the decision base for each party might be the cost which either of them is willing to pay or to forfeit. Neither party can know about their counterpart’s willingness. If the providers of the good accept that the return to the users is higher than the return on the cost that they expense for providing the good, there will be no defection and the parties will consent on the quantity to be produced. Once this decision has been made, compensation talks can start, and since they are based on a consensus. Here are two examples. They connect to exploiting natural resources. The parties in question, though, are not government and the private sector but two competitors in a market where decision-making is non-communicative (like the two prisoners which are isolated from each other). One case is palladium which is mined in Russia and China and exported to Japan by both countries. If they ask the same price, they will have a comparable market share. If one of them undercuts its rival, its market share will increase, but mining more palladium and selling it a low price will diminish its profit. For a time, both attempted to outbid the other which shrank their profits constantly. They found that they need to change towards some type of cooperation by always following the decision the other one had taken. In the end, profits rose about 11% for each (Saner 2012, pp. 104 f.).

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Another case is from the oil industry. Dietrich Fischer, former director of the European University Center for Peace Studies, describes a situation where two oil companies, A and B, work on the same underground oil well (Fischer 2006). They cannot extract the oil too rapidly, otherwise the oil does not flow to the well, and instead gets stuck in the sand. Each company, rather than pumping oil slowly, can also pump fast but will then lose about a quarter of the volume. The assumption is they can extract 8 million barrels each when pumping slowly, and when they pump fast, each can only get 6 million barrels, with the rest being lost in the sand. So, pumping slowly would clearly be in their joint interest.If one company pumps slowly and the other pumps fast, the output is 14 million barrels altogether. But by pumping fast, one of them wins time, and fast gets a bigger share, e.g., 10 million barrels. This results in the following payoff matrix (Fig. 13):

Company A pump slowly

pump fast

Company B pump slowly

10

8

4

8 pump fast

4

6 10

6

Figure 13: Payoff matrix from alternative actions. Source: Fischer 2006, p. 22.

The payoffs are known by each of the two (e.g., that A can obtain 8 million barrels if both A and B pump slowly as per the upper left quadrat of the matrix), but A does not know what B may do as they do not communicate with the rival. So, what would be the decision-making process in company A? If B pumps fast, A can as well pump fast and obtain 6 million barrels; it can pump slowly and will only obtain 4 million barrels. In the latter case, B should better pump fast. However, if B pumps slowly? Then A can pump slowly also and obtain 8 million barrels, or it can get 10 million barrels by pumping fast. Anyway, pumping fast is better for A. So, without knowing what B will do, A will always prefer to pump fast. By the same logic, B will also prefer to pump fast. They will only obtain 6 million barrels each, although both could have achieved 8 million barrels each if they would have cooperated (Fischer 2006, pp. 9–10).

The prisoner’s dilemma model can also be extended to cases where there are more than two participants. This is the typical situation in societal contexts. The following graph illustrates a case of five participants of which one is a government entity (Table 9). The case reflects the decision-making process issue that would determine who operates 5G communication systems in the European Union. The EU Commission, as the regulatory authority (the “S” in Table 9) opted for a minimum of four network operators – this would still be an oligopolistic market, but regulation would eliminate the build-up of a cartel. For the process of granting the licenses, a negotiation scheme was suggested that would run along the lines of a prisoner’s game. As from Table 9, a good result would have been achieved (6 out of 10 on a scale where 10 is the maximum)

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Table 9: Example of a Five-Person Prisoner’s Dilemma Game. A Five-Person Prisoner’s Dilemma Game Choice of S

D C

Number of Others Choosing C 









 

 

 

 

 

S denotes one of the five members of the group. C and D denote cooperative and defecting choices, respectively. If S would choose to not interfere in the game and none of the others would choose to cooperate (as per column 1 of the matrix), the result for S would be “2”, and it would be “0” for the others. Now, if all were to cooperate (as per the last column), the result would be 10 for S and 8 for all the others. Source: Komorita and Parks 2019, p. 9.

if only two of the four parties would have cooperated with the regulatory authority. But with only two parties winning, the result is predisposed to monopolism. So, in the end, the states that were involved, instead of applying that scheme, have chosen to work with public tenders (Arnaiz del Pozo 2017). The case of the 5G licenses is typical for a setting where the state deliberately limits access to a public good. This comes with the condition that a gain in allocative efficiency is higher than the cost of the exclusion mechanism. A similar logic may apply to other infrastructure items like highways, railways, airspace, and ports. In infrastructure, this policy has led to an increase in the participation of the private sector over the last 100 years, and it spans beyond the local level. On that level, though, limiting access is mostly handled through the club-good format – as with public swimming pools. It might be asked why the operation of the swimming pool is not conferred to a private firm. But keeping it in public hands is seen to be justified from the viewpoint that this can better secure the higher good of public health. A new facet of the club good format and of state-regulation is financing for sustainable development. When a club of investors shares a common risk and a common understanding, finance for sustainable development can be regarded as a public good on its own (Schnebel 2020). The view that finance is a functional, communicative system that benefits society was initially introduced by sociologists Talcott Parsons (1990) and Niklas Luhmann (1998). They hold that finance communicates about systemic risks and therefore enables a coupling of surrounding issues (risks) with measurement of financial risk. The rationale is non-excludability: As with the swimming pool, if it were non-exclusive, nobody will invest because there is the risk that it cannot operate; hence, the public authority must allow the investors to gain a competitive advantage from making it exclusive. If the operability is at risk, the pool members would reduce their investment which equals that they de-couple from the shared understanding of the purpose and the impact of that investment (Schnebel 2020, p. 15).

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Shared understanding is fundamental for any view on the Sustainable Development Goals, and adding the communicative aspect to the decisions on financing development will make it easier to amalgamate funding efforts. The magnitude of this goes into the trillions: An outlook on global infrastructure (Global Infrastructure Hub 2017) predicts the following: “Until 2040, the world will invest about 3.0% to 3.6% of GDP, or an approximate average of 3–3.7 trillion US$ a year, for new and existing economic infrastructure: energy (1 trillion US$ a year), water (230 billion US$ a year), telecommunication (300 billion US$ a year) and transportation (1.5 trillion US$ a year). Electricity and roads account for more than two-thirds of global needs on infrastructure while meeting the SDGs for universal access to drinking water, sanitation and electricity increasing the need for global spending on public infrastructure by a further 3.5 trillion US$ by 2030. In consequence, the 2021 Financing for Sustainable Development Report of the United Nations (https://developmentfinance.un.org/fsdr2021) calls for a risk-informed approach to finance for sustainable development, and for investments in prevention, risk reduction and resilience: “As many such investments have a public good character, governments must incorporate risk analysis into their planning processes and . . . align the private sector risk landscape with SDG risks (Schwank and Spiegel 2021).71

Shared understanding is a prerequisite for public policies’ acceptance on all levels and it leads to solutions that are convincing – they are realistic, their implementation is feasible, and the outcomes are beneficial for all parties. Without this, they are not, especially if they are loaded with ideology.

4.3.2 Convincing and non-convincing solutions Japan’s resources policy Ensuring a safe and stable supply of resources is crucial for the upkeep of industrial production and technological progress. For Japan, which depends on the import of key resources like energy and minerals, close cooperation between all sectors has been its foremost policy features for decades. For instance, the Ministry of International Trade and Industry (MITI) was pivotal when the economy had to be restored after World War II, and for gaining international competitiveness. From the 2000s, in the advent of global crises, intensification and refinement of the MITI policies lead to a set of governmental and non-governmental entities in whose center is the Japan Oil, Gas and Metals National Corporation (JOGMEC), an administrative institution created in 2004that is not attached to a state ministry, and which has about 600 employees and 13 foreign representations, among others in Botswana and Peru. Together with the Japan Bank for International Cooperation and the Nippon Export and Investment Insurance it handles import coordination, debt guarantees and financing as well as geological surveys and exploration (https://www.jogmec.go.jp). This delivers a compet More on financing public goods will be presented in section 4.5.4 of this book.

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itive edge to the country which has proven to be robust not only in 2020 to 2023 when supply chain breakdowns happened elsewhere but also for mastering future crises. JOGMEC was the first to successfully extract methane hydrate from seabed deposits, and with its Geological Remote Satellite Sensing Centre in Botswana, JOGMEG is active in minerals exploration from remote. It is also the first to carry out large-scale deep sea mining of hydrothermal vent mineral deposits in several sea fields (Malala and Adachi 2022). German politicians, who lost against Japan in bidding for a ten-year contract for hydrogen produced in Australia, enviously state that “it is not the resources, it is the resources policy that makes Japan a treasure island” (Detzer 2022). The Japanese resources policy is a highly productive public good, and there is nothing to be found in the world that were comparable. Even Chinese observers admit that their country lags far behind because their bureaucracy produces many problems in the decision procedures through contradictory overlaps caused by the intervention of diverse state authorities (Jiang et al. 2015). The European Union has its Raw Materials Alliance (https://erma.eu) that was formed in September 2020. But it does not have the legal basis to develop a regulatory framework. Still, the crisis brought about through Russia’s war on Ukraine has motivated the EU leadership to expedite specific policies not only for securing minerals to its members but also for preparing the way towards global minerals and metals governance (Christmann 2021). “Green Deals”: U.S. climate policy and the European Union’s green taxonomy The idea of a Green New Deal for the U.S. aroused heated debates in the electoral campaigns of 2020 but then the discussions ebbed down. What the U.S. Administration has basically installed is a set of legal devices that produce a substantial “green” achievement: Together with the Build Back Better Act, the Inflation Reduction Act and heavy support for carbon-neutral investments will contribute to drastically reducing greenhouse gas emissions by 2050. This will promote technological change in manufacturing and in the provision of energy. The green bargain between the government and the respective industries, with reciprocity at its core (i.e., as commentators point out, “linking carrots to sticks”), represents a crucial innovation in climate policy: It links subsidies and similar financial supports with tailored requirements, which should incentivize innovation and discipline the industry to perform, while blocking firms from access to funds if they underperform (Meckling and Strecker 2022). On the political end, i.e., with a view to reaction from voters, this way of policymaking avoided the argumentations in favor or not of a carbon tax. It made the notion of subsidies sound much more positive, because, other than making things more expensive by levying a tax, the government makes things cheaper for the consumer/the industry. And the jobs created from battery and solar panel manufacturing, or installation, are visible to all. The opinion page of the New York Times read: “Biden’s energy policy went virtually unnoticed. Great!” (Krugman 2022). One other part of this policy was to save communities from flooding by relocating them to higher ground. Three native tribes received 75 million US$ to help them move away from

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coastal areas or rivers, and eight more got 5 million US$ each (Flavelle 2022).72 Altogether, in terms of its ambitions, commentators view the Biden plan as the biggest shift in public goods since the New Deal and since the mid-1960s. But they call for careful monitoring on the local level to ensure that the details are handled in a way which redounds to the public and not just to private equity investors (Titolo 2023). The European Union has also combined “building back better” with climate policy by coupling its Recovery and Resilience Plan with its Green Deal, totaling 1.8 trillion € altogether. But it created a quite difficult entanglement by demanding that all crisis policy measures must be measured by their effect on environmental outcomes (Sikora 2021). For this, the EU leans on its “green taxonomy”. The EU’s green taxonomy, though, when it first came up as a part of the EU Sustainable Finance Action Plan, merely sought to promote sustainable investment across the 27-nation bloc. Applying that taxonomy to recovery and resilience projects seems very unpractical. It subjects a total of 1.8 trillion € in investments, subsidies, reduction of levies, etc., to the environmental outcomes criterion. For some industries, this is not viable at all. The tourist industry, for example, has been severely impacted by the pandemic. But there has been a trend to sustainable tourism before the pandemic: Hotels, transport, and other offers already follow the imperative of sustainability. They could not elevate new investments to a higher sustainability level. Another case is social infrastructure: Increasing the wages for health-workers cannot be related to any environmental impact. So, no “carrots” here. In their place: bureaucratic obstacles. There are several interdisciplinary recommendations that suggest a different treatment, like weighing the externalities of those recovery investments (Bardy and Rubens 2022). As this book goes to print, the EU’s Recovery and Resilience Task Force which oversees the investment promotion policy, has started a process of endorsing the national plans. The strict requirement of “green” projects seems to have weakened as the plans also entail social undertakings (without any reference to an environmental effect), like, e.g., Malta with its digital preparedness and social resilience plan.73 Austerity measures in the United Kingdom Austerity measures and fiscal consolidation through cuts of cash benefits and reductions in public payouts are widely perceived to have an impact on income distribution and equality, with the poor losing more than the rich. However, countries like Greece and the United Kingdom, where the measures were accompanied by reform programs following

 This proactive motion contrasts with the year-long delay of flood protection by German authorities in the Ahrtal region. And when 174 people were killed by a massive deluge in June 2021, one official reaction was to blame climate change and not the utter negligence in flood protection (Ionita and Nagavciuc 2021).  https://commission.europa.eu/about-european-commission/departments-and-executive-agencies/re covery-and-resilience-task-force_en.

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the 2007/8 financial crisis, experienced a different outcome. Among others, they adopted decentralization strategies which strengthened local authorities (Callan et al. 2011). Local authorities know much better than the central state how to compensate reductions in the provision of one public good by stepping up another. And urban institutions that provide public services represent the public interest and simultaneously seek efficiency, which may be called a ‘combination of practical and economic rationality’ (McEldowney 2016). The positive outcome, reported by the National Audit Office (http://www.nao.org.uk), became especially evident in public housing, waste management, electricity provision and public transport services. After the United Kingdom left the European Union, the consequences of Brexit, the COVID-19 pandemic, and, later, the Russian war against Ukraine, caused economic efficiency to go down sharply, and the government that came into office in October 2022 had no other choice than to resort to austerity measures once more. Its ‘doom-andgloom-budget’ burdens the citizens with a painful ordeal of tax increases and spending cuts. But it soothed the financial markets, which substantially reduced the extra borrowing costs that the government had been forced to pay because investors no longer trusted it. While the government’s hope was that recovery would begin in 2023, the public reacted with a series of strikes that threatened to halt all economic and social activities. The government originally projected a 7% decline in household income over the next two years, but it then announced that the plan to rebuild the public sector will soften this figure. The plan to restore the public sector would again strengthen the local provision of public goods, to which the trade unions agreed because it would also strengthen their local base. A positive outcome would give proof once more that public goods policies need collaborative decision-making (Lander and Castle 2022). Labor market policies in Europe When the 2008/2009 recession brought a harmful impact on young people, mainly in the South of Europe, this led to a wave of labor market reforms. One objective was to reduce or eliminate segmentation which had produced a divide between permanent jobs – the upper tier of the market – and temporary jobs – the lower tier. Segmentation is robustized by barriers to competition that serve vested interests of power groups like trade unions and professional associations. While these groups protect employment of their members and secure superior benefits, jobseekers are left out. The upper tier workers (i.e., the permanent ones) tend to align themselves with their employers, and, hence, two-tier reforms that treat permanent and temporary separately, have proven to be more successful because they minimize opposition (Lucifora and Moriconi 2012). Many of the reforms have improved protection for non-permanent employees by setting strictions on fixed-term contracts and against early dismissal. In some countries, unemployment benefits and coverage were stepped up for this tier also. This was helpful, but nowhere have the reforms produced a noticeable reduction in labor market segmentation. For the employers, though, the reforms produced advantages in some cases: In France, workers who do not accept collectively

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agreed wage and working-time adjustments in economic crises can now be dismissed. In the Netherlands, the 2015 Work and Security Act introduced a streamlined formula for severance pay, which will considerably reduce the amount in some cases (Eichhorst et al. 2017). When considering how delicately labor reacts on all policy impacts, the accomplishments achieved by the reforms may appear well balanced: there was no labor unrest. There is another aspect of labor market policies: Labor market outcomes are, in part, dependent on educational systems. A study that was conducted in the late 1980s has found that with a standardized educational system (where educational standards are equal nationwide), job changes occur less frequently than with a stratified system (where the standards are selected within the school systems). The study also showed that in the US (with a stratified system) a high-school certificate is not significant for the prediction of occupational status, while in Germany a high-school certificate (which gives equal entry rights to all students) significantly increases status attainment in the first job. Another result was that half of all German employees complete the final job match within two years of entry into the labor market; in the United States, it takes twice as long (Allmendinger 1989). One might say that this has constituted a competitive advantage for Germany. So, did the recession of the early 2000s affect Germany less that the US? And what was the impact of the labor market reforms? A statistic from Eurostat (2015) for the years from 1985 to 2014 reveals that the share of German young workers (aged 19–24 years) with temporary employment contracts rose from 22% of all young workers employed to 40% until 2008 and has remained at this level. Hence, no, there seems to have been no positive impact on short-term employment from the reforms. After 2008, the situation has worsened due to the influx of immigrants and their integration into the labor market, and through the short-term worker programs that were created to avoid lay-offs of workers in the COVID-19 crisis. But policymakers, in Germany and in the EU, have worked on improvements. The idea was to combine major reforms in the factors which drive innovation (including higher education and public research), with major changes in employment protection laws and in social security (Eichhorst and Rinne 2020). With all these positives, there is an outstanding negative as well which is the serious malaise in the French labor market. Whether rooted in situational factors (an overall lack of mobility, unsatisfactory working conditions, insecure jobs) or in the incontrollable power of the trade unions (Tirole 2017, pp. 233 ff.), employment rates for the young (29% for ages between fifteen and twenty-four) and for the older (46% for ages between fiftyfive and sixty-four) are considerably lower than, e.g., in the Netherlands (62% and 70%, respectively) and in Germany (47% and 58%).74 The French government’s attempt to improve labor market conditions by raising the pension age from 62 to 64 was met with fierce resistance by the trade unions with strikes affecting refineries, bin collections, rail transport, air travel and schools. The government’s stance was firm; it only offered dia-

 Figures are for 2015.

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logues with unions on other labor issues (Chrisafis 2023). Both parties seem to be unaware of the damage this causes to all categories of public goods in the country. Privacy protection and policies in the European Union Privacy protection in the EU is ruled by the General Data Protection Regulation which became enforceable in May 2018. Other than an EU directive which has to be transferred into national law by each member state, a regulation is directly binding and applicable, but it still provides flexibility for certain aspects to be adjusted by individual member states.75 In total, the EU members have used this flexibility in a way that balances the juxtaposition of all public goods. The exception is Germany which has applied the regulation in a strict coercive format and in an interpretation which consistently regards privacy rights as stronger than other values of the common good, like public health, security, and proper use of public funds, etc.76 In health, individual data on patients cannot be shared for research purposes without the consent of the patient – which, however, can be given for one specifically named single purpose only; public security is endangered because police data cannot be transferred between state agencies without the consent of a judge; abuse of public funds is made easy for criminals because government offices which pay out benefits in cash in one province are not allowed to share this with offices elsewhere. The consequences of ranking data privacy so high can be disastrous: It took eighteen months to launch a 100 m € project of expanding the Heidelberg Cancer Research Center to an outside location because privacy experts struggled to come to terms with how to interchange of health data of individuals (https://www.dkfz.de/en/index.html). There is a sharp contrast in this to Chinese thinking: While the German concept is to protect health data of individuals, the Chinese use individual date to protect public health and they have sacrificed economic growth for that even though some of the methods may seem questionable (Chen and Chen 2022). The right to privacy is regarded to have its ideological and legal base in an 1890 (!) article written by U.S. Supreme Court Justice Louis Dembitz Brandeis and Boston attorney Samuel Warren: “The Right to Privacy” (Brandeis and Warren 1890). The motive was to chastise the journalists of the time for prying into people’s private lives and to plea for imposing liability in tort for invasions of privacy. U.S. law of today recognizes four types of torts against privacy which are (1) “unreasonable intrusion upon the seclusion of another,” (2) “appropriation of the other’s name or likeness,” (3)  See: http://data.consilium.europa.eu/doc/document/ST–9565–2015–INIT/en/pdf.  A similar policy is to be worried about when the new data regulations of the European Union come into force. Businesses will have to get prepared for navigating the digital landscape: There are five acts, The Data Governance Act on managing data and data sharing, The Digital Markets Act on competitiveness in the digital sector, The Digital Services Act on user rights, The Data Act on cloud providers and access to data in B2B, B2C, as well as in B2G (business-to-government) relationships, and The AI Act on (high-risk) AI systems. The question is how their implementation will affect freedom rights (Mikkelsen et al. 2023).

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“unreasonable publicity given to the other’s private life,” and (4) “publicity that unreasonably places the other in a false light before the public” (Bratman 2002, p. 624). Privacy protection issues have changed since then, like the needs of society have changed. But there is a link which is the element of respect for social life, as per the mentioning of ‘publicity’ and ‘public’. However, there is no mentioning of an “autonomous private self” (Lindroos-Hovinheimo 2021), nor of a ‘private sphere’. The attention to private and public spheres was raised by German philosophers Jürgen Habermas, Hannah Arendt and others who founded the Frankfurt School of Philosophy. They argued that capitalism and mass society are characterized by decreasing autonomy and freedom (limiting the private self), along with greater alienation and conformity (Hansson 2008). It can be assumed that the philosophical foundation of the autonomous self is the background to how the German privacy protectors interpretate and apply the European regulation. The paradox is that this ideology contradicts court rulings throughout Europe, and particularly in Germany, which rank individualistic benefit lower than collectivistic benefit. However, that does not seem to affect the German privacy protection agencies (there are public agents on the federal, the state and the municipal levels and in universities and research centers). Or is the German predilection for bureaucracy to be blamed for this mismatch? The German privacy protectors’ latest threat was to limit the availability of Microsoft Office 365, and the conference-ware Microsoft Teams: Microsoft announced that it will provide the products cloud-based only – from which the privacy protection agents assume that data may spill over from one user to the other. The firm has assured that this possibility does not exist, and that the product complies with the EU regulation. Nevertheless, the state of Baden-Württemberg in Germany’s South prohibited the use of Microsoft 365 and Microsoft Teams in public schools, even when they were in high demand for remote learning during the COVID-19 pandemic (Budras 2022). The effect was that another public good, education, was de-ranked. There are no advocates on its side – Microsoft, though, was able to defend its business model in the European Court. Earlier, and similar to the state of Baden-Württemberg, the data protection authority of the state of Hessen temporarily ordered that Hessian schools not use Microsoft Office 365. This decision followed an announcement from Microsoft about data storage: The firm would not ensure that data were stored on the German cloud only and that they would use the US cloud as well. The data protection authority found that there is a risk in allowing US authorities “to access European children’s data without appropriate guarantees” (Celeste and Fabbrini, 2020 p. 52). The Hessian ban was lifted a month later after an intense dialogue with Microsoft. It takes a short step from prohibiting the use of freely available computer software to limiting freedom of speech. The nexus lies with the usage of social networks. There always is a tension between the benefits they provide for free speech and the negative impact they have on user privacy. So, in a strict sense, limiting the access to social networks by inhibiting its software is equal to limiting free speech. Again, we have two public goods that need to be balanced (free speech and privacy). In view of

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the wide-spread use of social networks and despite the many scandals that have occurred, there seem to be no clear solutions to this – the standard answer is: ‘parental discretion advised’. Another issue is freedom of speech at educational institutions: It is claimed for students everywhere, but increasingly negated to educators in many places. With this comes misuse of the right to demonstrate under the guarantees of free speech, which has been growing with so-called “activist” movements. Both have impacts on society that can be highly destructive. Freedom of speech at educational institutions, whether for students or for educators, is an important public good. When it is limited, education and research will lose their effectiveness. A notorious case in point is Hungary, where the government, among other limitations, has banned gender-related lecturing from all schools and prevented the set-up of the ‘Central European University’ founded by the HungarianAmerican billionaire George Soros (Rónay 2018). The European Union has not come to terms with this blunt infringement of EU fundamental rights by its member state. While the European Court ruled in June 2020 that the respective amendment of the Higher Education Law represented unjustified restrictions, the Hungarian government refused to make any changes. It argues that by the EU Charter, education is a member states’ competence (Zaccagnino 2020). The Hungarian case is by far the most problematic one, and on a large scale. But there are many instances in European universities where the freedom to express one’s opinion is limited in a very subtle but nevertheless shrewd manner, or even violently crushed outright. The subtle alternative can be played by various instruments. One instrument is withholding campus facilities for a discussion that is against mainstream, another is denying research funds; the violent alternative is by giving in to student activists (from woke77 movements), or to self-appointed censors who oppose what they call neoliberalism or colonialist attitudes or white supremacy thinking. Whether from this side or from ideological bias in the professional bodies, even the field of mathematics has become embattled. Mathematics has been criticized for its academic elitism, for marginalizing women and minorities, for being based on a patriarchal structure and a male-centered epistemology. And mathematics is said to have served as the gatekeeper to numerous other areas of study because schools rely on numerical rankings to filter out students who are unable to fulfill program pre-requisites (Sriraman et al. 2010, Riegle and King 2010). This criticism has now entered the scenario of the woke who blame mathematics to be Euro-centric, racist and bound for suprematism, and it seems that academic lecturing will be regulated by norms which abide by that criticism: The British Quality Assurance Agency has set new standards for teaching mathematics, statistics and organizational research in 2021, and the German Research Foundation has issued  The term “woke” came to the American vocabulary after the 2014 death of Michael Brown in Ferguson, Missouri, and it first carried the idea of being fully aware of systemic racism in America. The term was taken over by protesters of all denominations. The “woke have been enlightened to understand the only politically progressive truth about society” (Dahlen 2021).

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new diversity standards in 2022 to “take greater account of differences between researchers in the Foundation’s funding activities” (http://dfg.de/en). Censoring is in the frontline, and critics are upset: They call it “The Death of Culture and Creativity” (Thomas 2022). Add to this what occurred in Cambridge, UK, when Irish journalist and executive editor at The Economist Helen Joyce was due to appear in a panel to discuss her book “Trans: When Ideology Meets Reality” which critically analyzes transgender activism based on complex statistics, legal statutes, and other evidence. She was disinvited by the rector who sent a note to the students that she will boycott the event and commenced a smear campaign against the author (Woolcock 2022).78 When university personnel do not protect freedom of speech on all sides of the lectern,79 favors one party above the other and ranks quality of education and research lower than membership to a group, all society (not just the scientific community) is in demise. A parallel is politicians who look the other way when activists deny open dialogues with parties that dissent, or when members of the extremist group “Last Generation” attack public goods to raise awareness on what they think are government neglects in fighting climate change. Yet looking the other way was obviously not enough for the German Federal Minister for the Environment, Nature Conservation, Nuclear Safety, and Consumer Protection, Ms. Steffi Lemke, a member of the Green party: Her comment on the roadblocks performed by the activists who glue themselves to streets (in 2022, the group performed 276 road blockades), was that “this serves a good cause” (Theurer 2022). An attitude like this creates hateful environments, erases cohesion among societal groups and discredits the efforts of all factions in the private sector to find common terms with state authorities on how to best secure public goods. It may seem that in the eyes of such politicians, civil society organizations, trade unions, businesses, and individual professionals have less weight than activists. But even if some political groups (not just “activists”) may have reservations against public-private partnerships (see section 3.6), decisions by the government to pursue this type of collective action must not be jeopardized by one single cabinet member and her/his associates. The examples which were presented here of public policies on public goods reveal that their acceptance on all levels depends on an approach that is not partial or

 Interestingly, Cambridge University alumni started to pull funding from their college to express protest against the activity of the rector (Sommerville 2022).  There are governmental initiatives on the issue – not in Europe, but in Canada. The Ontario Ministry of Training, Colleges and Universities requested that publicly assisted colleges and universities develop and publicly post speech policies by 1 January, 2019. It expressly refers to “faculty, students, staff, management and guests” (http://news.ontario.ca/opo/en/2018/08/ontario–protects–free–speech– on–campuses.html). There is no government request in the U.S., but many schools refer to the University of Chicago Principles on Free Expression. They demand “free, robust, and uninhibited debate and deliberation” for all members of the university community (http://provost.uchicago.edu/sites/default/ files/documents/reports/ FOECommitteeReport.pdf). So far, on the other side of the Atlantic, it seems that protection is meant for students only. Otherwise, the Anti-Radicalisation Law that was introduced in the UK in 2015 (HM Government, 2015) would have stopped cases like that of Helen Joyce.

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that ranks one public good too far above the others. A holistic approach is needed here. The same goes for implementing the decisions on policies: They need to be embedded in a framework that balances the diverse interest of those who make them and those who are affected.

4.4 Frameworks for managing collective efforts 4.4.1 Legal requisites Whether it is the state on its own, or the private sector, or a public-private effort which provide a public service: It is the outcome of the service that counts, and this outcome is publicly owned. Therefore, any legal framework for a collective effort, e.g., a publicprivate partnership (PPP), must first consider the objective, then the question how to measure output and outcome and, lastly, how to proceed if the desired results are not obtained. This is why, from a pure legalistic view, a PPP often is compared to a contract into which a public body enters. A contract is a set of terms with which to regulate the provision of services by the private sector and secure the funds provided by both partners. But a PPP is more: It is a compound system of relationships, and like any long term-relationship there is more than just reciprocal obligations. Beyond the contract between the two partners, the partners also have a contractual obligation to the beneficiaries of the public good. In the case of an educational institution this would be the students, the parents, and the teachers. In a PPP there is constant interaction, a sense of community. Neither the two parties nor the beneficiaries can maximize their own interest; they certainly need to ensure that their interests are satisfied, but they must adopt an “ethic of care for the interests of all others” (Marique 2014, p. 259). An example of a framework with recommendations on PPP structuring and governance is the European Commission’s Green Paper “On Public-Private Partnerships and Community Law on Public Contracts and Concessions” issued in April 2004. This was followed by an EU Public Procurement Directive which member states were requested to transpose into national law by 31 January 2006. Most of them, like Germany, did not issue a specific legislation but, instead, altered existing laws, which did not really fulfill the aim of the Green Paper which was “was to facilitate the development of PPPs under conditions of effective competition and legal clarity” (Rosell and Saz-Carranza 2020). Anyhow, the Commission did not pursue its original idea of specifying modalities for PPPs; in view of the broad variety both in PPP application and in the member states’ tradition of public contracting, there had been significant opposition to such a regulatory regime (Calleja 2010). A concept that finds more approval is issuing regulation or providing statutory guidance on a state- or local level. This concept has been deployed in the UK. The rationale is that a local public authority, e.g., a municipality, when entering into a PPP, should have the power to set rules that apply

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to ventures of this type. With this comes the question of which autonomy exists on a local level as opposed to that of a central government. In the United Kingdom, the scope of legal powers granted to local governments and the provision of financial means by the upper authorities have changed over time: Between 1990 and 2010, legal powers of local authorities have been extended, but finances and organization have not followed suit. This has undermined local autonomy in general and for PPPs in particular (Badcoe 1999). So, in 2011, an update to the regulation80 for the format of financing PPPs was launched by the UK Treasury, the “Private Finance Initiative 2 (PF2)”. It rules that in all PPPs, a private finance company – a Special Purpose Vehicle (SPV) – be set up which borrows funds to construct a new asset such as a school, hospital, or road. The taxpayer then makes payments over the contract term (typically 25 to 30 years), which cover debt repayment, and, in some cases, costs of finance, maintenance and any other services as well. The UK Department of Health and Social Care and the Department for Education have used this format, and by 2018, there were 700 deals, with a capital value of around 60 bn £ and annual charges of about 10 bn £ in 2016–17 (National Audit Office 2018). The British PF2 format is the classic case of a “Build, Own, Operate, Transfer” model of PPPs (see section 3.6.1. above). As repayment from the taxpayers is widely guaranteed, the model is attractive to private investors. However, the government will not spend tax money without guarantees either: Apart from regulating finance, PPP contracts must spell out which risks are to be borne by the parties.

4.4.2 Risk sharing Long-term contracts have a high likelihood of unforeseeable circumstances which bear risks. Not all of these can be listed in a risk sharing agreement, and in a PPP, like in long-term procurement where no partnership is established, the parties must mutually trust the capacities of each other. But risk allocation in PPPs is different: The public partner wishes to obtain a reasonably risk-free long-term service and will not cover asset-based risks if the service is not delivered to the specified standards (like, in a road project, deterioration from excessive use even though the time of use exceeds what was stipulated in the contract). Decisions on issues like this must be made before concluding the contract, and ways must be found on how to distribute the remaining risks and between the parties. The format of transferring a risk, in general, is that the party who will bear it gets an incentive to manage the risk effectively. There is value for money in this, and the public partner will have to determine which risks

 The old regulation, PFI, dates from 1992. It was launched as an initiative of the Conservative Party by Prime Minister John Major, but the Labor government of Tony Blair supported the move and expanded it considerably.

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it should take back. The criterion will be whether there are risks which it can more efficiently manage by itself. This is exhibited in Table 10 which is an excerpt from a risk matrix set in a comprehensive work on PPPs by Australian researchers Grimsey and Lewis (2007) and which shows which risks are mostly taken by the public party in infrastructure projects. Table 10: Risk sharing in public-private infrastructure projects. Site risks: Pre–existing liability on site Land titles from cultural heritage Revenue risks: Changes in taxes and tariffs are commonly shared between the parties Decrease in demand for output is commonly shared between the parties Financial risks: Interest rates, inflation are commonly shared between the parties Force measure risks: Impact of floods earthquakes riots strikes are commonly shared between the parties Regulatory/political risks: Changes in law to be compensated by government as per contract Political interference, cancelation of license Asset risks Residual transfer value The risks which are not listed remain with the contractor: Construction risks and operating risks remain with the contractor except for delays and changes in specifications by the government that occur during construction and operation. Source: Adapted from Grimsey and Lewis 2007, p. 182.

Many projects on road and railway construction have followed this type of risk sharing, e.g., the 270 km Lyon-Turin high-speed railway connection, a megaproject involving funds from the EU, France, Italy, and a construction consortium including the national railway companies SNCF Réseau and Rete Ferroviaria, and which is about to be completed in 2030. The initiator was France which has a long-established tradition of public private cooperation especially in sectors such as toll-roads water, where PPPs are widely accepted. The acceptance by society may be the reason why the process of the project was not conflictual in France, while construction was delayed in Italy for several years through construction stoppage brought about by civil society groups in the Susa Valley (Esposito et al. 2023). It seems that this risk was not contemplated early enough, and that public consultation before starting the project was incomplete.

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4.4.3 Public consultation Private entities partaking in public goods provision will face a demand from all other stakeholders and from the general public on full transparency and deep disclosure. Citizens will often suspect that the benefits businesses obtain from the venture will excessively outweigh their cost. This is one reason why public consultation should be held before launching a PPP. The public partner must also consider the accountabilities towards the electorate. At the core of PPP projects there always is a complex web of relationships among government officials, politicians, media, the general public, very often beyond the local, and special interest groups. This socio-political context requires that public consultation is fully integrated into the planning process. If all stakeholders are invited to public hearing before a PPP is built, acceptance will be a given. For instance, the Victorian Department of Treasury and Finance in Australiawhich annually procures over 1.8 billion US$ of public infrastructure, holds civic dialogues regularly (Ng and Loosemore 2007). It was found that, irrespective of any ideological preferences that governments of the day may promote, such dialogues can satisfy the high expectations which interest groups invariably have in relation to the management of projects in the environment, health and safety, etc. Any infrastructure project lives or dies on its reputation with these groups (Sharpe 2004). The critics of PPPs who claim that they represent the public overlook that it was the public, the people, who were the driving force of transformation towards more efficiency in service delivery. The state responded – otherwise, wellbeing in the Western world would not have risen as it did in the last decades. But when the public feels marginalized, uncontrollable repercussions may arise. Even in China PPP projects failed because of heavy protests of the locals (Shan et al. 2011). Examples of more such cases are given in Rwelamila et al. (2015) who call public consultation the “missing link in PPP projects”. But who exactly are to be consulted? Is it the taxpayers who ultimately pay for a project when, e.g., it is in the format of ‘Build-Own-OperateTransfer’? There are others who also benefit from the project and would be affected if the project fails, like travelers from abroad, foreign missions, associations that are tax–exempt (which is the case for most CSOs. Or is it only the users of a facility financed by a PPP? In any case, it is more than just the immediate stakeholders, and careful selection for the consultation dialogues is needed. Exclusion for the reason of commercial confidentiality may become rampant (Yuan et al. 2012). Extensive public consultation and stakeholder engagement has been shown to be the most critical element in strategies for PPP implementation as per an extensive survey conducted in developed and developing countries by Osei-Kyei et al. (2018). The other elements are: – existence of well-structured and clear policy guidelines by the public partner, – thorough assessment of value for money, innovation, cost, and risks, – employment of highly skilled and competent staff during evaluations, – competitive, fair, and transparent tendering processes,

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comprehensive evaluation of the impact on sector/national policy, adequate protection of intellectual property rights of partnering firms.

These findings are for infrastructure projects on the local/regional level. But they can be transferred to other areas. E.g., in education, if consultation is limited to parents groups without identifying the needs of various civil communities and the business sector, PPPs may fail (Srivastava 2010). If innovations, particularly those that are initiated from outside the education system, are introduced into educational PPPs without adequate consultation with key personnel, implementation will go wrong. Without transparent decision-making, the PPP cannot be sustained over time. Walk-aways can only be avoided by clearly defining the desired outcomes and to what the partners need to be committed (Robertson and Verger 2012). There are examples from the global level where wide-spread consultation is the main requisite before making decisions, e.g., on health projects. For instance, The Global Fund to Fight AIDS, Tuberculosis and Malaria (https://www.theglobalfund.org), an international financing institution that organizes in-country programs to prevent and treat HIV/AIDS, tuberculosis, and malaria, is designed as an open council. The fund works as a permanent intergovernmental-private arrangement which formally incorporates non-state actors as equal players in its membership and core governance structures. Apart from the Foundation Board, the Secretariat and the Technical Review Panel, there is a Partnership Forum which prepares all decisions. The composition of the Forum reaches beyond states to include donor representatives, multilateral development cooperation agencies, civil society, NGO and community-based organizations, technical and research agencies, and the business sector. Their consultation work ensures that each PPP project is responsive to the interests of the affected constituencies (Aziz 2009).

4.4.4 State participation in commons Commons, by principle, are not designed to incorporate state actors because their main characteristic is self-organization by an independent community. This would exclude interventions by market and state actors. However, when it comes to specific situations, the actors of the commons may decide to have the state participate in financing a public good and in controlling processes related to the quantity and quality of its provision while the provision itself is executed by others (Capelari et al. 2017). One example is water governance in the Western U.S. which has served as a case in point for commons protagonists Vincent and Elinor Ostrom. There, several state and federal agencies engage in water use and control while it is other actors that are involved in the resource appropriation, use and distribution (Ostrom 1972). Water is the object of another example, too. This is about treatment of effluents. Here, the state actor is not controlling the issue, but it is one partner in the commons

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that uses the service. The scheme that is most widely used is a communal water treatment plant. Everyone who is allowed to dump polluted water into it is an authorized user. The operator of the plant is a lead-partner in the commons. The proprietary and the claimant functions must be negotiated between the authorized users. German chemical giant BASF has been operating one such installation since 1975 with the city of Ludwigshafen, and it opened another a few years later with the participation of several other firms and municipalities. All participants have established the appropriate format of governing the resource in a joint commitment (Wilken 2006). With water, again, there is one more case to be presented, which is agricultural drainage in the Western Lake Erie Basin (WLEB) region of Ohio. This has a history going back to 1841 when the state, unlike anywhere else in the U.S., established agreements on agricultural drainage. County-offices and landowners organized, designed, and built the WLEB drainage projects. These mechanisms worked well for a long time before new systems were developed in the 2000s (Nolte 1981). The new systems provide coverage to over 7.4 million acres of cropland in Ohio with a water governance format where landowners agree to provide drainage facilities and improvements. The cost is then financed and maintained via assessments on the benefitting landowners levied by the county commissions (Mecklenburg and Fay 2011). There are other large-scale cases, like forests in India, the rainforest in Brazil or coastal fisheries, where there may be important roles for the state. With a well working government, and with clear cut definitions of responsibility, state monitoring and participative organizations can be reconciled, and a status of accountable autonomy can be preserved (Fung 2004). On the global level, the monitoring function would have to be entrusted to some intergovernmental entity which legitimates powers of coercion including the right to impose a solution if the other parties cannot come to a negotiated agreement. For this, an arena for negotiating must be created, which would also enable sanctioning when parties do not comply with the communal commitments (Mansbridge 2014).

4.4.5 Mirroring viewpoints of practitioners on PPP management with theory Managing PPPs requires flexibility and recognition of the other partners’ interests. Also, there are behavioral aspects and aspects that reflect owners’ positions. When practitioners are asked on the governance of PPPs, they rather consider the question of managerial freedom. This comes out from a survey conducted by scholars from Erasmus University, Rotterdam, Copenhagen Business School and the University of Toronto. The survey included 119 public and private professionals in Canada, the Netherlands and Denmark (Warsen et al. 2020). Canada is considered a global leader in using PPPs, followed by the Netherlands, while Denmark is a slow mover. Even though experience, country, and culture have an influence on the practitioners’ viewpoints, there is unanimity among the respondents that PPP governance can sway be-

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tween two sets of extremes: One is collaboration opposed to control, the other is managerial freedom opposed to restrictions in management. The Canadian respondents exhibited that in their country the public partner usually enforces control, and the private partner must deliver according to performance indicators but has little room to make own decisions. This might be explained by the government’s fear that if it does not show that it is in control, it will not meet the public’s expectations. The Dutch respondents reported that there is horizontal collaboration between the partners and no strict control but the room for the private partner to make its own decisions is limited, nevertheless. In Denmark, the private partners get more room to make their own decisions and manage the project and the public partner’s role is more of an enabler (Warsen et al. 2019, p. 134). Even though the survey presented above is a three-country study, the international character of the PPP phenomenon suggests that to a certain degree similar perspectives can be found in all countries. There are only slight differences in the discourse on PPPs from country to country. Also, everywhere, beyond the issues of managerial freedom, PPP managers are confronted with questions like these: How do we approach situations where the partners are different in their normative beliefs or the perception of a problem or its solutions? What if orientations are highly competitive or downright hostile? Situations of this kind are a field of studies at the Max Planck Institute for the Study of Societies in Cologne, Germany. The institute has developed a typology of problem situations (see: Mayntz 2009). The sequence of arguments is the following (Mayntz 2009, pp. 74–75): The chances of cooperative problem solutions will depend on depicting the problem generation (who causes a given problem by what kind of behavior), problem impact (who suffers what kind of negative effects) and problem solution (who engages in what kind of coping behavior). The genetic, the impact, and the coping structures are linked in a causal way. Initially, there is a group of actors in pursuit of their individual interests, e.g., to consume as much as possible of a scarce resource. This structure of interests motivates behavior or actions, and these give rise to a problem, e.g., that a desired public good becomes unavailable, or a scarce resource is depleted, i.e., a public good is destroyed. The impact of the problem creates a new interest structure, as the actors perceive the need to arrive at a problem solution – e.g., to stop the erosion of the resource. The efforts to cope with the situation will be shaped by cost-benefit considerations; however, in many cases it is just the coping that is considered and not how coping, problem generation and impact are interrelated: Where has the problem arisen and who is affected determines how a solution is found and what it will look like. Depletion of a public resource is a problem case for which the genetic, the impact, and coping structures typically include the same group of actors, and their interests relate to the same issue.

Solutions to these conditions can be provided when contemplating that the involvement of private business in public goods provision will, of necessity, affect property rights. When a business devotes its capital to a common cause, it abandons a piece of property. In return, the owner of that capital wants to get a share of the common benefit. The private party engaging in the provision of a public good extends some type of

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property right to it. There is a bundle of rights related to property. Five categories are discerned: access, withdrawal, management, alienation, and exclusion as per Table 11: Table 11: Bundles of property rights. Property right

Description

Access (P)

The right to enter a defined physical property

Withdrawal (P)

The right to obtain the “products” of a resource

Bundles of property rights

Authorized user (P + P)

Management (P) The right to Claimant (P + P + P) regulate internal use patterns and to transform the resource by making improvements Exclusion (P)

The right to determine who will have an access right, and to how that right may be transferred

Proprietor (P + P + P + P)

Alienation (P)

The right to sell or lease the right of management, exclusion, or both

Owner (P+P+P+P+P)

Source: Ranjan and Koontz 2018, p. 64.

The water treatment and agricultural drainage cases exhibited in section 4.4.4. can exemplify the categorization of properties very well: all five categories of Table 11 assign particular roles to the parties of these commons. Elinor Ostrom who also conceptualized the bundling of property rights admonishes that a common venture will only work if the composite rights by which it is governed, and their boundaries are specified before any such venture is started (Schlager and Ostrom 1992). She also constructed a clear-cut regime for effectively managing public goods provision through communal efforts (see Ostrom 1993; Cox, Arnold and Tomás 2010). Comparing her list of conditions to the wastewater treatment and agricultural drainage cases gives evidence of its remarkable practicality. These are the elements of the list (Ostrom 1993, p. 2):

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3. 4. 5. 6. 7.

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Clearly Defined Boundaries: Rights to withdraw from the common venture are separated from running the common venture. Congruence between Appropriation and Provision Rules and Local Conditions: Restricting time, place, technology, and/or quantity of access to the common venture need to correspond to local conditions regarding requiring labor, material, and/or money. Collective Choice Arrangements: All members, or at least those who are elected for the job, can participate in modifying operational rules. Monitoring: Conditions need to be actively audited through persons/institutions who are accountable to the appropriators. Graduated Sanctions: Appropriators who violate operational rules are likely to receive graduated sanctions. Conflict Resolution Mechanisms: All need to have access to low-cost, local arenas for resolving conflict. Minimal Recognition of Rights to Organize: Appropriators must be allowed to devise their own institutions without interference from external governmental authorities. Nested Enterprises: In a larger system, smaller-scale resource regimes should be linked in multiple layers to form larger entities of governance.

This list points to the institutional success factors of PPPs. There are managerial success factors as well, of which the foremost are relationship management (Zou et al. 2014) and procedural effectiveness. Not surprisingly, well-structured payment mechanisms were named as the most important factor of effectiveness in an international questionnaire survey on PPP success. The survey was conducted with purposively sampled PPP experts from the private, public, and academic sectors (Osei-Kyei and Chan 2017). The private parties to the PPP need clear terms on cashflows for facilitating effective service operations and to recover investment cost, and the public parties must have exact positions on which to place their budgets. Following in the survey’s ranking were well-structured legal dispute resolution mechanisms and effective operational risk management and. If we go beyond managing procedures, what also is required, in general, are data, because decisions can only be made properly with a numeric or monetary database.

4.5 The database This section will first ask what ‘value’ is in regards to a public good, then it covers the topic of monetary and non-monetary value indicators for tangible and intangible public goods and, at the end of the section a brief overview will be given on public goods in public statistics.

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4.5.1 Which value for which goods? “Value” always comprises several related concepts. One is ‘intrinsic value’ or the ‘value in their own right’ for all natural and social resources. The term was first used by the English painter, writer, philosopher and art critic John Ruskin (1819–1900) in his book The Maintenance of Life (1860). He defines intrinsic value as the absolute power of a good to support life, a power that requests respect (Griffiths and Lucas 2016, p. 146). The meaning of intrinsic value (and of value in general) has become the subject of deep-founded philosophical discussions which mostly relate to wellbeing (see, e.g., Vilkka 2021, McShane 2007). “Intrinsic” can be brought down to such simple terms as ‘An apple has value if it is tasty and good looking’ or ‘A knife has value if it is sharp’ – they are sought for their own sake, they have an ends value (Vilkka 2021, p. 11). This can be transferred to natural environments like rivers and forests and to social resources like cohesion in a family or a community. Then there are means values. Means are sought for to achieve ends. So, if health is an end value, good nutrition, securing of proper rest and avoiding toxic substances become means to that end. From there, the second connotation of value comes up: What is it that a good (a public good) contributes to the welfare of a society compared to what other goods contribute – the ‘instrumental value’. Policy makers employ this value concept. They base it on preferences because many types of resources that provide welfare do not have a value that can be determined by a price as they are not traded in markets. But nonmarketable resources can also have an ‘economic value’, i.e., a monetary value. Examples of non-market goods are natural resources such as clean air, and environmental services such as flood prevention and water filtration). But they can be allocated to productive processes, and for assigning an economic value to these inputs, they need to be expressed in monetary terms. Assigning monetary values to environmental resources and other public goods makes it possible to determine the cost which businesses have to bear for using them. An easier way is to determine the cost for protecting the environment. With this we have a clear market-concept: Policymakers, here, are confronted with the decision on which part of the public budgets they assign to that objective. Another category is demands which policymakers must satisfy and for which there are no price regimes, like the desire to relax in a public park or by the riverside.81 Theoretically, even if there were a market for this, it would be a dysfunctional market, because it neither reaches an equilibrium (for instance if all citizens demand access to the riverside at the same time) nor can that market be efficient (there is no information on supply and demand which could lead to prices (Perelman 2003).

 Section 3.4 on has dealt with this type of market. Relating to that, another connotation of values is use- and non-use value. See section 3.4 as well.

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Dysfunctional markets are a pronounced feature of public goods, which makes it difficult to apply welfare criteria to them: How should governments determine which good provides the maximum benefit to the largest possible number of people (the utilitarian principle; see, e.g., Brown 1992)? What they need is a criterion that shows, for instance, if their environmental policies achieve the optimum of what is called “social value” (Bürgenmeier 2000). Social value, according to Sheth et al. (1991), is ‘‘the perceived utility acquired from an alternative’s association with one or more specific social groups’’ (Sheth et al., 1991, p. 161).82 The term alternative in this definition comes from Sheth’s consumption theory, which studies customer choice behavior, i.e., the reason why a customer decides to acquire one of various offerings. So, social value is not always equal to all society. This is why an optimum must be sought for policy decisions. There are social values in all shared resources. Some are obvious, like in the case of environmental protection, and some are less so. E.g., it is evident that a society heavily depends on shared infrastructure. But it may be valued differently by different groups of society (Frischmann 2012). The social value of environmental protection and of the natural environment, in terms of economics, rests on ecological scarcity, on the quest to overcome asymmetric costs and asymmetries in information and on the pursuit of wellbeing (Zaharia and Zaharia 2012). There are several components from which a specific social value can be determined (Szántó 1995): 1. Achieving economic goals is always accompanied by that of social goals. Hence, a nexus can be established. 2. Like all actions, economic actions occur in a social context from which two-way feedbacks impart with (possibly) asymmetric information. 3. Economic judgments are mostly linked to value judgments. Environmental policies will have to prove the environment’s social value in the long run. Proofs that the policies work can be attained through citizens’ participation in deliberative democracy or if the parties affected by the policies unanimously legitimize them (Kenter 2017). In the short run, though, policy makers must find and implement solutions whose effect can be seen immediately. As politicians are, in most parts of the world, bound by their oath of office which obliges them to avert harm to society when they become aware of it, immediately visible results are elemental. This extends beyond policymaking: If harm is brought by an extensive use or a misuse of a public good, governments must intervene on the instant, revert the misuse and at once impose penalties. A state can also try to avert harm or injustice through preventative measures,

 Social value, in a consumer-related context, is one of five consumption values, with the others being the functional, the epistemic, the emotional and the conditional values. In the context of political choice, the other four values are on a sideline.

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like taxes on emissions, charging for emission rights and fines for water pollutants. They will base them on the monetary value of the damage which they cause. Monetary assessments for environmental damages can also serve to derive estimates for the monetary value of the goods affected by these damages. An example is fines for polluting a river. There also is another way that can lead to specification of values: When developing and managing large river systems, choices may have to be made that relate to alternative combinations of water usage, like cargo shipping, hydroelectric power, recreational or commercial fishing, etc. It may also be proposed to ‘re-nature’ a river by removing an existing dam. All this raises questions: One question may be whether the recreational and ecological benefits from removing a dam are higher than what the community loses from having power generation and water storage reduced Here, it becomes obvious that a type of valuation is needed which would encompass a holistic perspective regarding the resources in question. For this we should “view the environment as an asset or a kind of non-reproducible capital good that produces a stream of various services for man” (Freeman et al. 1973). These services can be tangible (such as minerals or flows of water), they can be functional (such as removing, dispersing, storing or degrading wastes and residuals) or intangible (such as enjoying a national park). On the intangible ones, monetary values can be found through contingency valuation as set forth in section 3.4. above. On the tangible and functional ones, a relation to value can be sought through the concept of productivity: They are the “fruits” coming from productive usage of public goods. Relating productivity to public goods usage is founded in considering them as an investment: As with any investment, the effort required for increasing the output of a public good must not be greater than the value gained from the extra output. Otherwise, the effort is worthless. Now, when a government has provided all the goods on the extensive menu of consumption available to a modern society in the right amounts, and the problems of equity and consumer satisfaction have been approached (Heath 2001), the relation between effects and expenses becomes apparent. Expenses are expressed in monetary terms, and so a monetary value can be assigned to the benefits as well. This can be made for a range of publicly provided services, like educational benefits, childcare, healthcare and housing or food stamps. On average across OECD countries, social benefits from education and healthcare are estimated to be about 13% of GDP, ranging from 8% in Turkey up to 20% in Denmark and Sweden (Verbist, Förster and Valaavuo 2012). The services can be valued at their production cost. This can be used to show that those benefits increase the income of the households who are the beneficiaries – arriving at what is called Extended Income. The notion of “extended” properly indicates that income distribution changes when publicly provided services get included. This reduces the magnitude of income inequality. Still, the extended income concept is not applied to one of the most known inequality measures, the Gini83

 The Gini index is named after the Italian statistician Corrado Gini (1884–1965).

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index. The reason mainly is it’s the index’ connection with poverty indices of the World Bank (https://pip.worldbank.org). Statisticians recommend that interpretations of the Gini index should at least be accompanied by a comment that when using extended income, the inequalities would be lower. Studies have shown that this is valid for all types of families: one earner, double earner, childless or with children, and for different levels of education of the head of the family (Addabbo and Caiumi 2017). Using extended income would be supported by many welfare economists: They posit that when a public good is provided to all (like free healthcare) and adds to human wellbeing, it has economic value – a monetary contribution to public benefit (e.g., Adler and Posner 2006). The healthcare case demonstrates that economic/monetary value of a public good can be calculated based on production cost of the services it renders or which are needed to build it. The following sections will extend this to services rendered by natural resources; these services can be viewed as the ‘rent’ of those resources. Before discussing the respective techniques in section 4.5.3, the topic of non-monetary indicators will be exposed. They also are a vehicle to exhibit value.

4.5.2 Non-monetary value indicators In the categorization of values, we have seen the intrinsic, the instrumental, the ends and the means value, the use-and non-use values, social values, and economic/monetary values. Monetary terms indicate that the demand for a good can be reflected in its price. Private goods, for instance a commodity or a long-term asset, if they are high in demand, have a high value. A public good which satisfies a need that is important to many will also be in high demand. There are goods for which a price is set or whose value can be derived from its production cost, like a waterway or a road. Others do not have a monetary value; if they are in high demand, they will have a high non-monetary value. For example, the presence of police officers satisfies the need of feeling safe in the streets. There is a demand for this, and the demand has to be met by a matching supply. The public good of safety is supplied by a public institution, but while it is in demand, there is no market for it; no price can be determined. So, how can government officials or the elected bodies of a town decide which part of the municipal budget is to be allocated to providing that good? How can they assess the demand – that is the amount of security which its citizens want – and its value? Safety accounts for a set of expense items in a municipal or a county budget, i.e., what is spent to serve the citizens. Therefore, the best way to determine the amount which should be set aside for serving the citizens’ demand for safety is to leave the decision to the voters. Switzerland is the country where this is practiced with many issues of public interest. They are resolved through referendums or similar initiatives on the local level and higher. Various forms are applied: one is popular initiatives, where a political debate on a specific issue can be launched by the signatures of 100,000 vot-

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ers; another is optional referendums, which can put any bill approved by parliament to a nationwide vote with just 50,000 valid signatures; and the third one is mandatory referendums. A mandatory referendum is required for any constitutional amendment before being approved by parliament (Ladner 2002). It must be put to a nationwide popular vote: If there are multiple choices, the result of a voting can be a list which shows which priorities exist among the voters, i.e., which outcome they value higher than another. This, ranking, hence, is the value indicator . Safety is a public good that is ranked high in the Maslow pyramid. The need for self-actualization, though, has the highest level on Maslow Hierarchy of Needs).84 Satisfying this need places an immense responsibility on public officials: The human desire to exploit one’s intellectual and physical faculties requires a range of social skills and technical skills. Also, like any human need, it corresponds to other public goods and services. So, the measure of the economic value of this need, whether for an individual or the society as a whole, can be expressed in terms of the physical units of the goods and services which are necessary to attain it (Felline 2020). Self-actualization can be attained by education, training, and professionalization, but also, among others, through involvement in cultural and social networks. There is a demand for any of these. Decisionmakers in the public realm must find out which public good would best meet which demand and how to provide it. Referendums on that question will give a ranking, but the citizens can also be asked to rank-order a list of choices which are opposed to each other, such as more police patrols or state subsidies for alarm systems in residential buildings. This method has been widely applied to other public goods, e.g., to environmental issues: It was used to identify options for forest management in Finland (Hiltunen, Kangas and Pykalainen 2008) and for determining total allowable catch in Chilean fisheries (Leal, Quinones and Chavez 2010). A wide assortment of non-monetary indicators which measure progress in public goods provision is in the SDG framework (https://unstats.un.org/sdgs/indicators/indica tors-list). For briefly exemplifying it may suffice to look at one indicator for SDG 1 (End poverty in all its forms everywhere), which is “Proportion of the population living below the international poverty line by sex, age, employment status and geographic location” (Indicator 1.1.1), or at SDG 3 (Ensure healthy lives and promote wellbeing for all at all ages) where Indicators 3.1.1 to 3.2.2 refer to mortality rates and 3.3.1 to 3.3.4 to incidences of infectious diseases). Within SDG 16, one of the targets points to ‘promoting the rule of law at the national and international levels and ensure equal access to justice for all’. The respective indicators are activity-based (e.g., ‘reduce the proportion of victims of violence and of unsentenced detainees’ – Indicators 16.3.1 and 16.3.2). However, the UN has no overall measures for the quality of legal systems because official data on the rule of law in many countries are scarce, and local capacity in the national statistics offices is still to be built. But the UN Secre-

 https://www.simplypsychology.org/maslow.html.

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tary General had given an impetus before the SDGs came up when he appealed for thorough assessments, baseline data and ongoing monitoring and evaluation on which to base the UN’s rule of law assistance (Parsons and Thornton 2011). There are indicators on the value of law and order, which also indicate to the culture of a society and to public policy investment. Allowing for inconsistencies in national data, the United Nations Rule of Law Indicators provide an assessment of quality in police, courts, and prisons. They were jointly developed by the UN Department of Peacekeeping Operations and the Office of the UN High Commissioner for Human Rights. The two UN agencies’ concern is about peace and security which is the global analogue to law and order; so, the rule of law indicators help to reflect if progress has occurred in post-conflict and unstable settings (OHCHR 2011). Another value indicator is the World Justice Project’s Rule of Law Index, a private initiative founded by the American Bar Association. It works with national surveys of more than 130,000 households and 4,000 legal practitioners and experts. The focus is on government constraints, regulatory enforcement, and absence of corruption (https://world justiceproject.org). A different focus is sought by the European Union’s EU Justice Scoreboard (see, e.g., European Commission 2019). It monitors the following parameters of an effective justice system: (1) Efficiency, measured by developments in caseload, like number of incoming cases by case type (civil, commercial, and administrative), length of the proceedings, clearance rate, number of pending cases by case type. (2) Quality, measured by: (a) the accessibility of justice, like means and effectiveness of obtaining relevant information about the justice system, how to initiate a claim, about the related financial aspects, the state of play of proceedings up until their end; (b) resources, i.e., finance (government expenditure per inhabitant and as a share of gross domestic product) and staff, like number of judges and lawyers per 100,000 inhabitants); (c) assessment tools/standards for timing (time limits, timeframes, backlogs), and for information to parties. (3) Independence of courts and judges: (a) as perceived by the general public; (b) composition of the court, rules for the appointment, length of service and grounds for abstention, rejection and dismissal of its members; (c) management powers over national prosecution services, like Prosecutor General/Prosecutorial Council, Minister of Justice/Government/Parliament. The enumeration shows the innate relation of law and order to other public goods, like freedom of movement, separation of powers within the state, transparent governments. In another field, various parameters are also monitored to build non-monetary indicators. This is the Global Reporting Initiative (GRI) which has become the global standard-setter for corporate sustainability reporting (Willis, Campagnoni and Gee

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2015). Most firms use GRI; some, out of consideration to their stakeholders, employ other reporting standards systems such as the AA1000 Standards for SustainabilityRelated Assurance (AccountAbility®, https://www.accountability.org/standards) and the Social Accountability Standard on workers’ rights and workplace conditions (http://www.sa-intl.org). GRI is of a wider scope. It has three sets of topic-specific standards whose composition reflects to which public goods they purport (environmental ones, like clean water and fresh air as well as social ones like health and privacy). The following list (abbreviated) exhibits these relations: – The GRI 200s are indicators on economic standards, including Procurement Practices (GRI 204), Anti-corruption and Anti-competitive Behavior (GRI 205), and Tax Policies (GRI 207). – The GRI 300s are on environmental issues, ranging from Materials (GRI 301), Energy (GRI 302), Water and Effluents (GRI 303) to Environmental Compliance (GRI 307) and Supplier Environmental Assessment (GRI 308). For the latter, disclosures would have to be on: a) Number of suppliers identified as having significant actual and potential negative environmental impacts. b) Significant actual and potential negative environmental impacts identified in the supply chain. c) Percentage of suppliers identified as having significant actual and potential negative environmental impacts with which improvements were agreed upon as a result of assessment. d) Percentage of suppliers identified as having significant actual and potential negative environmental impacts with which relationships were terminated as a result of assessment, and why. – The GRI 400s are on social issues, ranging from Employment (GRI 401), Labor/ Management Relations (GRI 402), Occupational Health and Safety (GRI 403) to Rights of Indigenous Peoples (GRI 411), Supplier Social Assessment (GRI 414), Customer Privacy (GRI 418) and Socio-economic Compliance (GRI 419). These indicators, together with the macro-economic indicators of the SDGs, could help build a better understanding of how to determine the value of public goods and how they serve the business sector. By measuring the economic contribution of firms in achieving the SDGs, monetization of the public goods in question becomes feasible. The minimum achievement would be to monitor progress in SDG implementation by using data from company accounts (Bebbington and Unerman 2020). Conjoining the GRI indicators on ecological themes with those of the SDGs can also pave a way to quantify resource contribution and thus to arrive at monetary values for natural public goods. From another end, as there are value indicators for the rule of law and public health as shown above, conceptualizing them as quantifiable resources can lead to a re-definition of social resources which can also lead to monetization. This will be discussed in the next section.

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4.5.3 Monetization of tangible and intangible public goods Placing a monetary value on an environmental or a social good not only is a difficult tiling to do, but it has also met with criticisms. One hostile argument is that monetization leads to marketization of the state, its functioning, authority, and legitimation – which “is equal to neo-liberalization of nature, education, healthcare, infrastructure, public service delivery, and so on” (Birch and Siemiatycki 2016, p. 178). Blaming what critics call neoliberalism for social deficiencies, alleged or actual, is not new (see, e.g., Castree 2006). These critics deny the fact that decisions, whether by state officials or by business managers, win more acceptance from their constituencies and their stakeholders if the decisions’ base is cash numbers. So, other than decried, the state’s functioning improves when using monetization wherever possible. The other argument against monetization of public goods, especially environmental goods, comes from the advocates of ‘strong sustainability’ who view nature as indivisible and rebuff what they call the commodification of the environment. If market instruments are applied to nature, they say, this leads to collective action against preservation. It would favor unlimited extraction of resources and “subjugates nature to human technology and methods engineered by humans, when theoretically it should be the other way around” (Scherhorn 2004, p. 14). They reject all efforts to replace natural resources by manmade capital. Now, it is certainly reasonable to carefully examine each case where manmade capital substitutes natural capital. But in most cases, there is no substitution at all: Manmade capital is complementary to nature: Extra sawmills do not substitute for diminishing forests, more refineries do not substitute for depleted oil wells, and larger nets do not substitute for declining fish populations (Daly 1990). The outcome of this complementarity is that the one good in shortest supply gets attention, and if its productivity can be raised by the other good, a status can be achieved where natural and manmade capital are managed at optimal levels. This would secure that they are maintained over a long period of time and for the future generations. This is what ‘weak sustainability’ is about (as opposed to ‘strong sustainability’), and it becomes clear that monetary values are needed to calculate those optimal levels. Another criticism against monetization of natural goods draws at the uncertainties of ecological forecasting: If we cannot project what will happen with the environment, we should not assign an economic value to it: Early on, the following three types of uncertainties were exposed by Arrow, Parikh and Pillet (1996) who explored forecasting frameworks for the Intergovernmental Panel on Climate Change: – Scientific uncertainties, like technical relationships between, e.g., greenhouse gas emissions and climate feedbacks; – Socio-ecologic uncertainties regarding relationships between human societies and nature, e.g., diseases that may stem from agriculture on eroded soil; – Socio-economic uncertainties, like the human welfare effects of climate change.

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Despite these uncertainties, the panel’s projections have influenced policymaking worldwide, and the monetary value of what these policies have brought is enormous. Dealing with uncertainties is normal in climate policy, and climate policy affects a wide range of public goods. Hence, why should uncertainties in climate projection stand in the way of assigning monetary values to natural goods? One advantage is that this can improve decision making. Confining uncertainties by using monetization as a base for decisions is a tool that environmental politics should eagerly take over from the corporate world: Many valuations set up in business, were it computing the return of an investment or marketing prognostics, entail assumptions on future developments, be they socio-economic or technical. There are cases where valuation is easy: An infrastructure project, which is a public good., e.g., a road or a pipeline, has a determined cost defined by the expenses made for it. If it causes environmental damage, as building a road or a pipeline necessarily will do, these environmental losses can be monetized and added to the investment cost. Compensating the losses (the damages) requires expenses. That cost is the base for estimating the monetary value of the respective public good. Then the expenses would be capitalized. The good side-effect of a reasoning like this is that people who get aware of realistic (monetary) values assigned to the environment will care more about negative environmental impacts. Numbers always are persuasive. Capitalizing expenses or costs is a normal way to arrive at monetary values. Its analogue is rent capitalization. Defining cost and defining rent is not always so easy as when there is a clear cause-effects relation like between the origin of damages to the environment and the affected part of the environment. And there are more than one cause-effects relation very often. A method to deal with this is by translating the effects (i.e., the outcomes of activities deployed in a natural environment) into flows of environmental services The following exhibit shows five of these services in forestry. They can be delivered by man or by the biophysical relationships that exist in forests; they have effects and monetary impacts as shown in Table 12. The example shows that the economic value of a resource/an environmental system can be calculated as the total of the discounted present values of these flows. Another type of service flows is rents obtained from an asset. If the asset is tangible, like an office building which is on the market, monetary values are available for the investment and the returns. But not all flows are traded in the market. For instance, while an acre of wetland might trade in the market based on its value for commercial or residential development, it may also be used a as a wildlife habitat and as a means of controlling floods and recharging groundwater. From these services, quite a different value will be produced: There are different ‘rents’ obtained from different uses (Freeman et al. 2014). The methodology of rent capitalization for public goods has been refined over time; it has become a prominent technique in frameworks for comprehensive valuation measures. One such framework is the “Survey of Methodologies for Valuing Externalities and Public Goods” (Hayden 1989); the subject is both natural ecosystems and socio-

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Table 12: Linking Forests, Water, and Cost of Environmental Maintenance. Relationship

Effect

Monetary Impact

The rate of runoff in a watershed is slowed down

Forest vegetation takes up water and delays the time to soil saturation

Lower cost for soil improvement

Soil erosion and sedimentation of waterways is reduced

Vegetation and leaf litter protect the soil from the impact of rain

Cost for drainage is lowered

Forest soils filter out contaminants

Influence on water chemistry

Cost for water treatment is lowered

Groundwater recharge is reduced

Precipitation is intercepted by vegetation and Irrigation cost is returned to the atmosphere lowered

Forests sustain aquatic productivity

Trees shade waterways and moderate water temperatures

Population of freshwater fish grows

Source: Adapted from Johnson et al. 2001, p. 3.

ecosystems. The survey lists systems analysis, matrices, rent capitalization and cost-benefit approaches. One of its main achievements is that it has created a comprehensive terminology for service flows that distinguishes between provisioning services, regulating, supporting, and cultural services. The terminology was taken up by The Economics of Ecosystems and Biodiversity Initiative (TEEB), a global effort commissioned by the Group of Eight (the “G8” inter-governmental political forum) and hosted by the United Nations Environment Program (UNEP). The components are:85 – Provisioning services are the products obtained from ecosystems such as food, fresh water, wood, fiber, genetic resources, and medicines. – Regulating services are defined as the benefits obtained from the regulation of ecosystem processes such as climate regulation, natural hazard regulation, water purification and waste management, pollination, or pest control. – Supporting services are those that enable the production of all other ecosystem services, like biomass production, production of atmospheric oxygen, soil formation and retention, nutrient cycling, water cycling, and provisioning of habitat. – Cultural services include non-material benefits that people obtain from ecosystems such as spiritual enrichment, intellectual development, recreation, and aesthetic values. This categorizing allows a pertinent definition for various types of ecosystem service flows. When all the impacts caused by a specific flow ecosystem are quantified, their

 http://www.teebweb.org.

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aggregate monetary value equals the total net benefit of the policy that has set these flows. Again, here we have a numeric base for decision making. In social public goods, policy decisions may directly affect wellbeing. And they are often based on monetary considerations as with health and healthcare. Unfortunately, the monetary is mostly restricted to expenses and income of health institutions. There are other monetary aspects, though: Health is influenced by social support (Iecovich et al. 2011, Saito et al. 2005), by living conditions (Wahl et al. 2009) as well as, among others, by social institutions and culture (Hall and Lamont 2009). All these, each to a different extent, indicate public and private expenses for public goods which reflect monetary value. And insufficient provision of these goods leads to monetary losses for society. The losses decrease social resources/social capital. Social resources/social capital has become a prolific concept but it has also become critically debated in the social sciences. Since the works of Bourdieu (in his seminal work of 1974; see also Bourdieu 1986), the approaches to the term have shifted over time. For Bourdieu, social capital originates in families and clans, or in clubs, where members are homogenous. This similarity of attitudes and cultural practices produces and reproduces social benefits which perpetuate a class society. Putnam (1993), from his studies on civic associations in Italy defines it as set of horizontal relations between people, from which attitudes and norms develop that impact the productivity of a community. Coleman (1988) gives a broader definition: “a variety of different entities, with two elements in common: they all consist of some aspect of social structure, and they facilitate certain actions of actors – whether personal or corporate actors – within the structure” (Coleman 1988, p. 12). This implicitly considers relations among groups rather than among individuals. A more encompassing view includes the political and social and environment which shapes social structures and enables norms to be developed and applied (see, e.g., Grootaert 2001). Social capital cannot be detached from the societal foundation laid by public institutions. Otherwise, one could assume that civil society conflicts can simply be settled by society itself and “in its inner workings” (e.g., Foley and Edwards 1997; 1999; Grix 2001) and not through the political system. However, the political system – well functioning government agencies – is needed to prevent that societal conflicts end up in civil disruption. Social networks and CSOs cannot avert this on their own. Hence, over-simplifying the social capital concept is not an abstract matter that can be dissociated from praxis. A practical approach, i.e., the operationalization of the social capital concept, is needed to exhibit how it connects with social institutions, with value creation and with increase in wellbeing (Bhandari and Yasunobu 2009; Rostila 2011). Attempts to operationalize the social capital concept have long been overshadowed by the World Bank approach which is restricted to a networking perception: “The institutions, relationships, and norms that shape the quality and quantity of a society’s social interactions” (World Bank 1998). While the definition includes “institutions”, which should encompass the political environment, the five key aspects which the World Bank engrained in its indicator for measuring the state of social capital are

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all intangible (World Bank 1998, p. 9): groups and networks – trust and solidarity – collective action and cooperation – social cohesion and inclusion – information and communication. And there are no indications to numerals that would properly reflect how to measure these aspects. Therefore, the Bank resorted to proxy statistics; in doing so, it tried to bring in a contextual relation between social capital aspects and available statistics, e.g., between the number of civic associations and the level of welfare. But this context differs from country to country and even from one district to the other,86 and no indicator can mirror these differences. For this reason, the concept became very controversial from the beginning and has remained so to this day. In consequence, the World Bank no longer provides updates to its index (Hammer and Pritchett 2004). A new emphasis on social capital was laid with the bank’s new strategy for reducing povertywhich seeks a connection between institutional reform and the promotion of social associations. The reasoning is: If state and social institutions are made more responsive and accountable to the poor, service agencies get closer to poor communities and poor people and the “social capital” of these communities will notably influence development (Ruckert 2010). The need for more and more effective social capital also comes out from the concern for the next generation as per the Brundtland definition of sustainable development (see: WCED 1987). It does not suffice to solely employ tangible production factors for future generations to achieve as much welfare or possibly more than for the current generation; intangible inputs of social capital also play a major part. Social capital in its more extensive meaning generates definite benefits for individuals or for groups (i.e., for their wellbeing) and the effects may last for a long time. The variety of such outcomes spans from job opportunities to competitive advantage of firms, from individual and public health to educational performance, from socioeconomic development to government effectiveness (see, e.g., Lin and Erickson 2008, Kay and Johnston 2007; Portes 2000, Woolcock 1998). Viewing social capital as an outcomes concept makes it receptive to monetary valuation: When making the concept encompass institutions like government and government agencies, the rule of law, the court system, etc., input/output relations as well as cost and benefit assessments can be brought in. This would lead to quantifiable items with which to measure the value of social and institutional infrastructure. The wider interpretation of social capital also comprehends the terms of Social Value, Social Resources, Institutional Capital, and Governmental Social Capital (North 1990). It is the assets engrained in the political, legal, and institutional environments which produce or condition social capital. By attributing value to the formal institutions (an input) which produce social cohesion (an output), we get a link between a tangible base and intangible outcomes which determine human progress. This makes

 A method to measure social capital on a local base (district, ZIP–codes) was developed by the Basel Institute for Commons and Economics (http://www.commons.ch). See: Dill and Gebhart 2016.

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the outcomes quantifiable. When looking at developing countries, for instance, investment in the efficiency of the basic government institutions, the rule of law, and the labor market should have a measurable output, i.e., improved, or higher, or more social capital. And th. outcomes– more job opportunities, higher business competitiveness, better health conditions and better schooling, etc., – become measurable as well. Figure 14 demonstrates how to construe a relation between the World Bank’s social capital definition and the resources definition: The figure exhibits that both resources or relationships build social capital: Embedding them into an integrated concept will make the definition of social capital more precise and will lead to improving the efforts to make it measurable (Poder 2011). This can best be studied on the local and regional levels, where regional institutions as well as local businesses exert the most direct influence on building social capital (Peiró Palomino and Tortosa-Ausina 2012).

Quantifiable Outcomes Groups and networks Trust and solidarity Collective action and cooperation Social cohesion and inclusion Information/communication Social Capital as per the World Bank

“Social Resources / “Institutional (Social) Capital”/ “Governmental Social Capital”/”Social Value” The (quantifiable) fundament for Social Capital

Figure 14: Social Capital and Social Resources. Source: Bardy, Saner and Yiu 2015.

The following will show two cases where quantifications have been made – one for natural and one for social public goods. Resource effectiveness for the Urmia Lake Basin The Urmia Lake Basin87 is an area of about 52,000 square km located in the northwest of Iran. The minimum level of the basin is 1171 meters above sea level, the maximum is 3732 meters. It has the world’s second largest salty lake. The lake has faced a gradual deterioration in the early 2000s as it suffers from unsustainable development in the environment around the lake (see, e.g., Schulz et al., 2020), apart from the consequences  Bozorgzadeh and Mousavi (2021).

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of natural factors such as precipitation decrease and prolonged drought. The anthropogenic factors are dam construction, overexploitation of groundwater resources and unsustainable use of surface water. The assumption is that changes in agricultural water abstraction would have a significant impact on the lake volume and could either stabilize the lake or lead to its complete collapse (Schulz et al., 2020). Hence, the assessment model uses an equation from physics which states that mechanical work (W) is equal to the amount of energy transmitted by a force (F) acting within a distance/direction (D): W = F. D = jF jDj cos α F and D are vectors, and α is the angle between the two vectors. Now, in a development process where a set of strategies, contingency plans, and techniques has been defined to determine organizational goals, the respective agencies spend natural, economical, and human resources to reach these goals. But there is often a gap between the predefined goals and the outcomes. Expressed in the terms of the equation, the force is exerted (the resources are used), but no effective work is done (the goals are not met). In physics, effectiveness is signaled when the angle between two vectors is acute (see Figure 15 below, where f denotes the actual direction).

→

f →

D cos α →

α

F →

D

→

f cos α

Figure 15: Force and distance vectors in a strategy-resource relation. Source: Author.

If the angle is obtuse (D is low), the function of F is ineffective. For the assessment and quantification of strategy effectiveness, resources enter the equation as the force vector, strategies are the direction vector, and development achievements are the work done.88 In order to seek for failure in sustainable development, the model cho A detailed description of the model is given in Bozorgzadeh and Mousavi (2021), pp. 12–15.

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ses a classification for the resources into (1) human, (2) financial and (3) environmental ones. This corresponds with the resources used in the Urmia Lake Restoration Program established by the Iranian government in 2013. The numerical results of the study indicate that environmental resources (e.g., decrease of effluents) have a constructive role (the angle α is acute), pushing unwanted runoff down by 21%, which represents a factor ratio equal to 0.79. By contrast, the ratio for human and financial resources was 1.9, meaning that the negative role of investments in the development process more than offset the result of the environmental resources. Combining the factor of 1.9 with the monetary value of the financial resources and the cost of labor gives a monetary measure for the environmental damage, and it also allows to assess a total value for the environmental treasure of the Urmia Lake. Social capital in sustainability reporting of Italian cities Italian municipalities have introduced monetary valuation of their social infrastructure for quite some time (Rollo 2022).The first jurisdiction which issued a sustainability report on a regular basis was the Province of Modena in Northern Italy (Provincia di Modena 2004). The intention was to account for the five social resources of fertility, social security, mobility, and well working institutions each second year until 2014 (Sancassiani 2005). Then, with the upcoming of the United Nations agenda on the SDGs, the Modena officials together with other cities sought to construe a local sustainability index that would correspond to the SDGs. The effort was also influenced by the Smart Cities debate which recognized that urban performance, apart from depending on physical infrastructure, is as well built on social infrastructure and knowledge communication (Fondazione Ambrosetti 2012; see also Evans et al. 2013; Cardullo and Kitchin 2019). The attempt to draw up an urban sustainability index in Italy was, to some extent, motivated by the fact that a ranking on SDG implementation89 placed Italy 29th of 6 countries in 2017, after Sweden, Denmark, and Finland, but behind also other countries like Slovakia, Hungary and Latvia (Farnia, Cavalli and Vergalli 2019). This was taken up as a challenge by Italian scholars and practitioners: Conjoining an urban performance index with the SDGs would allow to determine where the SDG implementation process was progressing and where more impetus was needed. The nexus to implementation places the Italian Cities Sustainable Development Index visibly above other indicators, like the 2009 Global City Indicators Program of the World Bank (https://openknowledge.worldbank.org/handle/10986/10244), or the Cities Data Book (CDB) of the Asian Development Bank dating from 2001 (https:// www.adb.org/ publications/urban-indicators-managing-cities).

 Rankings of this kind are regularly undertaken by the Sustainable Development Solutions Network (SDSN). SDSN is a UN initiative for mobilizing scientific and technological expertise to promote practical sustainable development solutions in its agencies. See: https://www.unsdsn.org.

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The Italian Cities Index (https://resources.unsdsn.org/sdg-cities-index-for-italy) contains 53 elementary indicators that are connected to 16 out of the 17 SDGs (Goal 14, “Conserve Life Below Water”, is excluded). The index measures several Italian municipalities’ performance compared to the average of all municipalities. The data are taken from the Italian Statistical Office, and special weighting criteria are applied to avoid an overweight of indicators, particularly of those which are interrelated. As some of the SDGs have more indicators and some have less, the effect of SDG targets on the composite index was accounted for: E.g., Goal 1 (“Eradicating Poverty”) gets a high weight but less influence (reflecting that municipal programs cannot act on their own and need support from national programs on poverty alleviation), while Goal 8 (“Procuring Decent Work and Economic Growth”) gets about the same weight but a higher influence as a municipality is more autonomous in that respect (Farnia, Cavalli and Vergalli 2019, pp. 8f.). This procedure enables breaking the composite index down into partial performances of a city within each of the goals.90 An experimental sustainability index for municipalities that would concur with the SDGs was also attempted for New York City under the auspices of the SDSN91 (Prakash et al. 2017). Another measurement approach has been undertaken by the British government: A list of 39 indicators for communities has been in use since 2005; this had been preceded by a list of 49 indicators taken from the Housing Corporation, which is a non-departmental public agency in the UK (HM Government 2005). Similarly, a list of 40 urban sustainability indicators is employed by the municipality of Seattle, and other standalone examples can also be found elsewhere (Turcu 2013). But while they could certainly serve well the respective towns for policymaking in, their lack of embeddedness in the wider concept of the SDGs does not allow references to progress in overall sustainable development. The Italian cities’ approach can serve to find monetary values for social capital: When connecting an indicator to the outcome it produces, its value can be determined. For instance, it was found that the indicators for electoral participation and for willingness to give back to the community (two elements of social capital) affect whether households invest less in cash and more in stock, use more checks, have higher access to institutional credit and make less use of informal credit. Allowing for household income and household wealth, a survey that contrasted cities in Northern  The qualities of this index, both the break–down facility and the combination of indicator weight and influence rank it very high in comparison to other composite indices, e.g., the Bertelsmann SDG Index for OECD countries (Kroll 2015) and its extension, the SDG Index and Dashboard for 149 countries (Schmidt–Traub et al. 2017). Their objective is not operational; the main purpose is to show differences. Still, as they will be updated regularly, they might become the key tool for measuring progress in the SDG implementation. The big question, which is not a topic to be further discussed here, is whether the data inputs for the dashboard are comparable or even redundant as the range of 149 countries compels to the usage of statistics that are, in places, not reliable (Dill and Gebhart 2016). By contrast, the Italian method uses data from one country only.  See Fn. 89.

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Italy (high electoral participation) with those in the South (low participation) revealed that the percentage of cash in portfolio, deposits in portfolio, and stock in portfolio indicators is clearly linked to these social capital indicators. The effect can be expressed in numerical terms. So, there is a monetary outcome which enables to estimate the value of this specific social capital (Guiso et al. 2004). Another method to arrive at monetary terms is by including social capital into a wellbeing function and estimating the shadow price of social capital. The technique determines the value of foregone income that people accept in lieu of an increase in interpersonal trust or fairness, of institutional trust and of family cohesion. The numerical results were achieved through an in-depth analysis of the answers given in the European Values Study92 and they show that people are willing to sacrifice up to ca. € 8000 per year if they stay in a relation with high trust and cohesion instead of moving elsewhere (Orlowski and Wicker 2015). This has a very practical consequence with regard to . Similarly, an analysis based on individual-level data for housing and labor markets in Italian cities found that individuals are willing to pay a positive and significant monetary price (up to € 1150 per year in terms of higher housing costs and foregone wages) to live in cities where people spend more time with their friends (Colombo and Stanca 2014). On the macro-economic level, a cross section study on 54 European regions exposed that regional differences in economic growth are related to social capital, in the form of generalized trust and associational activity – where it is not the mere existence of networks which counts but active involvement in these relationships. Again, the data on social capital were taken from the European Values Study; GDP growth was found to be affected to an extent of ca. 0.5 percentage points by investments in community relations, in schooling, and for living in agglomerations (Beugelsdijk and van Schaik 2005). The interest in measuring social capital has grown over time. It is acknowledged by researchers and politicians that “we have a pressing need to study social capital building and the value this produces for society – which may best be understood if its monetary value is known” (Halstead and Deller 2015, p. xxxvi). This shows how important it is to determine the extent at which all public goods, not just the tangible ones, can improve economic, social, and ecological performance – be it in a bounded environment like a city or on a more aggregate level. Many of the SDGs are connected to social capital. But it seems that the overemphasis on the climate goal often obscures the view on the manifold efforts that are needed to improve social wellbeing. The same goes with data on public goods in public statistics.

 The European Values Study is a large–scale, cross–national, repeated cross–sectional survey research program that provides insights into the ideas, beliefs, preferences, attitudes, values and opinions of citizens all over Europe. It was started in the late 1970s by informal grouping of academics, and it is now carried on in the setting of a foundation: https://Europeanvaluesstudy.eu.

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4.5.4 Public goods in public statistics A comprehensive statistical approach requires measures of both how well we are preserving our assets (resource indicators) and how well we are satisfying current needs (outcome indicators). A resource accounting framework of this type would need to complement the basic national accounts system for economic statistics. As economic statistics in the macro-sphere adhere to the United Nations System of National Accounts (“SNA”: https://unstats.un.org/unsd/nationalaccount/docs/1993sna.pdf) in most countries of the world, the task of building this accompanying accounting system was undertaken by the United Nations Statistics Division. The outcome of this endeavor is the UN System of Environmental-Economic Accounts (SEEA), an “SNA satellite system” (meaning that it is not incorporated into SNA), which has been in process since the early 1970s.93 Similar to the SNA’s basic structure of discerning between monetary assets (stocks) and monetary transactions (flows), the SEEA is intended to measure resource stocks at a point in time (for example, land, forest, water, and animals) and resource flows per unit of time. The flows correspond to both resource-use by the economy (inputs of energy and materials into production) and resource-subtraction from the economy (ecosystem inputs and residuals that are incidental and undesired outputs from the economy). SEEA, unlike SNA, has one more set of accounts that are separate from stocks and flows. This is environmental protection and resource management expenditures (expenses incurred by industry, government, and households to protect the environment or to manage natural resources). An additional feature is a reservoir of valuation techniques whose primary aim is to calculate the cost of natural capital and environmental depletion and degradation (which, ultimately, would serve to adjust GDP for reflecting the full range of socioeconomic activities beyond merely monetary transactions94). With this, SEAA casts a very wide net: Further than merely assigning monetary value to the outcome of physical stock-taking (which is a herculean task in itself), the SEAA aspires to measure what the natural environment contributes to the economy (the resource flow), as well as the impact of the economy on the natural environment (from pollution and depletive use). SEEA was employed at the national level for Japan to estimate environmental damages (Uno 1989). One other application was attempted in India (Haripriya 2001) which was to adjust GDP for the depletion of the Indian forest resources. It was shown that this would lower GDP by 1.6%. Both studies were isolated from the routine of official statistics. No work in this matter has been done recently, perhaps because of the overwhelming output of climate change analyses which also tie up professional

 Section 4.5.4 is taken, in part, from Bardy et al. 2021, pp. 101 ff., with kind permission of all authors.  The intention of SEEA to provide indicators for adjusting GDP runs parallel to the “Beyond GDP” initiatives that have gained momentum after the EU released a “road map” in 2009 for making GDP inclusive of environmental and social aspects (see: https://ec.europa.eu/environment/beyond_gdp/back ground_en.html).

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resources. Still, in forums that are much less raucous than the climate debate, there is progress under way in improving both the data base and the solutions for contexts that encompass valuation of natural resources. One such context is the Aichi targets which predate the Paris climate accord. The Aichi targets were signed in 2010 when the 194 signatories of the Convention on Biological Diversity (https://www.cbd.int) met in Nagoya, Aichi prefecture, Japan, to establish conservation goals for safeguarding global biodiversity, for measuring progress and attaching values to the effects (https://www.cbd.int/sp/targets). In the accord, the objective was to: – address the underlying causes of biodiversity loss by mainstreaming biodiversity across government and society, – reduce the direct pressures on biodiversity and promote sustainable use, – improve the status of biodiversity by safeguarding ecosystems, species, and genetic diversity, – enhance the benefits to all from biodiversity and ecosystem services, – enhance implementation through participatory planning, knowledge management and capacity building. The Aichi process involved the business sector, other stakeholders and data holders right from the beginning (Weber 2014). So, any Aichi activity sets off with a perspective that integrates the public and the private entities, both for management of a project and project resources. One case is the project for the management of two natural protected areas of the coastal zone of Campeche, Mexico (Galindo-González and Rivera-Arriaga 2018). The project had been delayed for over 23 years because federal, state, and municipal governments could not agree on a suitable scenario that would include businesses. Then the Aichi determinants were used to define the value of the two areas; this helped to trigger the launch of the project. The Aichi process also contributed to evolve suitable marine governance in protected areas of the sea around the United Kingdom which were endangered by over-industrialization (Wright 2015). The winning factors here were creating reliable data, arguing in a non-ideological way, and transparent cooperation between all stakeholders. The Achi targets are not meant to build and value inventories of natural resources, but their valuation method can be used to set monetary values to specific objects. The SEEA, by contrast, set out to build such inventories. The UN Statistical Commission adopted an experimental version of SEEA in 2012 which was tested in a few projects. The objective of the projects was to develop additional methods (Murty and Panda 2016, Friend 2012, 2019). In parallel with these projects, Statistics Netherlands developed a supporting methodology developed for the European Union Commission. This is the National Accounting Matrix of Environmental Accounts (NAMEA). NAMEA describes the flows of material through the economy through an input-output matrix (Stauvermann 2006). All European Union member states are participating in the European Commission’s NAMEA project.

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Another expansion of the SNA is the Social Accounting Matrices (“SAMs”) (Leadership Group SAM 2003). SAMs start with linkages between sectors of an economy (like an input-output matrix), but other than the traditional framework95 which is limited to institutional units and shows how outputs of the government, the business and the household sector serve as inputs to the other sectors, SAMs features a different type of units: (1) products, (2) establishments (production units), (3) primary input units (employed persons, loans, etc.). With this, a SAM incorporates detailed information on labor and households (the “social”) into the system. It provides data on the generation of income in an economy by differentiating labor inputs according to sex, level of education, and type of profession. This gives a sub-division of the household sector. Forming household groups can also provide a lead towards measuring social capital/social resources: When the breakdown follows economic criteria (level of income or expenditure), social criteria (education, age, gender, affiliation with societal groups), and geographical criteria, it records inter-relationships. And it attaches a monetary value to the benefits from these relations (Mainar-Causapé et al. 2018; also, Keuning and de Ruuter 1988, Pyatt 1991). Data on the cost of public health are a rubric of their own. They are, however, not disclosed uniformly in each country because the System of National Accounts does not clearly define the components of health cost. This disfigures cross-country comparisons of healthcare-spending and -outcomes which complicates debates on the efficacy of healthcare. For example, in discussing the US healthcare system, observers note that the U.S. spends more on healthcare (per capita and as a share of GDP) than any other nation, while it ranks very low in the quality of health among major developed economies. But the data on spending do not reveal the distribution of that spending across the population, the drivers of cost by type of provider and disease, and the productivity (or quality- adjusted real output) of spending (Aizcorbe et al. 2018). While the SNA counts all the costs for private for-profit hospitals, including their capital costs, it excludes the depreciation component and the interest component for hospitals run by the government. This leads to a bias between countries where the share of private hospitals is different. Also, a number of countries list medical research and development and training/education expenditures under healthcare cost (Schreyer and Mas 2018). So, the national accounts reveal contents that may differ from country to country. A better source for comparable data is the World Health Organization (WHO). The World Health Organization issues annual reports that show recent trends, e.g., on life expectancy and causes of death.96 They specifically relate to the healthrelated goal in the SDGs, which is SDG # 3. It aspires to ensure health and wellbeing  The traditional Input-Output Matrix is a key tool in the economic analysis since its origins (Leontief, 1936) as it provides useful description of inter-sectorial relations. It analyzes the production side of the economy, but it does not mirror the complete behavior of the economic system.  https://www.who.int/gho/publications/world_ health_statistics/2019/en.

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for all, including universal health-coverage and safe/effective access to medicines and vaccines. The WHO explicitly states, though, that disaggregation is not possible for all indicators; meaning that the national statistics which serve as the sources are deficient. Hence, the WHO reports are incomplete. The lack of local level data is not just a feature of health statistics. It has become one of the many statistical obstacles with regard to implementation of the SDGs. In the health sector the statistical problems also reveal institutional deficits (Bloom, Standing and Lloyd 2008). Therefore, many developing countries do not have the information on where to launch specifically configured projects and programs for improving or restoring health, which impedes progress in, e.g., eradicating the consequences of a pandemic like COVID-19, or for improvements in other areas of social concern. SDG # 3 is connected to several other SDGs that indirectly cover health issues. So, measuring progress in all of these is hampered. For improving progress measurement, the WHO has adopted some features of what has been developed by the Statistical Office of the EU, Eurostat (Macfarlane and AbouZahr 2019). Eurostat gives the following categorization for health statistics (see, e.g., Aromaa 1998): 1. Health status (including data on span of healthy life years, mortality and life expectancy, causes of death); 2. Specific health conditions (affectedness by types of diseases and injuries); 3. Health determinants – lifestyles (including consumption, obesity, mental wellbeing); 4. Healthcare expenditure; 5. Healthcare human and physical resources (physicians, nurses, hospital beds, etc.); 6. Healthcare activities (surgeries, consultations, preventive services, etc.). The World Health Organization’s adapted Framework for Country Health Information can now detect the need for specifically tailored aid, and when programs are set up, their performance can be monitored directly. This also relates to private programs, as it coincides with World Bank Group restructuring itself from being a lender for major development projects to a broker for private sector investment (Sridhar, Winters and Strong 2017). Together with SDG Agenda’s overall emphasis on improving the local database, better World Bank data will substantially support the implementation of SDG # 3 and upgrade the global public good of health (see, e.g., UNECE 2017).

4.6 Monitoring public goods provision Monitoring the public goods delivery involves several questions: Which methods can be applied for controlling public goods provision? Which indicators are available on the local, national, and global level for determining if provision of a public good meets the needs? How can public good provision be coordinated effectively? A broad array of tools for this and other types of monitoring and controlling is available from

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business administration, like Zero-Based Budgeting, Outcome-Based Budgeting, and the Balanced Scorecard, to name a few.97 A local community, for instance, must install monitoring schemes that observe if the projected demand for a public good is fulfilled by quantity and quality. Data can often be drawn from surveys and statistics, e.g., figures on the demand for schooling (Brasington 2002). The same applies to the demand for healthcare, where econometric techniques, forecasting through parametric probability, dynamic panel data models, etc., can be deployed (see, e.g., Jochmann and León‐González (2004). The monitoring scheme will have to get different for cross-border ventures or global public goods. When a multitude of governments, businesses and individuals in various countries align their activities for a common purpose, they may be bound together through treaties, regulatory mechanisms, and systems of standards. These are coordination instruments that can be applied both to the core activity of a venture (like conservation of the biosphere) and for activities that complement it. Table 13 exhibits examples of such core and complementary activities. Table 13: Linkages between international and national activities in public goods. Sector & Scope

Core Activity

Complimentary Activity

Research to reduce emissions Conservation

Regulation and tax incentives Environmental education

Research to eliminate disease Preventive health care

Vaccine distribution system Health care system

Specialized research centers Education service

Internet Infrastructure Education infrastructure

Conflict Prevention Crime reduction

Institutions for conflict Management Policing

Multilateral institutions Good government

Strengthening domestic civil society Civil service reform

Environment International National Health International National Knowledge International National Security International National Governance International National Source: Barrett 2007, p. 41.

 The baseline of Zero-Based Budgeting is that it starts with questioning a budget-position: What would happen if it would not be funded? Outcome-Based Budgeting asks for non-monetary consequences of a budget, and the Balanced Scorecard looks at cause-effect relations from various perspectives that are interlinked.

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The terms “core” and “complementary” in this table are taken from the World Bank’s terminology of Official Development Assistance (ODA) for financing development projects (many of which are national or international public goods). Complementary expenditure, in most cases, is higher than core expenditure. It is directed to activities “on the ground”, i.e., within a particular country or region, and the cause-effect relation in the project can be controlled locally (World Bank 2001). For example, conflict prevention (an international core activity as per Table 13) starts with policing at the national levels, but the core may lie at a level above. The importance of local activities has motivated the World Bank, in elaborating new modalities for control, to increase local staff for monitoring the activities of its regional projects. This was seen as a strategic change from the more centric control it had hitherto practiced (Corral et al. 2020). With this, national governments whose faculties for control had been limited, will now assume the role of the monitoring agency. This extends beyond checking if funds are coming in as planned towards direct intervention when deviations arise. The local staff would have the power to enforce fulfillment of contracts – the international institutions often lack this power. This new division of work allows the international institutions to better concentrate on their role as program enablers, not only with regard to funding arrangements but also with regard to conceptual tasks that lay the base for control and monitoring. Two cases are the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD). Another one is the United Nations Human Rights Council (UNHRC).

4.6.1 Enablers and monitors global collective efforts: WTO, UNCTAD and UNHRC Both the World Trade Organization (WTO and the United Nations Conference on Trade and Development (UNCTAD) are concerned with building a better foundation for global wellbeing. The WTO mission statement says it is about “ensuring a level playing field for all, thus contributing to economic growth and development” and it clarifies that businesses, consumers and the state are all alike.98 “Level playing field” is not merely a phrase. Arranging for equitable conditions is the quintessence of WTO corrective actions (see, e.g., Grané 2001). Similarly, UNCTAD, one of whose primary roles is to provide investment treaties that warrant fair conditions for all parties, establishes level playing fields among national governments, enterprises, and civil society organizations. UNHRC, the United Nations Human Rights Council, monitors whether businesses and states comply with thematic human rights issues like women’s rights, freedom of belief and religion, freedom of expression, freedom of association and assembly, and the rights of racial and ethnic minorities. The United Nations Forum on Business and Human Rights, set up by UNHRC in 2011, uses its Guiding Principles on Business and

 https://www.who.int/gho/publications/world_ health_statistics/2019/en.

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Human Rights to prevent and address the risk of adverse impacts of business activity on human rights. Likewise, guidelines for business cases have been established in the field of ecology by UNCTAD’s sister organization, the United Nations Environment Program (UNEP), such as “The Business Case for the Green Economy: Sustainable Return on Investment” (UNEP 2012). They also address the need for equity in international economic rules; the call is for a “hand-in-hand association” among equals – whether rich or poor (see, e.g., Saner 2016). The broad mandate of UNCTAD and the WTO, which is linking trade and investment to economic, social, and environmental development, includes dozens of programs that affect public goods – e.g., the programs for mitigating the consequences of global climate control. In the developing world, this is about measures for climate change adaptation which must be balanced with the public good of socio-economic wellbeing. Program designs need to consider this carefully. Often, ecological reflections are not at par with economic issues, and therefore implementing those measures may often end up in conflicts. Also, local conditions are different, and the overall cost of mitigation measures may be less, e.g., for protecting small island states from rising waterlines than for reducing carbon dioxide emissions in the African hinterland. Cost matters, though, must be pondered thoroughly. Above all, budgets must comprise the cost of the overall consequences. For example, in Africa, it would be easy (and not incur high cost at first sight) to ban the use of unclean energy like firewood. The argumentation from outside is mostly about positive consequences. It is unquestionable that terminating the use of unclean cooking facilities will diminish health hazards, domestic/shack fire accidents, and premature deaths, and that children who need to spend hours for collecting firewood in far-away areas can attend schools instead (Longe 2021). This will certainly outweigh negative consequences in many cases, but if access to clean residential fuel like liquefied petroleum gas (LPG) and electricity is not accelerated throughout all regions of a country, households are left with no choice. In rural Kenya, for instance, almost 88% of fuel source is firewood, while for urban consumption, 44% is kerosene (Waweru et al. 2022). So, a simple solution will not help here – other than in the case of the small island states, where moving people away from the waterlines is a clear-cut way out of the problem. The way out of a conundrum like the firewood issue will lie with new technologies that overcome the scarcity of clean sources of energy. As a matter of fact, many of the United Nations support programs are about technology transfer combined with demand side solutions for, e.g., settlement planning and changes of land use (Creutzig et al. 2016). Support programs by the community of international organizations always need to include local governments at par with global technology firms and their regional counterparts. With its Inter-Agency Task Force on Social and Solidarity Economy, the UN has set up a vehicle that is destined to address the social challenges arising from solving environmental issues in the developing world (see: http://www.unrisd.org/tfsse). Providing what is called ‘ownership’ of an international development project to the local authorities is a main objective of an OECD initiative for effective private sector engagement in development co-

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operation. Its guidelines are laid down in the Kampala Principles, named after the capital of Uganda, where the steering committee of the Global Partnership for Effective Development Cooperation group99 met in March 2019. Numerous projects have been launched since then in Asia, Africa, and South America (examples are given at https://effectivecooperation.org/ landing-page/gpedc-stories-progress). The focus is on improvement of farming, small industries, and trade where the outcomes impact social progress of the respective communities and beyond. The Kampala Principles projects which reach down to the local level are one segment of global development cooperation. There are other segments which address issues that originate at local levels, but their effects can go way beyond. One such issue is liability for environmental damage. The global community, in coping with the manifold problem of pollution, has developed two options: One is the ‘polluter pays’ strategy that attempts to remedy what results from market failure. The objective is to internalize the effects of pollution into the cost calculus of the market players. The party that is responsible for the damage done to the environment will be charged with the cost associated with reverting that damage. But can the culprit be found out easily? Is it the manufacturers of plastic who damage the environment with their products? Is it the consumers who do not dispose of plastic products in an orderly fashion? Is it the recycling firms which have formed alliances with fraudsters off all the seashores? These questions reveal that concerted action is required from the international community. Levying charges on the producer may relieve local communities from the cost of cleaning their streets, but this would not educate those who pollute the streets, and it would not prevent skippers from dumping their garbage cargos into the oceans. Close monitoring of ships by satellite systems and drastic fines might be a solution, but the wrongdoers will often escape justice. So far, protecting the global public good of clean oceans is still a global challenge. The other strategy lies with devising a new format of private ownership rights and assigning these rights to environmental goods. This would create entitlements, and these entitlements could be traded on markets. For example, a community can become ‘owner’ of a seashore which is polluted by plastic waste. Then it can contract a specialist firm for clearing up and concede this ownership right to the contractor. The idea was born by Gary Don Libecap, University of California Professor of Corporate Environmental Management, a research associate at the U.S. National Bureau of Economic Research. Property rights, he says, “link individual incentives with social objectives for environmental and natural resource use. Property rights allow for markets, and markets provide price signals on alternative uses, generating data on the costs and benefits of constraining emissions, fishing, and other forms of common-pool

 Global Partnership for Effective Development Co-operation (https://effectivecooperation.org) is a multi-stakeholder platform attached to the UN Department of Economic and Social Affairs. Its objective is to advance the effectiveness of global development efforts on all levels.

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extraction and of providing environmental amenities and other potential public goods” (Libecap 2009, p. 132). This type of a rights-based solution, as it asks for a novel form of trade, needs an enabler (whether the WTO or UNCTAD) that validates it on an international scale. The topic has already been taken up on a regional scale: The Caribbean Environment Program Regional Action Plan for Marine Litter and the Arctic Regional Action Plan Against Plastic Pollution employ rights-based solutions that involve the private sector (Balton et al. 2020). The Arctic Regional Action plan operates under the auspices of the Oslo Paris Commission (OSPAR; https://www.ospar.org), an international convention that fights dumping and marine pollution in the North-East Atlantic. OSPAR has coordinated marine litter measuring in the region for many years. There are many standalone activities by individual governments but challenging the trans-boundary concern of plastic waste requires an overarching initiative like the Arctic Regional Action Plan. The plan couples indigenous knowledge of local communities with industrial innovation for waste prevention and cleaning. The plan’s cleanup projects compile data on the location and on the amount, origin, composition, and distribution of plastic waste. Thus, collection of waste and recycling can be paired. This enables funding. From there, all involved parties, including “scientists, politicians, industry leaders, communities, indigenous peoples, non-governmental organizations, and other stakeholders – will be able to co-create lasting solutions to the Arctic marine plastic pollution problem” (Balton et al. 2020, p. 3). Libecap’s proposition to abate pollution from plastic waste by conferring cleaning rights comes close to the U.S. system of permits for releasing SO2 and NOx emissions that can be traded in a special market. In its first years, the system has produced cost savings of over 1 billion US$ relative to what might have been possible under a regulation that merely defined restrictions (Tietenberg 2007). The European system of emission rights trading is based on the same idea, and both systems need polycentric approaches at multiple levels. It is hoped that the plastic waste issue can get a similar treatment in a transnational setting. The topic of the greenhouse gases is older. But if we simply replace “greenhouse gases” with “plastic waste” in the wording which has been used for collective action against global warming, the urgence of both issues becomes comparable: “Global warming is a quintessential global pure public good, because each country’s release of greenhouse gases augments the world’s atmospheric stock in an additive fashion and each country’s cutback results in a greater cost than benefit for that country unless assurances can be given that a sufficient number of nations will act” (Sandler 1998, p. 225). The dumping of plastic has a visible effect, more than global warming, where the cause-effects relation will always be a subject of debate. There is another public good, though, where the cause and effects relations are also very visible. This is food security.

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4.6.2 Food security: A global public good to be controlled bottom-up Meeting the food demands anywhere in the world is one of the biggest challenges facing mankind. With the rapidly expanding global population, this is one of the most urgent problems that needs to be solved. in the world. The carrying capacity, which is the ability of the world to feed and sustain itself, is presently estimated to be between 9 and 10 bn people.100 Present population reports total approximately 8 bn, of which about one third is undernourished, and about 13.5% suffer from chronic hunger or food insecurity (Sasson 2012). Fighting hunger already requires huge resources from the global community. Estimates are that the demand for food will increase by 70% (van Dijk et al. 2021). Having sufficient food sources is imperative for our continued existence. “Sufficient”, “affordable”, and “nutritious” come within the definition of by the World Food Summit.101 There are four central dimensions (FAO 2006): – The availability of sufficient quantities of food of appropriate quality, supplied through domestic production or imports (including food aid). – Access by individuals to adequate resources (entitlements) for acquiring appropriate foods for a nutritious diet. Entitlements are defined as the set of all commodity bundles over which a person can establish command given the legal, political, economic, and social arrangements of the community in which they live (including traditional rights such as access to common resources). – Utilization of food through adequate diet, fresh water, sanitation and healthcare to reach a state of nutritional wellbeing where all physiological needs are met. This brings out the importance of non-food inputs in food security. – Stability through securing continuous access to food even through times of sudden shocks (e.g., an economic or climatic crisis) or cyclical events (e.g., seasonal food shortages). For attaining food security, businesses, state actors, international institutions and civil society organizations need to work together, beginning at the local level – food producers, food retailers, independent auditors and certifiers, state and federal ministries, and consumer protection institutes. But it is often hotly debated that these diverse public and private actors form a coalition. The contentious phrase is ‘co-regulation by the interested parties’. The argument against this is that the “fundamental ways how people eat, how much they pay for food, and how it reaches the dining table” (Rudder, Fritschler and Choi 2016, p. 21) cannot be left to private intervention, and that food security should be governed by the state exclusively. However, the business sector is one of the key players: Farmers earn a business income by producing food, tradespeople deliver

 https://www.livescience.com/16493-people-planet-earth-support.html.  The first World Food Summit took place from 13 to 17 November 1996 in Rome under the direction of the United Nations Food and Agricultural Organization (FAO).

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and distribute food. The public sector can only prevail in the long run if it involves businesses in setting the rules. A single central effort cannot secure sufficient levels and adequate types of food, not for the citizens of a state nor of a region. On the global level, the pertinent institutions are the United Nations agencies of FAO (Food and Agriculture Organization) and IFAD (International Fund for Agricultural Development (IFAD) together with WFP (World Food Program), a multi-stakeholder organization founded in 1961 at the behest of US President Dwight D. Eisenhower. The three organizations are committed to a multilateral system approach. They cooperate in channeling the resources for activities on local, regional, and global levels, they promote investment for increasing sustainable agricultural production, and they support programs to mitigate the effects of climate change on agriculture and to increase the resilience of agricultural producers towards crises in general (World Summit on Food Security 2009). The main work for alleviating hunger must be done on the local level. But there are some issues of food security which require solutions on the global level. International approaches that aim to secure sufficient, affordable, and nutritious food are trade agreements, assistance to national governments to formulate policies on agricultural production, on the pricing of products, and regulations in the commercial, the healthcare, the fiscal and the occupational areas. This then must reach down to the community/district levels because it is there and at the household level where the effects of food-insecurity are felt first and where deficiencies in production, distribution, transport, and delivery cause defects in food provision quickly. Also, in many countries households not only consume food but also produce the most of it. Subsistence farming, which is the term for a type of agriculture that produces only enough to feed the farmers and their families, usually without any significant surplus for sale or trade, nourishes millions of people in the developing world. But they are also most vulnerable: They regularly suffer from seasonal food insecurity in the period before harvest known as ‘the season of hunger’. In many countries, especially in Africa, governments are trying to transform this low-income mode to a more competitive income mode (Guma et al. 2022). The challenges are manifold: smallholder farmers prefer to stay on their own, and this traditional type of agriculture is not attractive to new entrants; improving productivity and strengthening under-developed value chains requires ample funding; land ownership is fragmented and often ruled by tribal authorities. But this is where international organizations and civil society associations can provide specific support (Oyo and Kalema 2016). Whichever type of support is convened, it must first build a system that understands and rapidly addresses food shortages. Signals of shortages always emanate from the local level, whether in the developing world or elsewhere. In developed countries they can be monitored by observing groceries and supermarkets. In developing countries, signals of early warning come from the rural population – shortages will first be felt by small and marginal farmers, landless workers, small fisheries, sharecroppers, and small livestock raisers where poverty and food insecurity go hand in hand. FAO estimates that the largest numbers of the hungry and poor live in 88

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countries. These countries cannot produce enough food, or they are unable to import food because they lack the financial resources (Liamzon 2010). Their populations are the most vulnerable when sudden shocks occur (a climatic or an economic crisis) or who regularly suffer from seasonal food shortage. More than anywhere else, it is in the regions where these vulnerable societies live that an adequate monitoring system is needed. From this base, data for control and coordination of remedies can be compiled. There are technical solutions for monitoring the causes which might produce an imminent shortage of food. For instance, several African states have established a ‘National Early Warning System’ and a ’Famine Early Warning System’ with the support of external donors and outside agencies, such as FAO and USAID, the United States Agency for International Development (Seaman 2002). Beyond merely alleviating ad-hoc deficiencies in food supply and food balance, they must connect to the daily routines of the rural communities, where local perceptions and qualitative data can be observed. This would feed information into the systems that pave a way for development planning and make those communities familiar with measures they can take on their own (Downing 1990). If there are technological aspects, they should be kept apart from the political and socioeconomic aspects of direct support. The beneficiaries, then, would better accept technical innovation. The following points should be thoroughly studied (Saner 2010): – Techniques must be made transparent, like satellite-based monitors that are already in orbit for detecting underground water catchment areas and anticipating signs of drought and deforestation. If the population in these areas understands what the systems provide, they will cooperate. – Supranational organizations that participate in the system, like the Intergovernmental Panel on Climate Change (IPCC) and the International Telecommunications Union (ITU), should be aware that some of the key countries may pursue strategies of their own, like pushing a vehement industrialization plan for their agriculture.102 The donors should try to convince them that these particularities will negatively impact the resolve of the international community. – While capacity-building for control and monitoring are a prime concern, they must be embedded in a holistic perspective that would lead to gradually moving these countries’ agriculture and food processing towards a higher level in the global value chain. ‘Holistic’ would also entail that the programs for advancing food security are connected to other initiatives. This was done, e.g., through the Save the Children Fund103

 E.g., in 2013, amidst harsh economic and climate change conditions, the government of Uganda introduced a plan to move the country from a predominantly peasant system with a per capita income of US$ 500 to an industrialized state with a per capita income of US$ 9,500. Donors responded negatively (Kjær and Ulriksen 2014).  Save the Children is an international, non-governmental organization that was founded in the UK in 1919.

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which established inclusive systems of data collection in the Mopti region of Mali (Lambert 1994) as well as in several regions of Uganda, Rwanda, and Burundi (Suresh and Ergeneman 2005). In village meetings and with key informants like traders and village elders, methods were designed to retrieve bottom-up data on the availability of produce and fish, on the conditions of livestock, food consumption and exchange, employment in farms, and migration. The informants also provided secondary information on soil condition and rainfall. There is rich indigenous wisdom in the rural population that contains techniques for conservation of soil and water, for rational land-use in agroforestry, and a large array of early warning signals to forecast weather and temperature (see, e.g., Akolgo-Azupogo et al. 2021, Subramanian and Pisupati 2010). From these data, seasonal calendars can be assembled which the various producer groups can use for harvesting activities and for strategies to cope with external events. And foreign donors will better understand how rural communities react when they connect the indigenous information to other data on livelihood criteria. Then, labor or capital requirements can much better be assessed for overcoming localized food insecurity timely and effectively (Davies 2016). Another connection that must be built is between information providers and clients/consumers on the level above the rural communities (Kiratu et al. 2011). Efforts have been made, by, among others, the United Nations University Institute for the Advanced Study of Sustainability (UNU-IAS; https://ias.unu.edu/en) whose objective is to improve the use of indigenous knowledge on a broader scale. For this, the United Nations established an Education for Sustainable Development Program with regional hubs in many African and Asian countries. As of 2023, the program has a global network of about 150 Regional Centers of Expertise (RCEs, https://www.rcenetwork.org/ portal /regional-centers-expertise-rce). These RCEs create partnerships among educators, policy makers, researchers and community leaders, including young people. One output is a framework for strategic thinking and collective action on sustainability in agriculture. Bottom-up control is essential, but there are obstacles. If there is a price shock for globally traded agricultural goods, poor countries are much more affected than the other players on the world market. While some Euro-centric economists argue that it is the “poor performance of African agricultural trade” (Lamy 2011) which causes harms and distorts resilience, the main cause lies elsewhere. It is the impediments fabricated by tariff escalation in the rich countries. They protect their food industry by levying high tariffs on imports of processed food. But exports of processed food would bring a higher level of value addition to producers in the developing world. The effect of those tariffs is that African economies lose all chances to increase the income from these agricultural exports. Another barrier has been erected by the European Union, which does not allow imports of genetically modified crops and of food that is processed from these crops. The paradox is that U.S. donors give genetically modified seeds to African smallholders for free because they are resistant to dry climate. The EU practice, which is partly based a ‘green’ ideology, jeopardizes the prog-

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ress which Africa could attain in their economies. The Europeans, as per a bitter expression, are “sowing misery in Africa” (Hassett and Shapiro 2003). But there is no other way for the Africans to increase productivity: the alternative would be to apply expensive chemical pesticides, which is a no go. They abstain from this, which is a creditable endeavor to avoid the unwanted consequences of chemicals for the quality of soil. Still, European policy makers do not honor that endeavor (Matthews 2015). Another example of harm produced by ideology is the one-sided acceptance in Europe of the argument that avocado production leaves a “big global footprint” because of its high use of water (Hoekstra 2015). This type of reasoning neglects that by reducing avocado growing the livelihood of thousands of small farmers worldwide will be extinguished – the contrary of support for food security. There are, though, well-balanced policies that can disjoin African farmers from the instability of staple food prices. Mainly, they provide incentives which conduce to upgrade investment in the agricultural sector. This gives rise to a wider range of export products which will also create spillovers to employment and technological advancement. Parallel to this, developed countries must lift the unilateral measures that impede imports from Africa on grounds which they justify with what they call “ecological concerns” as mentioned above (Guha and Alier 2013). There are some signs which show that international policy makers begin to understand which course of action is needed for African agriculture. One reflection was the launching of the Comprehensive Africa Agriculture Development Program (CAADP), which increased market integration in Africa (https:// www.un.org/en/africa/osaa/peace/caadp.shtml). CAADP is a great example of teaming up knowledge. Cooperation with, FAO, the UN Economic Commission for Africa and the African Union, among others, has led to a change of the outdated stance in the 2001 WTO Agreement on Agriculture which had rested on the false belief that when opening up agriculture markets in developing countries, they would benefit from worldwide supply and demand (Skoet et al. 2004). What happened was that Europe traded poultry to Africa. In consequence of the CAADP, Europe started to discontinue these controversial exports (Rudloff and Schmieg 2016). Mainstream institutions like the World Bank or the WTO, as they need to serve all member countries, tend to favor information that leans on the interests of their major shareholders. Both pursue research in global markets, and the monitoring of regional food markets is sometimes neglected. But if market makers – commodity exchanges and transnational food companies – would direct their attention to the trade flows into and out from developing countries, they could assist in forward planning and thus contribute to proactive action if scarcities are anticipated. Such “food and agriculture observatories” were built in a few regions in Africa in the wake of the food crisis of 2007–2008. The intention was to reduce public stockholding (state acquisition, storage, and subsequent release of food stocks, especially rice, corn, and wheat). This met with the interest of the key market players to integrate more countries into the international trade system; in turn, they provided support for the design and improvement of food availability prognostics (International Center for Trade and Sus-

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tainable Development 2014; Saner, Tsai and Yiu 2012). Together with international policies that persistently lower trade barriers, these measures have terminated what has been called the “institutionalized inequality” in world food markets. This has fortified a free flow of marketable food products and thus improved agricultural development in regions that had hitherto been disadvantaged (Nakuja and Kerr 2019). The food security issue as well as cleaning the oceans from plastic waste show that the controls which are applied both bottom-up and top-down contribute satisfactorily to improve the provision of a global public good. Another case is securing the human rights of fishermen, which falls under the jurisdiction of the United Nations Human Rights Council.

4.6.3 Safety for fishermen Decent working conditions for fishermen, including the protection of their lives has been the subject of years-long collaborative efforts between UNHRC, maritime states, global shipping agencies, international CSOs and the international food industry. But their commitments were unable to fully stop human abuse on fishing vessels. The problem lies with the overlapping competencies of states, shipowners that operate offshore, international regulatory institutions, etc. It seems that they just cannot be harmonized. Even the UN International Maritime Organization (IMO) cannot remedy the issue. So, a deplorable situation of modern slavery persists in many offshore territories, especially in Asia. It seems that Northern buyers cannot (or do not) exert an influence on labor practices in these countries, and even if international organizations have a mandate, they cannot enforce it. An example is Thailand’s and Indonesia’s fisheries with a high number of unregulated and unreported illegal activities on a large scale. While there is cooperation between governments, the International Labor Organization and buyers of seafood, unlawful practices up to human trafficking endure offshore to where they cannot reach. An attempt was made to eliminate the criminals from the market by employing third party certification for wild capture fisheries, but the effect was minimal: Very often, an oversee by governments or by local civil society organizations is prevented by maneuvering between jurisdictions (Marschke and Vandergeest 2016). But there is the Code of Safety for Fishermen and Fishing Vessels which has been in effect since 2005. The question is why it cannot be enforced on all types of vessels and in all waters. Three of the highest-ranked global organizations have approved the Code of Safety for Fishermen and Fishing Vessels – the Maritime Safety Committee (MSC), the FAO Committee on Fisheries, and the Governing Body of the International Labor Organization (ILO). The code explicitly refers to “ensure compliance with appropriate safety requirements for fishing vessels and fishers in accordance with international conventions, internationally agreed codes of practice and voluntary guidelines” (IMO 2006, p. 160). The

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most pertinent conventions are the UN Palermo Protocol104 which sets legal provisions against human trafficking and the ILO Work in Fishing Convention which is key for ensuring effective protection of the rights of fishers. For both treaties, the Monterey Framework for Social Responsibility in the Seafood Sector105 provides a Social Responsibility Assessment Tool which member states use to monitor whether there are indicators in fisheries of forced labor, abuse of vulnerability, deception, restriction of movement, isolation, physical and sexual violence, intimidation or threats, retention of identity documents, withholding of wages, debt bondage, abusive living and working conditions, excessive overtime and whether workers have access to grievance procedures (Lout 2023). The catalogue exposes the vulnerability of people who are subjected to unfair treatment of all sorts. But there are still employers on fishing vessels anywhere who deploy unlawful conduct towards their employees, and who evade prosecution. A new means to stop this is SDG Target 8.7 which specifies that “immediate and effective measures be taken to eradicate forced labor, end modern slavery and human trafficking”. This should evolve to becoming an effective vehicle, which, first, makes the oftentimes invisible crimes visible and then gradually eradicate them (Hampton 2019). Another possibility of action that has been suggested is to involve non-traditional actors such as the financial and banking sector who are indirectly implicated in the money transfers and laundry schemes of the traffickers (Saner, Yiu and Rush 2018). A pioneering example has already been set by Dutch ABN AMRO (Coster van Voorhout 2020). The fight against human trafficking, whether in fisheries or elsewhere cannot stop at prosecuting the criminals and bringing them to justice. The needs of the victims must get better attention as well. Local CSOs can help there, but it would also help to globally raise more interest in the fate of the workers that are employed in Indonesia’s and Thailand’s offshore fisheries. The issue has finally been connected to the Open Government Partnerships initiative. The initiative was founded by the Obama Barack Administration in 2011 together with the United Kingdom, Norway, the Philippines, Brazil, Mexico, Indonesia, and South Africa (https://www.opengovpartner ship.org). Its projects have improved healthcare provision in India and Vietnam and water services in Chile and Mexico by increasing transparency, by global and local civil society participation, and by holding public institutions more accountable (Hughes et al. 2017). The initiative’s endeavors are now embedded in the general context of the sustainable development agenda. This will help the international community to give more concerted support to those who are denied their fundamental rights –

 The Protocol was adopted by the United Nations in November 2000 in its session in Palermo, Italy, as part of the United Nations Convention against Transnational Organized Crime. Member states that ratify this treaty must develop and enforce anti-trafficking laws.  The Monterey Framework was developed in 2017 to align efforts for aligning social responsibility in the seafood sector by a large number of businesses, NGOs, and workers representatives. It is now recognized by the Conservation Alliance for Seafood Solutions in their Common Vision (Conservation Alliance for Seafood Solutions 2021).

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like the offshore fishermen and the children who work in sweatshops, on coffee fields, or in illegal or unprotected mine-pits. Another advance came on when the seafood industry, adopting what has become common practice in other industries worldwide (McBride 2017), established a system of standards for fisheries which also include employment attitudes: The Fisheries Transparency Initiative (FiTI)106 addresses twelve thematic areas, from national fisheries laws, regulations, and official policy documents to conditions of labor and fisheries law enforcement. Official development assistance from foreign doners will only be granted to states which engage in FiTI (Biermann 2021). In many other fields, standards, if they are recognized on an international scale, and if their application can be enforced, may also become an instrument to supervise an industry and to monitor how industry behavior affects public goods and societal wellbeing.

4.6.4 Standards: A means to control provision of public goods Standards are public goods. This emanates from how standards fit into the public goods definition: They are available to all, and one firm can use a standard without diminishing another firm’s use of the standard. Any business can freely obtain an industry standard from a standard organization without having to invest in their initial development. Still, for updates, potential adopters may have to invest without being able to solely profit from the output. This can give rise to collective action dilemmas (e.g., withholding of information) especially when the groups are relatively small (Pereira and Santos 2019). So, a commitment to ensure the diffusion of the standard must be secured early on. But when the dilemmas have been identified and solved, a standard will create new public goods, e.g., new knowledge on technical procedures. An example is Good Manufacturing Practice to which industries adhere voluntarily, but the rules, in some cases, may become mandatory when a public authority chose to endorse it. Two have become very important: In the U.S., it is Food and Drug Administration (FDA)’s standards for the manufacture of drugs, in Europe, it is the EU Clinical Trial Regulation (Lamph 2012). The U.S. and the EU have synchronized their standard setting-in medicine to reach optimum practice transfer. This would ensure that drugs maintain health and do not endanger it; the standards are an instrument for safeguarding the public good of global health. If standards are not equal throughout borders, less responsible firms will move parts of their business to jurisdictions where lower standards apply, for instance with regard to environmental regulations. The consequences may be disastrous. In 1984,

 The German-based non-profit organization Humboldt-Viadrina acted as the fiscal host after is launch as an association formed by a multi-stakeholder group. The Seychelles, being one of the first countries to commit to the FiTI, became the official host in 2019 (https://www.fiti.global).

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hundreds of people were killed at the Union Carbide plant in Bhopal because basic rules for keeping production sites safe (and for ensuring that no dwellings are built by the factory fence) were not upheld. The contamination of the land in that region and of the groundwater reserves has not been fully reverted and is likely to stay forever (Mandavilli 2018). There are other cases: Inadequate safety investments in a chemical plant near Seveso in Italy caused a catastrophe in 1976 when a cloud of dioxin and other toxins was released into the air through a sudden exothermic reaction. It contaminated hundreds of homes in the region. Standard procedures for handling dioxin did not exist at the time, and neither the producer nor the regional government were able to handle this emergency (Centemeri 2010). Since then, these and other standards were introduced, whether on minimum content of toxins, on plant safety and hygiene or on laboratory manufacturing practice. Reports on new developments are issued regularly, and information is exchanged and updated on these practices. For instance, the United States Government has assured, through reports of that kind, that the U.S. manufacturing standards for the chemical industry and their international counterparts continuously provide increases in security within the entire supply chain of this field (Iveson 2014). With a view to the catastrophe of Bhopal, the question arises if the many international treaties and agreements which have come into force since then would prevent a multinational firm from resorting to low standards, e.g., in a developing country, instead of applying the high standards of its home country. An answer is given by the acclaimed Professor Peter Buckley, a renowned figure in the field of international business: He says that it is not the regulations emanating from governments which may have or not have the power to enforce them. But it is “the web of rules and signals within which corporations operate today”; this web is an outcome from compliance with industry standards, customer expectations, supplier demands, and civil society norms. Signals come from all stakeholders of the corporation, not only expressed as price signals but also through means such as social movements, ownership changes, and lobbying. “Corporations are not passive receivers of rules and signals; they also make them. Business organizations, collectively and individually, formulate rules and send signals to the rest of society” (Buckley 2018, p. 361). This opinion may look very positive, but feedbacks show that deviations from generally accepted standards are rare, and they are detected quickly (FDA 2021). While control of standards application may not be enforceable everywhere, standards are very useful for assessing if and to what extent businesses contribute to sustainable development and to sustaining public goods. A well-known instrument are certification schemes. For instance, the UTZ107 standards are used to certify whether cocoa, coffee, tea, and hazelnuts are sustainably farmed (https://utz.

 The UTZ program founded by Netherlands-based Ahold Coffee Company has its name from Utz Kapeh which means “good coffee“ in the Mayan language Quiché.

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org). Similarly, the World Fair Trade Organization sets standards that aim at improving working conditions and prices in small-hold-farming globally (https://wfto. com/). Ten principles are set by Fair Trade of which almost each refers to a public good and to human wellbeing (Figure 16):

Principles of Fair Trade 1

OPP0RTUNITIES FOR DISADVANTAGED PRODUCERS

2

TRANSPARENCY & ACCOUNTABILITY

3

FAIR TRADE PRACTICES

4

FAIR PAYMENT

$

PROMOTE FAIR TRADE

10

RESPECT FOR THE ENVIRONMENT

7

GOOD WORKING CONDITIONS

CAPACITY BUILDING

FAIR T LD

OR

TEN PRINCIPLES OF FAIR TRADE

8

G

N

9

NO DISCRIMINATION, GENDER EQUITY, FREEDOM OF ASSOCIATION

AN

I

O

6

WOR

NO CHILD LABOUR NO FORCED LABOUR

DE RA

5

IZAT

Figure 16: The World Fair Trade Organization’s Principles. Source: https://wfto.com

Another example is standards for sustainable production issued by the Roundtable on Sustainable Biomaterials (https://rsb.org). In all standards, the composition of partners is varying: Single firms, industry consortiums, civil society organizations, public-private stakeholder initiatives, and government agencies. The diversity of institutional participation reflects the different forms of standards application in diverse fields and on diverse levels, but this guarantees the effective outcomes in practice (Schouten, Vellema and van Wijk 2014). Many standards directly relate to the target schemes of a sustainable development goal, like SDG 14 (“Conserve and sustainably use the oceans, seas and marine resources for sustainable development”) and SDG 15 (“Protect, restore and promote

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sustainable use of terrestrial ecosystems”). Some standards started as a proprietary technique. E.g., dairy firm Danone developed its Regenerative Organic Certification Standard to advance research on regenerative processes for which it committed 6 million US$. The addressees were dairy farms in Danone’s supply chain. They were taught how to use regenerative agricultural practices (techniques for soil enrichment, increase in biodiversity, and watershed restoration). The standard became globally used by the dairy industry and its suppliers, with the worldwide societal benefit that ecosystems’ abilities are strengthened and that farms’ resilience to impacts from climate change is enhanced (Doh et al. 2019). In the Danone case, the CSOs who had first claimed that the firm bought from suppliers which applied non-regenerative farming methods and was therefore responsibly for ongoing deficiencies in nitrogen fixing, water storage, and filtration capacities, entered a cooperation with the firm at a later stage (Marais et al. 2018). Standards are indispensable also when legal measures are adopted to control the increasing influence of technology on human lives. The regulatory frameworks issued by the legislative bodies can only be enforced by the relevant executive agencies if they are complemented with technical specification material from non-government sources. Enforcement, though, should not mean punishment and court action: This would be an indication of failure. The focus must be on understanding and facilitating compliance. Studies have shown that U.S. authorities, in general, consider compliance with “a named, nationally recognized code or standard . . . as prima facie evidence of satisfying the fixed standard of duty”, and that UK courts, when they rule on buildinglaws have stated that “specification of technical detail with which conformity is held shall be a sufficient proof of compliance with standards” (Hitchcock 2006, p. 136). On a global scale, where national jurisdiction does not reach, control of compliance with standards can only be performed if all sectors cooperate in monitoring business behavior (see below, section 5.2). Such monitoring will also contribute to preventing free rides and corruption.

4.7 Fighting corruption and free riding Free riding and corruption abuse and eventually destroy commons and public goods. Free riding disregards the efforts of others to build and preserve communal property, and corruption is downright disregard for morality. Whether passive corruption by “the misuse of public office for private gain”, or active corruption by “inducing a responsible office holder by monetary or other rewards to take actions which favor whoever provides the reward”, both produce private benefits illegally to the detriment of a public good (Nye 2002, p. 966). The same is valid for a free rider, but while corruption can be prosecuted by law, free riding can only be deterred by societal efforts: Free riders place themselves out of one of the major foundations of all economic actions, which is cooperation. Hence, this position outside society must be made fer-

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vently unpleasant to the free riders. One way is negative incentives, like punishment, another way is positive ones, like rewards. On the level of individuals, it would suffice to have a sufficiently high number of cooperators that would crowd out the defectors, and the threat of punishment or the expectation of a reward (mostly, for naming accomplices) might induce them to rather sustain the public good and turn away from free riding, e.g., in networks that share media objects (Lehmann and Keller 2006). Still, a network may find that giving away its services to non-members has positive externalities, e.g., for achieving its goals. Then non-members who make use of these services would not be viewed as free riders. If they would, networks that wish protection will find many technical ways to secure access. Free riding is of a different category on the institutional level. Manufacturing firms and energy producers can find a high potential for free riding in the carbon-dioxide emission reduction program. If participation is voluntary, industry members cannot be forced to partake in the program, and some will enjoy the fruits of the work of selfregulation while avoiding the costs. So, e.g., the European Union’s Emissions Trading System (ETS), while mandatory for carbon dioxide, nitrous oxide, and perfluorocarbons, can be undercut: In some sectors, only operators above a certain size are included, certain installations can be excluded if governments use other measures for cutting their emissions, and in the aviation sector it only applies to flights between airports located in the European Economic Area (EAA108) (https://climate.ec.Europa.eu/euaction/eu-emissions-trading-system-eu-ets_en). The problem lies with the heterogeneous industrial levels in the various European countries; other compulsory systems are nationwide (Canada, the UK, China, New Zealand, Japan, and South Korea), which makes monitoring much easier. Another area of institutional free riding is international trade. Firms which participate in international trade will achieve an advantage edge if the institutions in their homeland work effectively, whether political institutions like an unbiased legislative body and well-working government agencies, and economic ones that the political environment protects. If the political system secures rights to real property and to intellectual property, consistent honoring of contracts, impartial courts, they will be better off than firms based in unstable political environments. There are international organizations and treaties which set rules for trade (WTO, UNCTAD, etc.). But while rules set by national institutions can be enforced within the nation state, international organizations and treaties only have force where the involved countries honor them. This gives a loophole to free riders who exploit this type of cross-border insecurity (Gmeiner 2021). While the effectiveness which institutions have in an advanced economy can be transferred with the transfer of its – tangible – products to an importing country, intangibles cannot “carry” these marks. The most prominent example is intellectual prop-

 The EEA links the EU member states and three EFTA states (Iceland, Liechtenstein, and Norway) into an internal market governed by the same basic rules.

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erty. Intellectual property is an intangible good which makes the surplus which it provides susceptible to international misappropriation. The same goes with other advantages which the economic institutions of an export country propagate, like well educated workers, quality education and resourceful innovation in product- and market-development. The importer may pay for that with the price of the good or the fees for a know-how contract or for technical assistance. But the exporter cannot control how other businesses related to the importer make use of these knowledge-transfers. This is where free riding can even end up in a government institution of the importing country (Office of the United States Trade Representative 2021). A few response mechanisms against institutional free riding by traders exist and can be deployed. If the attack is on common resources or public goods (which leads to their overexploitation or diminishing), governments can react together with the export firms in question. Free riding on U.S. pharmaceutical intellectual property, for instance, affects knowledge protected by U.S. patents. One remedy which the U.S. chose to curtail this practice was aiding U.S. pharmaceutical companies with subsidies because interference with the trade systems of the importing countries is a “no go” (Feldmann 2016). The other American response has been a ban on reimportation of lawfully produced U.S. drugs that were exported by U.S. firms at lower prices because some import countries threaten that they would otherwise compulsorily license production of generic drugs (Yang and Maskus 2009). An ultimate resort, though the overall policy in free markets is to support free flows of goods, is trade restrictions. The key in implementing such trade restrictions is that they are limited to target the practices of free riding such as smuggling and theft, and not the outcomes like improvements in natural resource use (Sarker et al. 2018). The question is whether these improvements (e.g., of groundwater, when perpetrators use a water treatment plant for free) override the need to penalize free riding. The context of environmental free riding is a complex one, and sanctions may not achieve the desired effect. Environmental free riding, at first sight, reaps benefits without the perpetrator having to bear the cost of cooperation in an ecological effort. While the members to such efforts produce collective benefits from, e.g., reducing pollution and conserving resources, the free rider achieves an individual benefit. On a global scale, a country that engages in conservation of nature will, rationally, wish to secure the benefits that accrue to foreign countries from this endeavor (Barrett 2003). If these countries cooperate by committing to similar policies, the problem is solved. If not, enforcing commitments might be a solution, but this may have unintended consequences. For instance, in the discussion on policies for protecting rainforests, Germany has suggested that trade sanctions be applied on ozone-depleting substances and products which contain them, and it has threatened to completely ban the trade in goods whose production uses ozone-depleting substances (Casarões and Flemes 2019). Apart from harming the export industries in poor countries, the measure meets legal constraints. If this move ever came to pass, the World Trade Organization would declare such action as non-compliance with international trade agreements (Beaufils et al.

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2023). The case of carbon border adjustments proposed by the European Union is a similar one, and it raises similar concerns. The European Union’s carbon border adjustment mechanism intends to “put a fair price on the carbon emitted during the production of carbon intensive goods that are entering EU countries, and to encourage cleaner industrial production in countries outside the EU”.109 This would have the same effect as a tariff, but there is more: UN experts fear that the mechanism would most likely “encourage foreign firms to export to the EU from their ‘cleanest’, most carbon-efficient plants, while selling ‘dirty’ products to their own domestic users or third countries” (Hufbauer et. al., 2021, p. 1; UNCTAD 2021). The measure would only make sense if the levy’s proceeds were hypothecated towards low-carbon innovation in the developing world, and if they were channeled towards climate change mitigation and adaptation investments in Least Developed Countries (Burke et al. 2021). That, however, is a very unlikely scenario. But without a recompense to the countries that will suffer from the effects of the EU’s carbon border adjustment, a new potential of trade-distortion and protectionism may come up, and trade relations that are already fraught might be further strained. Countries which adopt programs to bar carbon intensive goods from entering their territory might as well fall back on trade sanctions. An outcome of that kind is undesirable and should be avoided from both a climate-protection and a trade governance perspective. A different view turns up when sanctions are discussed that aim to combat corruption on a state level where criminal procedures in governments inhibit the moral development of a country’s legal, political, economic, and cultural institutions. The players can be found on the level of state officials and on the business level, and on one level between those, which is the meso-level of industry associations, cartels and clans that influence markets. They may employ corrupt practices which obstruct the collaboration between a government and the private sector and are a major hindrance for public goods provision (Hoffiani 2019). While corruption was a predominantly regional or national preoccupation in the 1900s, globalization and public sector deficiencies all over the world have turned corruption into a global issue where it endangers global public goods. The fight against corrupt practices has been taken up by governmental and non-governmental organizations on the international echelons – the United Nations, the International Chamber of Commerce, Transparency International, the World Economic Forum, Interpol and

 See: https://taxation-customs.ec.europa.eu/green-taxation-0/carbon-border-adjustment-mecha nism_en. The measure is part of a broad set of proposals laid down in 2021 and in which the European Commission introduced the bloc’s climate change policy agenda for the coming years - the “Fit for 55” package. They embrace an update of the EU Emissions Trading System and developments with respect to emissions and removals from land use and forestry, renewable energy, energy efficiency, emission standards for personal vehicles, among other areas (https://www.consilium.europa.eu/en/policies/ green-deal/fit-for-55-the-eu-plan-for-a-green-transition).

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the OECD.110 There is the unanimous understanding that attacks on corruption must be launched from the supply side (the bribers) and the demand side (government officials who are prone to accept or to extort bribes). Sanctions against bribers and blacklisting are arrows in the quiver of the OECD that extinguish a source of income which the bribers achieve from imports and exports. Governments should be aware that stopping corruptive practices in cross-border trade will lead to growth in fiscal income that can be used to build better living conditions for their citizens; also, stopping corruptive practices can rectify distortions in the domestic price system caused by those practices. This will create improvements in the markets, like better job opportunities – another case where the effects of one SDGs implementation (SDG 16 includes commitments to fight corruption) also impacts the objectives of another SDG (# 8 calls for full and productive employment). Trade sanctions can also help to improve attention for the conservation of natural public goods: In developing countries the ecological sphere is often neglected. Efforts to maintain the habitat often fail – and sometimes the reason is corruptive practices. While many African countries have regulations that demand the mining industry to recultivate depleted mining pits, restoration often just does not happen as corrupt local governments block the implementation of the laws (Selmier II and Newenham-Kahindi 2017). Another case is when crooked politicians and their partners in business misuse public funds for sustaining or expanding the palm oil industry (Ayokhai and Naankiel 2016). This happens frequently even though ecologists warn that new oil palm plantations trigger environmental damage and above all, cause forest destruction (Jean et al., 2019). This obstructs economic growth in areas where people really need it. Interestingly, indigenous societies can mitigate the effect of corruption ‘from above’. E.g., the high cohesion which exists within African rural societies enables them to counter criminal practices of corrupt governments: The measures they can take, e.g., on sustainable farming, strengthen the ties within their communities (Akolgo-Azupogo et al. 2021). By contrast, in the developed world those ties seem to weaken: Conscientiousness on ecological concerns may advance in Europe, but social concerns get out of the spotlight. This enables “soft” corruption, which works to the detriment of social sustainability (Bronzini 2017). Favoritism, cronyism, and nepotism, which are forms of “social corruption” (Holmes 2015), wear off the democratic societies’ fabric. While often being blamed for the rise of corruption in Europe, the main cause is not the transformation of the former communist states. There, a new group of politicians may be tempted to abuse its political influence, but subtle forms of bribing and taking bribe are found in all other European states (Tänzler and Maras 2016). And even though personal experience with corruption may be low among citizens, if they perceive corruption elsewhere, social cohesion will wane (Charron 2016). And worse: When citizens cannot thwart public abuse

 The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions entered into force in early 1999.

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of power, they might respond with adopting corruptive practices on their own. Society will fail, people’s needs will not be met, public goods will not be delivered to the extent that is necessary (Rothstein 2013). Failed societies and failed states are at the worst end. However, there are many in-between stages on that journey. In the context of public goods, two main questions arise: – Can corruption be reduced by privatization of public goods, or would an increase in public goods provision by the state reduce corruption? – If corruption affects public goods provision, which measures can be found to fight this, and do they work? For answering the first question, a response can be found from reviewing the three major forms in which corruption occurs (as per U.S. Code, Title 18, § 201):111 a) Receiving bribe – public officers receiving money or other benefits with the purpose of changing the application of an act that falls within regarding their competence. b) Giving bribe – giving money or other benefits to a public officer to illegally satisfy an interest like buying a contract with the state, obtaining benefits from the state, obtaining licenses from the state, or accelerating the process of being granted a certain permission on behalf of the state. c) Buying influence – giving money or other benefits to a physical or legal person who has influence over a public officer, in order to determine the latter to do or not do an act that is required by their place of employment. Which are the public goods that would be most susceptible for what the three definitions depict? If the state supplies all that is presumed to be needed for its citizen’s livelihood, like nourishing, housing, supply of water, sanitation, healthcare, education, and all means of transport, then state officers have immense responsibilities. This “caretaker state” was seen to be the normal in the 1800s and early 1900s. Performing this type of statehood requires that responsibilities are attached to efficacy; however, the assumption that a state can shoulder all the responsibilities (and that it has all the capabilities for producing all public goods efficiently cannot be upheld in modern times: In a statement for the Vatican, Hans Tietmeyer, former president of Deutsche Bundesbank, underlined that this assumption has to be given up when looking at rising intergenerational struggles, at the crises which welfare-state regulations impacted in many countries and at unsustainable public sector budgets. Debt overload, whatever its cause (from mismanagement to tax evasion), can lead to the underprovision of public goods and to their complete collapse. There also is the upsurge of underground economies which abuse the welfare state: Countries with large under-

 https://www.justice.gov/archives/jm/criminal-resource-manual-2041-bribery-public-officials.

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ground economies, not just in Africa but to some extent in Italy and Greece as well, have weak institutions and weak and understaffed and underpaid judiciary staff who are prone to corruption because the oversight governance system does not work or is not sufficiently developed (Tietmeyer 2004; see also Bovi 2002). Some well-meaning economists defy the idea that full provision of public goods by the state tempts public officers to become corruptive. They argue that countries with large welfare programs have low levels of corruption, a high degree of social trust, and high levels of social wellbeing (e.g., Rothstein 2010), and they prove this with statistics based on averages for a whole country. However, a county-by-county analysis will give starkly different results (Ziblatt 2008; Dill 2015). In China, for example, corrupt practices and heavy-handed tactics used by local officials are frequent in spite of public supply of welfare, for example, of housing (Dickson 2016). But it obviously is a question of government style whether this equation is true. Singapore provides 90% of housing publicly, and no cases of bribes have ever been reported. So, a high degree of publicly provided welfare will not automatically induce corruption. The issue is that Singapore is a state with strong governance and with citizens who have a high sense of solidarity. (Khanna 2019). Are private enterprises better off with regard to corruption because, other than public institutions, they have legally prescribed governance systems? Sadly, oversight from shareholders (or, in the case of co-determination, from composite supervisory boards which include employee representatives) does not always work. There are examples of collusion (like with Swissair, where the main consultant and the board members were of the same political party which led to acquisitions that were highly overpaid – see, e.g., Nwabueze and Mileski 2008); there has been outright deceit in the infamous Enron fraud (see, e.g., Kroger 2005), there was mishandling of company funds by the chairman and several other board members and officers of Japanese optical equipment manufacturer Olympus (Dutta et al. 2014). Each of the three firms was a partner in public goods provision – Swissair in public transport, Olympus, with its powerful medical division, in public health, and Enron, in the field of public utility. Hence, whether a public good is provided by a business firm or the state, officials may become corrupt in either case. The only way to inhibit this – in government agencies and in private firms – is through effective “bureaucratic”112 control, transparency, public and private scrutiny – i.e., an appropriate institutional design. This would encompass a new format established in public agencies that has been called “professionalized bureaucracies” where independent specialists (“unelected bureaucratic agents”) are hired by their

 For German sociologist Max Weber, who created a new notion of the term, bureaucracy consists of two parts: One is the “existence of fixed and official jurisdiction areas that are generally ordered by rules”, and the second is “an office hierarchy with graded levels of authority” (Foster 1990, p. 223). Modelling control along these lines should be on the agenda of any officer in whichever institution.

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political “principals”.113 After the 2007/8 financial crisis, when independent regulators and central banks were staffed by professionals from outside the public agencies, the outcome was strict oversee on all levels – an effect that was largely unanticipated by politicians (Miller and Whitford 2016). On the international level, the supranational authorities are all professionalized bureaucracies, but they can only be effective in supervising public goods provision if the members to international treaties cooperate. Practically, it is mainly negotiations between nation states that determine which contribution is to be furnished by which member of a partnership. If one of the members acts in self-interest, it will try to get a free ride (McGuire and Olson 1996). There are partnerships that include non-state members, for example in treaties about the global preservation of rain forests or the transnational provision of satellite communication networks – private individuals, civil society organizations and business firms. Each of these stakeholders, and each decision they are to make, is susceptible to free riding, and, worse though, to corruption. A case where trans-border collaboration succeeded in overpowering criminals and wrongdoers was the effort to control diamond operations in African conflict areas. The intention was to impede the illegal trade of diamonds with which militias were financed (Saunders 2014). The ongoing offenses were jeopardizing the public goods of international peace and security, of providing a livelihood for the workers on the lowest level of the value chain, and of maintaining trust in institutions. It all started with mining giant De Beers declaring that it would stop selling gemstones which originate in zones where rebel forces fight against elected governments. This instrument that was used was a global tracking system for export and import verification, the “Kimberley Process” (see Howard 2016). By 2019, the system proved that 99.8% of the world’s diamonds came from fully conflict-free sources (https://www.kim berleyprocess.com/en/kp-action). Collaboration from the ground was intense: There were partnerships between governments, civil society organizations, the mining industry, and the gem sellers early on, all united in the Responsible Jewelry Council114 (Jakobi 2013). This worked better than the official means that are in place to fight transnational corruption, like the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and the Council of Europe’s Criminal Law Convention on Corruption (for an overview, see: Ryder and Pasculli 2020). Significant non-governmental contribution comes from the OECD Anti-Bribery Convention and blacklists like the Transparency International Corruption Perceptions Index.115

 The principal-agent relation is a cornerstone of governance theory and practice; if asymmetries of interests and of knowledge are overcome, a trustworthy agent will work to the best outcome for the principal (for practice in the public field, see, e.g., Potůček 2017).  See: https://www.responsiblejewellery.com.  The OECD Anti-Bribery Convention requires signatory countries to criminalize bribery of foreign public officials. In this, the convention becomes legally binding. Being listed on the Corruption Perceptions Index does not induce legal consequences, but the power of Transparency International, even

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As with any other criminal intent, ill-willing ‘experts’ will always find ways to undermine anti-corruption provisions, and they will find loopholes. There is one type of loopholes which is difficult to eradicate and which is tax evasion. When nations compete in favoring investors, tax laws granting advantages will always create a gray area between what is allowed by law and what may become illegal. Much of tax evasion has been stopped through diligent monitoring and close cooperation between tax authorities (see, e.g., Hanlon et al. 2015), but eliminating tax evasion completely on a global scale would require far-reaching controls for all modalities of international finance transfer. Today’s interconnected world provides many means of communication to a ‘globalized individual’ that can undermine control, and there are many markets to choose from. Some activities are legal but still questionable: Between April 2014 and March 2015 overseas buyers bought more than 100 billion US$ worth of real estate in the United States. 55% of these transactions were all cash and it remains unknown how much of this was money laundering and how much of this was from unpaid taxes (Cooley and Sharman 2017). The buyers used the concept of beneficial ownership to disguise: A property’s actual owner can be different from the beneficiary of property ownership: the thresholds above which disclosure is required are relatively high and only apply to residential property. U.S. legislation that regulates the use of these shell companies has been delayed for years (Salvo and Beaulieu 2022). In Europe, despite the issuance of five Money Laundering Directives by the European Union as per 2022, some countries, among which the largest is Germany, still allow cash in real estate purchase (Meyer 2022). The illegal as well as the questionable practices of capital transfers are mostly uncovered by investigative journalists and not by state officials (e.g., the Panama Papers scheme; see Obermayer and Obermaier 2016). Media activity, hence, plays an important role in the efforts to attain transparency in this and other areas of public goods. Sharpening public interest may lead to effective control by state authorities as well, which should restore trust in public institutions. Trust is the public good which deteriorates the most when damaged by corruption, with highly negative impacts on social capital in all its dimensions, including the international one. Locally, if social cohesion is sustained, the joint resolve of goodwilling citizens can be a bottom-up source to (re)build a “decent society” (Abbott et al. 2016). Rebuilding social capital and building new one on the global level is harder. But there are chances for this, too, as will be exhibited in the next chapter.

though non-governmental, is such that businesses and state actors will refrain from intensifying relations with a country that has a high ranking on the index.

Chapter 5 The global level revisited: Public goods in the SDGs The quality of cooperation between governments, business and civil society has changed through the understanding that all will benefit from positive outcomes of the United Nations Global Compact and the Millennium Goals initiative which were forerunners of the United Nations 2030 Sustainable Development Agenda. Apart from the collaborative efforts that followed these programs, additional frameworks were set up for collective action on the international scene, including (see OECD 2015a, p. 78): – the Istanbul Principles that guide civil society organizations in putting the principles of development effectiveness into practice; – the Guidelines for Effective Philanthropic Engagement; – the network of international CSOs; – the United Nations Program on Reducing Emissions from Deforestation and Forest Degradation (REDD); – the International Health Partnership. Indices have been designed for ranking the actors’ performance on common goals and commitments, such as the Commitment to Development Index set up by the Center for Global Development, and forums for dialogue and learning that encourage changes of mindset, behavior, and policy change. Some of these are: the OECD Development Assistance Committee (https://www.oecd.org/dac/development-assistance-com mittee), the Global Partnership for Effective Development Cooperation (see section 4.6.1), and the Development Cooperation Forum (https://www.un.org/ecosoc/en/con tent/about-development-cooperation-forum). An overarching objective is to address all facets of human wellbeing – the social, the economic and the ecological.

5.1 Social, economic and ecological wellbeing are inseparable When all societal groups collaborate in procuring, improving, or maintaining public goods, this neither favors the interests of the rich nor does it overemphasize the concerns of the poor. SDG Goal #1, “End poverty everywhere”, rightly is the first one in the SDG list. There is a direct track to enhancing wellbeing not just of the beneficiaries of that goal but of all members of society. It is inherent in the SDGs that they are integrated and indivisible and that they affect multiple sectors and levels simultaneously. Optimizing ecological, social, and economic objectives (and the public goods they represent) embodies conceptions which embody dualities of this trinity: Green growth – combining the natural environment with the economy, green society – combining ecological with social goals, and inclusive growth – combining economic growth with social aspects (Gupta and Vigilin 2016). Human wellbeing is embodied in each of these https://doi.org/10.1515/9783111134611-006

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dyads: the quality of human life depends on social inclusiveness, green growth and “greening the society” altogether. And it is up to all humans to create the quality of life – their own and that of future generations. The present generation is responsible to leave a stock of natural, man-made, and social capital for future generations, a stock from which they can sustain an income. If this capital stock is not preserved and maintained, it will be depleted prematurely to the detriment of all. Human sustainability, hence, becomes an “economic calculus” (Brätland 2006). This applies to all individuals: Bestowing a resource to a future generation is a human act, and it is necessarily an act of a property owner. With this, the economic sphere comes into play, and the indissoluble nexus between the social, the ecological and the economic becomes clearly visible. So, the Brundtland definition of intergenerational sustainability (WCED 1987) rests on the intervention of individuals, and, since individuals assemble in businesses, it also rests on business intervention. This embodiment was formulated some time before Brundtland marked out the ‘intergenerational’ in sustainable development. In 1963, authors Harold J. Barnett and Chandler Morse said in their work Scarcity and Growth: The Economics of Resource Availability: By devoting itself to improving the lot of the living, therefore, each generation, whether recognizing a future-oriented obligation to do or not, transmits a more productive world to those who follow. . . . The most important components of the inheritance are knowledge, technology, capital instruments and economic institutions (Barnett and Morse 1963, pp. 248f.).

The book became one of the most influential books which were published on the human prospect. Scarcity and Growth made a convincing case that scarcity of resources does not halt economic growth – in contrast to statements made by the Club of Rome a few years later. In Limits to Growth Meadows et al. (1972) predicted that resource limits and, in consequence, collective peril, were fast approaching. But since 1972 economic performance has grown globally, and it has kept pace with the sharp increase in world population: On average, the people who lived on the planet in 1950, got by on an income that, estimated as best as we can, was just about US$ 2,000 per year. But, as of 2005, the income had risen to nearly US$ 6,000 per year within two generations and with four billion more people on the planet (Simpson et al. 2005, p. 8). US$ 6,000 per year is an average, certainly. On the lower end there is more than a billion people who only have an income of about a dollar a day. And economic growth among these poor can certainly not replicate the production possibilities and the consumption of the wealthy. But growth is not a quantitative phenomenon only. Output and income statistics do not account for the qualitative phenomenon, they do not reveal changes in product ranges and changes in the sources of productivity, nor do they consider that many public goods are provided for free. The appeal expressed in Scarcity and Growth is, among others, about capital instruments and effective economic institutions which the present generation shall bestow upon those who will live later. Capital instruments are used by a firm to raise finance; finance is provided by asset management firms. And the condition given by Barnett and Morse is that investment must serve the objective to leave a more productive and

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more sustainable world to those who follow. So, two generations before asset managers became obliged to account for sustainable investment, the path was set by Scarcity and Growth for the finance world towards prioritizing genuine non-speculative investment objects. The common denomination for directing asset managers towards sustainable development outcomes has become ‘green investment’. Before making a green investment decision, its environmental, social and governance aspects must be checked and monitored. The most important monitoring principles for this have been published in a 2012 OECD review (Inderst et al. 2012). The concepts and definitions to be applied in the marketplace are mainly built on the environmental, social and governance implication standards (ESG) of impact investing. The following list shows the main characteristics of ESG (Table 14); the left and the middle columns almost exclusively deal with public goods. Table 14: Exemplary issues of ESG. Environmental Issues

Social Issues

Governance Issues

■■ Climate change and carbon emissions

■■ Customer satisfaction ■■ Board composition

■■ Air and water pollution ■■ Data protection and privacy

■■ Audit committee structure

■■ Biodiversity

■■ Bribery and corruption

■■ Deforestation

■■ Executive compensation

■■ Political contributions

■■ Energy efficiency

■■ Lobbying

■■ Whistleblower schemes

■■ Waste management

■■ Community relations

■■ Water scarcity Source: CFA Institute 2015.

Since 2012, green investment pledges have soared; developed countries have promised to mobilize 100 billion US$ a year in climate change finance until 2025 (see, e.g., Marke and Sylvester 2018). There are numerous types of activities, diverse actors, and multiple investment schemes. The underlying rationale can be condensed into three points of departure (Bürgenmeier 2008): 1) The ethical dimension of sustainable development; 2) adhering to the best available technology principle, namely, to produce and to distribute goods and services according to state-of-the-art techniques with respect to ecology; 3) stock market evaluation for determining how the investment handles its relationship with all stakeholders. In principle, it is these three points from which all human, societal and financial efforts should start out. Businesses should review their investments with the objective

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to channel finance into private ventures that promote social and ecological responsibility. They should bring their knowledge, technology, and financial capacities into ventures where the other partners are public institution or civil society organizations. It is not businesses and economics only: There is a new term in ecological geology which speaks to the ‘wellbeing economy’, an economic model that is focused on the pursuit of human and ecological wellbeing. The idea is to extend the social purpose of geology beyond material and financial goals to the ultimate ends of sustainability through delivering long-term wellbeing for all (Stewart 2023). When looking at social efficiency and social effectiveness, geology is an excellent field to demonstrate that results can be obtained without ideologically biased argumentation. Geology abstains from mixing nature and society, and it can uphold an analytical distinction between the two. Thus, the “narrative that portrays humanity as a species ascending to power over the rest of the Earth System, which entails the attribution of fossil fuel combustion to human megalomania, will implode” (Malm and Hornborg 2014, p. 63). Only an unbiased approach of this kind will lead to an optimal distribution of benefits to all members of a society (“social efficiency”) and align it with this society’s long-term objectives (“social effectiveness”). This involves the question who should generally control public goods delivery. The best way would be direct control by society, i.e., by those who use public goods.

5.2 Societal control If monitoring of whichever undertaking on public goods involves its beneficiaries, the principle of ‘no one to be left behind’, which stands above all the SDGs, will be most properly fulfilled. The task requires collective efforts, where citizens partake in communal action with governments and corporate actors. On a global scale, international institutions need to be added to that collective action. Today’s global public domain, apart from state actors, entails transnational firms and civil society associations that span the world; production of globally available public goods is a result of the interplay between this (private) sector and national/transnational institutions. The public actors had been traditional overseers of global public goods before the internationalization of the private domain came up. As the public and the private domains are intertwined, there is a wider interplay which must be controlled by all society. Societal control, on a state or regional level, begins with check-and-balance mechanisms inherent in democratic systems; on specific topics, referendums may be held, or roundtables that include all which are affected by a governmental decision. There is a long history of such controls in the area of technology. For this, lawmakers have always used specification material from non-government sources. This has evolved in the establishment of standards boards that represent a democratic system of selfregulation. Standard setting as a means of self-regulated control has been covered above in section 4.6.4. On a global scale, three perspectives come into mind: One is

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what has been called the “transformation of issue spaces” (Ruggie 2004 a), the other is globally active civil society organizations and the third is building and utilizing social capital.

5.2.1 Transformation of issue spaces The international political world after World War II had a system of rules for problem-solving (global governance arrangements) that were designed to work between independent states, with some interference through the United Nations. Then, territorial associations were formed like the European Union, and trade agreements like NAFTA or the Mercosur in North and South America, and ASEAN in Southeast Asia. Another change was brought about by powerful non-state actors like multinational enterprises and global CSOs. This led to a transformation of political and economic relations – policy spaces were no longer either “internal” or “external”, and public goods provision became dependent on issues inside a state and outside a state. There is a parallel to what happened at international trade, where concerns on border measures (tariffs, volume restrictions) were made up for by concerns on subsidies and other protectionist measures – internal factors that have an impact on external relations (Ruggie 2004 a, p. 508). Likewise, while pollution had been a matter to be dealt with inside the borders of a state or even a province, causes and effects of pollution have become universal: Plastic waste in the oceans, oil spills and marine litter on the high seas, etc., have a source that is located elsewhere. And within the global supply chains, external parties (foreign buyers) proliferate human rights issues that address the most internal political regulations between a government and its citizens in the state where the producer is located. Which instruments can be deployed to control issues that endanger public goods internationally? First, one must consider that control starts earlier – with discourse, contestation, and action, all organized around the production of public goods, in a new format of interactions among non-state actors as well as states. An example is global health: The interaction of states, the healthcare and pharmaceutical industries as well as patients’ representatives allows that a wide variety of human interests, not merely those interpreted and promoted by governments, can be expressed and pursued (Kickbusch 2013). If all the actors are involved in rulemaking and rule-enforcing, no group will be able to claim that its interests have not been accounted for. But reality shows that rule-enforcing, as it has to be conferred to a public authority, can meet with difficulties. Staying with the field of global health: While the World Health Organization (WHO) has the power to establish rules that apply across borders, ruleenforcement lies with national governments which often shun the investment for a health measure. If they bring in private actors for investing, they can better concentrate on control. A case for this is the partnerships in malaria control that were built in many countries affected by the plague (Nahlen and Steketee 2012). Similarly, with

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HIV/AIDS, the United Nations announced in 2002 that they would abandon their policy of relying on governments and would instead fund corporate efforts to provide antiretroviral drugs (Lamont 2002). The HIV/AIDS case shows that private firms can become authoritative and legitimate players in a global public goods effort because they have expertise, successful practice, and are explicitly granted coercive power by, in the case of HIV/AIDS, the United Nations. Another case is the public good of intellectual property rights, where multinational corporations are functioning as autonomous actors because governments let them act freely. The agreement on Trade-Related Aspects of Intellectual Property (TRIPS) was devised and entered into the WTO negotiations by an independent team of twelve industry representatives (the Intellectual Property Committee116). It was industry that identified a trade problem, devised a solution, reduced it to a concrete proposal and advanced it to negotiations of governments. “In effect, twelve corporations made public law for the world” (Sell 2003, p. 96). It may be argued that giving business firms political authority in international politics is questionable with a view to societal control. In the TRIPS case, though, there was enough room for the governments who negotiated within WTO. Admittedly, there is a fine line between this procedure and business firms as interest groups lobbying their governments or international organizations. But, first, lobbying is getting more and more regulated in many parts of the world (see, e.g., Ban and You 2019), and, secondly, civil society nowadays has developed the power to harness excessive abuse of corporate power. For instance, in 2001, when the pharmaceutical industry intended to privilege considerations of patent rights over global health concerns, civil society organizations played a key role in forcing the industry to reduce prices significantly. Also, media all over the world denounced this industry’s position as untenable (Spar and Bartlett 2003).

5.2.2 Control activities by the global non-profit sector The non-profit sector (non-governmental organizations [NGOs], civil society organizations) have constantly increased their profiles at the international level throughout the last decades. There were about 30 000 entities with an intentionally transnational reach in 2002, and about 1000 had members from three or more countries (Ruggie 2004 a, p. 554). The numbers have increased, but what is more important, their political clout has risen (Lewis et al. 2020). There are a number of factors that contribute to this, like globalization and advances in communications technology. Also, governments have de-

 The committee was formed in 1986 by Bristol-Myers, DuPont, FMC Corporation, General Electric, General Motors, Hewlett-Packard, IBM, Merck, Monsanto, Pfizer, Rockwell and Warner Communications. Their work was finalized in 1994.

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liberately chosen to support NGOs, and there is an increasing occurrence of multilateral negotiations between states that inspire NGOs and activists to shadow them (Keane 2003). Many of them started on a local level with local objectives, like Oxfam that was founded in 1942 by Oxford citizens who wished to support war-torn suburbs (“Oxford Committee for Famine Relief”). Today, Oxfam is an international organization consisting of 21 affiliates and the international secretariat in Nairobi, with an operational budget of over 100 million US$ annually for international activities (https://en.wikipedia. org/wiki/Oxfam). There were prominent involvements of Oxfam in Ethiopia where it urged Starbucks to agree on fair trade coffee arrangements (Arslan and Reicher 2011), and in post-genocide Rwanda where it supported land-restitution on a broad scale (Pottier 2002). On climate change, the Climate Action Network (CAN), an association representing environmental NGOs, has taken part in multilateral climate negotiations since its founding in 1989. The foremost field of international NGO activities is to support developing countries, whether through local projects or in transregional efforts. Many of them entirely concentrate on monitoring the attitudes of multinational enterprises (MNEs), with their objectives varying from control of prices, of workplace conditions and quality of products/services, to checking on consumer information and environmental conduct. They act as powerful watchdogs without having any formal mandate except that they may have some directive from a government agency. There often is no recourse to a specific legal framework, which may put managers of MNEs into a dilemma: The managers might be willing to respond to an NGO request positively, but they are also bound to corporate guidelines and disclosure requirements. So, they are sometimes uncertain about what is expected of them. In any case, NGOs can assume the function of reducing the ‘information asymmetry’ that exists between consumers and producers in a globalized economy. This improves the knowledge which consumers have about how the goods they purchase have been produced, how workers were treated in the supply change, how waste was processed, whether there was corruption of public officials or whether raw materials come from countries at war. This may incite consumers to penalize, and it may also create an incentive for producers to become more socially responsible (Lodge and Wilson 2006). Another field of societal control is to monitor international financial institutions (IFIs) such as the World Bank, the International Monetary Fund, and transregional development banks. This is pursued by IFIwatchnet (http://www.ifiwatchnet.org), an international NGO network of nearly 60 organizations from 35 different countries in every region of the world. They use, among others, the experience of the Bretton Woods Project117, a UK-based NGO with long-standing involvement in making global institutions accountable to the people they serve (http://www.brettonwoodsproject.org). Recent topics

 The name was chosen because it was the so-called Bretton Woods institutions (IMF and World Bank) which were at the center of the Project’s fist scrutiny activities.

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which were taken up by the Bretton Woods Project are the African food crisis and international trade, the unfinished debt agendas of African states, and scrutiny of the IMF and World Bank-led COVID-19 response (Lewis et al. 2020, pp. 155f.). National and international NGOs, for their monitoring work, can use a knowledge device that was set up by the Division for Sustainable Development Goals in the United Nations’ Department of Economic and Social Affairs (UNDESA). The device is a large platform by the name of SDG Knowledge Platform (https://sustainable development.un.org). All information which citizens, private sector associations and businesses as well as local authorities upload to the platform is accessible to any user in a high-quality fashion that is timely, reliable and both aggregated and disaggregated. Cross-border joint action built on these data and the networks behind the data can contribute to the formation of a powerful civil society. They can help to craft institutions that safeguard the rights and the independence of citizens and protect the natural environment: This way of cooperation builds social capital, as was shown above, on a local level, for the case of dairy producer Danone, where the opposition between the company and the CSOs who had first fought against the firm turned into productive togetherness (which is social capital) in the common effort to promote regenerative farming methods. Any business which reaches out to its community builds social capital. And there are sources for social capital on the international level as well.

5.2.3 Rediscovering social capital A formidable leverage for social capital formation on a global scale is to be found in the United Nations Global Compact initiative which enlists corporate engagement in promoting fundamental principles on human rights, on rights at work and on environmental responsibility (https://unglobalcompact.org). Its ten118 principles all relate to public goods: 1. Businesses should support and respect the protection of internationally proclaimed human rights; and 2. make sure that they are not complicit in human rights abuses. 3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; 4. The elimination of all forms of forced and compulsory labor; 5. The effective abolition of child labor; and 6. the elimination of discrimination in respect of employment and occupation.

 Principle no. 10 was added in June 2004 in accordance with the United Nations Convention Against Corruption which had been adopted in 2003.

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7. 8. 9. 10.

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Businesses should support a precautionary approach to environmental challenges; undertake initiatives to promote greater environmental responsibility; and encourage the development and diffusion of environmentally friendly technologies. Businesses should work against corruption in all its forms, including extortion and bribery.

The Global Compact has become a “values-based platform for bringing the relevant social actors together in seeking joint solutions to the imbalances and dislocations resulting from the gap between the global economy and national communities” (Ruggie 2004 b). It is these imbalances and dislocations that hamper the balanced provision of public goods on a global scale. With the three instruments employed by the Global Compact – information sharing and learning, policy dialogues and partnerships – solutions can be found where public goods provision is deficient, lagging behind schedule or quality, and not inclusive. An example that combines the three instruments is “Green Shipping Africa” on which a partnership was built between the UN’s International Maritime Organization, seventeen maritime authorities from across Africa and several shipping companies. The onset was a conference held in Ghana in February of 2023, which was co-organized by the Danish Maritime Authority119 and the Maritime Just Transition Task Force (https://unglobalcompact.org/take-action/think-labs/just-transition) whose aim is to support a just and human-centered decarbonization of the shipping industry. The members of the Maritime Just Transition Task Force are industry (the International Chamber of Shipping), labor (the International Transport Workers’ Federation and the International Labour Organization) and the International Maritime Organization, representing national authorities worldwide. With these diverse memberships, the new venture is on the best way to achieve progress in the effort to get the oceans clean, the atmosphere less burdened with carbon-dioxide and providing new jobs of which many will be available in Africa. As per a statement from a Global Compact officer, “moving towards a low-emission global economy will create tens of millions of new, high-quality green jobs across sectors. Through ensuring a Just Transition to a green economy, Africa has an opportunity to capitalize on the emerging green jobs of the future – in shipping and beyond”.120 “Green Shipping Africa” promises to become effectful, not least because decarbonization is an uncontested issue on all global agendas. The initiative contributes to

 The Danish involvement has its roots in the fact its maritime industries have a long history of social links. This nexus supports a common mentality and attitude towards shipping, with mutually accepted social norms, formal organizations and laws, codes, and regulations (Sornn-Friese and Iversen 2011).  https://unglobalcompact.org/news/5009-02-15-2023.

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offset, at least in part, the overweight of the climate change theme. And it raises the attention on resource exploitation and working conditions in developing countries which (by the general public, at least) is badly neglected. Still unobserved, mostly, by the general public, the Global Compact, and also pressures by CSOs, have led to the issues of resource exploitation and working conditions being increasingly taken up through cross-sectoral partnerships. One other example is the Extractive Industries Transparency Initiative (EITI), an international organization that obliges member states to comply with a standard for transparency regarding exploitation of oil, gas, and mineral resources. The mission statement of EITI has all the elements that can build social capital: “We believe that a country’s natural resources belong to its citizens. Our mission is to promote understanding of natural resource management, strengthen public and corporate governance and accountability, and provide the data to inform policymaking and multi-stakeholder dialogue in the extractive sector” (https://eiti.org). Over 50 countries have committed to strengthening the accountability of their extractive sector management. A very valuable effect is that a country’s EITI membership has also helped to build trust in its politicians (Villar 2020). Another case is the Ethical Trading Initiative (ETI), a London-based alliance of companies, trade unions and CSOs. It promotes respect for workers’ rights around the globe. Companies that join adopt a code of labor practice that they expect all their suppliers to work towards. Codes address issues such as wages, hours of work, health and safety and the right to join free trade unions (http://www.ethicaltrade.org). These organizations not only provide support to members but also to the communities affected by their members’ business. They are part of a social capital that is formed by those communities and the respective government agencies. Their objective is to arbitrate and monitor. For this, they collaborate with CSOs on the ground and with transnational CSOs. There are corporations that have yet to assess how to cooperate with those CSOs. EITI and ETI can provide support to them and install partnerships that utilize the power of both sides in terms of specific knowledge, communications expertise, and public credibility. A case where it was not possible to build social capital for remedying a catastrophic situation was the failure of the international community to provide aid to the victims of the February 2023 earthquake in Syria’s northwest. There was a political background to this because the region is held by the opposition to Syria’s regime that is backed by Russia. This motivated the UN relief agencies to not take the lead, and that prevented the other relief organizations to proceed. One may see this as a moral obtuseness towards claiming the priority of saving human lives over all other considerations (Wintour 2023). Sadly, it seems there is no power in the Global Compact to overcome political obstruction, and the Syrian failure is one of the situations where good will is bluntly extinguished and all efforts of an operation to rescue minimal wellbeing are reduced to useless. There is some hope through the Global Compact being complemented by a “Global Compact on Refugees”, established by the United Nations General Assembly on 17 December 2018 and which affirms a comprehensive,

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multi-stakeholder approach to refugee situations. But, as a commentator said, it will stay unfinished work if it only spells out new modalities for international cooperation and not specific commitments (Aleinikoff 2018). Harsh to say, but even the United Nations are ostensibly powerless against the realities of evil powers attacking the world order.

Conclusion: Businesses, individuals and state actors collaborating for public goods and human wellbeing Members of a society, anywhere, do not act in isolation; they live together. This refers to individuals, to businesses and to state authorities. They may pursue their own projects, but they always cross each other’s paths in the process. Their pursuits often have external effects, that is effects which spill over into the spheres of the others. This may be with or without the consent of these others, and these externalities may be negative time and again, but they can also be a boon. The external effects which are most pronounced come from the delivery of public goods: For instance, people who defend their homeland generate positive externalities; they benefit other members of the society, not just themselves. In the light of these effects, one may claim that society is obligated to produce public goods, and to produce them communally, by collaborative action. This will secure wellbeing for all. With some restrictions, the same goes for commons. A commons, or collective property arrangement, is a specific format of goods. Commons are owned and governed by its members; while they are not accessible to all society, their implications produce benefits which go beyond the borders of that arrangement. For instance, a communal water treatment plant that is managed by partners from industry and public institutions ensures that groundwater stays clean. Provision of water, healthcare and education are further examples. These goods, like many other public goods, may be procured by the state, by businesses or by a common venture for its associates only. But their effect will very often reach all members of society. Whichever format is chosen, whether pure public goods or commons, it is state actors, businesses, individual citizens, and their representations by parliaments as well as by civil society organizations who must cooperate openly and without preconditions. This works well on the local and state levels even though there may be free riders and negative externalities. On the international level, cooperation to procure and defend global public goods is much more difficult. The war which Russia started against the Ukraine has shown how one party that obstructs cooperation in all fields can destroy peace, security, and the wellbeing of hundreds of millions of people. Global public goods have become vulnerable, also, through digitization of all processes in all spheres of human life. Not even on a regional level can statal authorities protect their constituencies against cybercrime and misuse/falsification of publicly available information. Attempts must be made on the global institutional level to regulate this and other social affairs and thus protect public goods. Citizens, and this includes corporate citizens because businesses are members of society, must ask themselves what they can do to help secure the benefits of public goods. But they must also rely on worldwide institutions to “get it right”, as per a https://doi.org/10.1515/9783111134611-007

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statement of Nobel laureate Amartya Sen (Sen 2010, p. 57). When citizens trust in public institutions, they look for effectiveness, in the first place, Sen claims, not for a ‘just’” institution, and he asks for policymakers to broaden their perspectives beyond national borders. With this appeal, Sen contrasts fairness principles that are based on the interests of a closed society only, and he returns to Adam Smith’s concept of impartiality as going beyond the “concerns of the local partners to a social contract” (Sen 2010, p. 61). What citizens also expect from policymakers is that they carefully balance the promotion of one public good against that of another. An example is the ongoing discussion on how to best integrate renewable energy resources which often neglects the economic wellbeing of consumers. The collective voice must be heard in any such vital issue: Democratic participation and deliberation are essential to prepare society for necessary change and for future emergencies. These implications arise most clearly when societies are under stress – whether from an environmental catastrophe or in a war, or when markets break down. The extreme level of stress brought by the COVID-19 pandemic gave momentum to the forces that hold society together, with some differences among countries and among some groups of society. But paradoxically, while social coherence increases in times of crisis, it is during these times when the call for receiving public goods and services from the state is overwhelming. The paradox may be solved when one looks at the sheer magnitude of the problems a crisis produces: They appear to hugely exceed the power that is available for a (smaller) community to co-produce and manage its commons according to its own rules and norms. One lesson learned for the pandemic is that successful implementation of response and recovery needs both a strong government and strong cohesion in society. When looking at the public goods that the pandemic has endangered, which mainly were – health services and health systems, – social protection services and basic welfare services, – productive employment and decent work, – supply networks and global connectivity, it is the same goods, whether on a local or on a global level, that are affected if provision of environmental or infrastructure goods is deficient or unbalanced. Climate change, the weakness of cyber-security, economic or military warfare and their aftermaths will augur imminent restructurings of the global economic order as per a crisis-briefing by McKinsey (Craven et al. 2020). Society is intimately connected in the affectedness of such events and in the need to overcome them. Many institutions (and businesses) will see that they must collaborate. Subsequently, there is a realistic chance for political, economic, and social restructuring. This would produce new types of relations between state authorities and civil society, a redefinition of intergenerational relations, better recognition for which public goods to foster and for how to make sure their benefits reach all. The question is not whether entering coop-

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erative endeavors for producing a public good has to be coerced or whether it is a prerogative; the question is how to prevent that non-cooperation becomes tantamount to defectors getting a free ride, which destroys social cohesion. The more we get into crisis situations, the more will coercive public goods provision become a case in point for restricting defection. But that should only be practiced if voluntary efforts alone are not sufficient to sustain society. With globalization, we are getting more and more societal challenges which require that the members of society transcend their self-interest to engage in impersonal cooperation (i.e., to collaborate with ‘strangers’) for creating public goods. This is required for conserving natural resources, mitigating the consequences of climate change, suppressing the spread of a deadly disease, halt military aggression and other public goods. It can easily be seen that the benefits of these concerted efforts will be non-rival and non-excludable. However, this only works with a unity of purpose around that collective action challenge, and then coercion should not become necessary. A unity of purpose would also achieve that – the world’s businesses, public entities and third sector organizations work together to preserve and improve wellbeing of mankind, – the controversy of arguments for or against non-market approaches to any economic activity, especially in the delivery of public goods is settled for good, – a comprehensive agenda is set up a on all societal levels for maintaining and expanding public goods, whether tangible ones or intangible ones, – decision-making support for communal efforts on public goods is built from whichever source, – communal efforts are made visible and measurable through measuring and valuating public goods (as monetization will also contribute to ease funding decisions), – the interdependencies and interrelationships of the SDGs are utilized as they are essential for the wellbeing and the survival of mankind. The contents of this book might help to improve an understanding for all these objectives and to motivate the audience of the book too seek ways for contributing to the effort from their own ends. The book also shows that the boundaries of the private and the public spheres are tenuous. There has never been an underpinning for separating these spheres, neither a political nor an economical nor an ethical one. From this viewpoint, the book highlights how the mission of businesses has changed and how they emphasize the greater stakeholder models that move towards including all members of society. So, the provision of public goods and services can be understood as jointly safeguarding the common good and the human wellbeing. This brings two old economic traditions together – the positivist one (outcome) and the moral one (motivation). Hence, the public goods concept becomes the social compact binder that unites what has been generally confined either to the public or to the private sectors, and it should thus be able to reduce the social tensions that we observe all over.

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Index AACSB 83 ABN AMRO 162 Aborigines 23 abuse 19, 65, 72, 90, 106, 117 access to food 2, 32, 156 access to law 30 access to water 2, 10, 45, 90 accessibility V, 1, 9–10, 27 accountability 69, 86–87 Accounting for Sustainability 79 acquired desires 42 affordable housing 16 Africa V, 69, 72, 90, 92, 96, 153–154, 157, 160, 162, 172 African agriculture 160 African Continental Free Trade Area 98 African Development Bank 98 African Union 98, 160 agricultural cooperatives 16 agricultural production 157 agriculture 87 Aichi targets 148 airport security 107 Alliance for Health Policy and Systems Research 97 allocative efficiency 9, 111 Alma Ata conference 47 Andean Community 98 Angola 69 Anti-Bribery Convention 173 Apple 68 appropriation of public goods 105 Arctic Regional Action Plan Against Plastic Pollution 155 Argentina 92 Aristotle 5, 12, 42 Arrow, Kenneth 5, 17 ASEAN 179 Asian Infrastructure Investment Bank 98 Australia 8, 23, 52, 57, 113, 124 Austria 35, 57 autonomous private self 118 bandwidth 5 Bangladesh 76, 89 Basel Institute for Commons and Economics 141 BASF 126 basic education 8, 52 https://doi.org/10.1515/9783111134611-009

beachfront 26 Behemoth 6 beneficial ownership 174 Beyond GDP 21, 64 Bhopal 164 Bill & Melinda Gates Foundation 66, 98 Bill Gates 103 biodiversity 3, 15, 148, 166 biomass 82, 139 biosphere 23, 39, 151 BMW 70 bonum commune 4 bottom-up control 159 Bretton Woods Project 181 bribe 170–171 bribery 71, 99, 171, 183 Bribery Act 173 broadband connectivity 34 Brundtland 141, 176 Build Back Better Act 113 Build, Operate, Transfer 90 Build, Own, Operate, Transfer 89, 122 bundling of property rights 128 Burundi 159 business education 83 Business in Society 68, 79 buying influence 171 Cadbury 17, 66, 68, 103 call neoliberalism 119 Cambridge 120 Campeche 148 Canada 52, 57, 94–95, 126, 167 carbon border adjustment 169 carbon dioxide 5, 23–24, 39, 65, 167 carbon dioxide capture and sequestration 40 Carnegie 66, 103 carrying capacity 31, 156 Catholic Church 6 Caveat emptor 71 Center for Peace Studies 110 Central American Common Market 98 Central European University 119 certification schemes 164 Chevron 69 child labor 53, 182 Chile 63, 162

220

Index

Chilean fisheries 134 China 19, 39, 56–57, 60–61, 72, 92–93, 109, 124, 167, 172 Cicero 4–5 circular economy 73, 80, 82–84 Cities Data Book 144 citizens 4, 6, 13, 67, 133 civic dialogues 124 civil disruption 140 civil society organizations 7, 23, 48, 69, 83, 86–88, 97, 120 clean air V, 1, 15–16, 19, 25, 30, 34, 59, 130 clean sources of energy 153 Climate Action Network (CAN), 181 climate change 2, 15, 24, 35, 85, 114, 137 climate change adaptation 35, 153 Clinical Trial Regulation 163 club goods 9, 30–31, 38 Code of Safety for Fishermen and Fishing Vessels 161 coercion 8–9, 12, 41 coexistence 108 coffee fields 163 co-funding 98 coherence 2 collaboration V, 1 collaborative decision-making 115 collective action 2, 7–8, 14, 120, 141, 155, 159 collective bargaining 182 collective choice 7, 41, 129 collective consumption 4, 9 collective decision-making 108 collective efforts 9, 13, 17–18, 102 collective ownership 14 collective spending 30, 32, 34 collectivistic benefit 118 colonialist 119 Commitment to Development Index 175 common good V, 1, 5–8 common interest 7 common interests 6 Commons V, 2, 4, 11, 14, 17–18, 36, 41, 125 commons governance 41 commonstock 101–103 communicable diseases 26, 47 community 5, 46 community of goods 5 community participation 51 community relations 146

compensation 104 competition 106 compliance 87 Comprehensive Africa Agriculture Development Program 160 compulsory labor 182 Concept Foundation 96 concession contract 88 concession model 90 Concession Schools 95 conflict prevention 152 Conflict Resolution 129 Confucianism 5 congestion 31 connectivity 20 conscious capitalism 69 conservation 3, 48 construction 33, 67, 72, 88–89, 123 consumption 1, 31, 150 consumption externalities 107 contingent valuation 62 Copenhagen Business School 126 co-regulation 48, 156 corporate citizen 66 corporate philanthropy 66 corporate responsibility 48 corporate social responsibility 69–70 corporatist 57 corrective justice 12 corruption 65, 99–100, 136, 166, 169, 171, 183 COVID-19 V, 47, 50, 58, 76, 99, 115–116, 118, 182 creation of wealth 80 creative destruction 18, 44 criminal 171 criminal acts 71, 85 Criminal Law Convention on Corruption 173 CSOs 69, 83, 85–88, 90, 96, 101, 140, 166, 179, 184 cyberspace 46 dairy industry 166 dam 32, 37–38 Danish Maritime Authority 183 Danone 166, 182 database 102, 129 Denmark 58, 126, 132, 144 destination principle 100 Deutsche Lufthansa 67 Development Assistance Committee 175 Development Cooperation Forum 175

Index

development planning 158 Dewey, John 81 diesel emissions 71 Diesel scandal 68 dignity 1, 23, 71 dilemma situations 108 dioxin 164 dis-appropriation 101–102 discrimination 182 disease 31, 36, 94, 96, 134, 150 dismissal 115 disparities 51, 53 distrust 20, 85 diversity standards 120 Dodd-Frank Act 72 doom-and-gloom-budget 115 drainage 88, 126, 139 Earth Charter 83 Eastern Europe 85 ecological law 104 economic efficiency 38 economic infrastructure 88, 112 economic utility 21 economic value 63, 130, 133–134, 137–138 Economics for the Common Good 1, 14 ecosystems 138–139, 148 education V, 10, 13, 15, 17, 27, 45, 54, 66, 88, 93–94, 96 education campaigns 48, 94 Education for Sustainable Development 159 effectiveness 36, 45, 69 efficiency 18, 30, 36, 69, 92, 94 effluents 58–59, 125, 136, 144 Egypt 95 Eisenhower, Dwight D 157 emission reduction 40, 167 emission rights 16, 132, 155 emission standards 169 emissions 48 Emissions Trading System 62, 167, 169 employee training 70 employees 48, 77 enabled utility 27 enclosing the commons 105 enclosure 102, 106 energy production 40 Enron 68, 71 entitlements 104, 154, 156

221

entrepreneurs 66 Environment Canada 63 Environmental Compliance 136 environmental damage. 154 environmental depletion 147 environmental protection 34, 86 Environmental Protection Agency 63 environmental reputation 74 environmental responsibility 183 Environmental Valuation Reference Inventory 63 epidemic 31 equality 44, 58, 69 equity 94 Erasmus University 126 ESG 177 ethic of care 121 ethical reputation 74 ethical standards 94 Ethical Trading Initiative 184 Ethiopia 181 EU Justice Scoreboard 135 European Bank for Reconstruction and Development 98 European Environment Agency 63 European Union Raw Materials Alliance 113 European Values Study 146 executive salaries 70 expropriation 103–104 extended income 132–133 externalities 10, 58–59, 62, 72 externalities valuation 130 externality 64 Extinction Rebellion 85 extortion 183 Extractive Industries Transparency Initiative 184 failed states 21, 171 Fair Trade 165 Famine Early Warning System 158 Fannie Mae 66 FAO Committee on Fisheries 161 financial cost of pollution 73 financial crisis 58, 107, 115 Finland 58, 134, 144 Firms of Endearment 70 fiscal competition 34 fisheries 74, 126, 162 Food and Agricultural Organization (FAO) 156 Food and Drug Administration (FDA) 163

222

Index

food availability prognostics 160 food security V, 155–156 Ford Foundation 66, 98 Foreign Corrupt Practices Act 173 Forum for the Future 75 Forum on Business and Human Rights 152 Framework for Country Health Information 150 Framework for Disaster Risk Reduction 39 Framework for Social Responsibility in the Seafood Sector 162 France 19, 51, 57, 94, 115, 123 Frankfurt School of Philosophy 118 free riding 41, 65, 166–167 free trade 71 freedom of association 182 freedom of choice 1 freedom of movement 135 freedom of speech 119–120 French labor market 116 fresh water V, 1, 15, 30, 39, 90, 139, 156 Friedman, Milton 68, 73 functionings 43 Gaza 87 General Data Protection Regulation 117 German Environment Aid 85–86 Germany 13, 19, 34–35, 50–51, 55, 57, 59, 66, 85–86, 107, 116–118, 121, 174 Ghana 45, 100, 183 Gini index 132–133 Global Alliance for Improved Nutrition 97 Global Alliance for Vaccines and Immunization 96 Global Alliance to Eliminate Leprosy 97 Global City Indicators Program 144 global collective efforts 152 global commons 3, 36 Global Compact 83, 97, 175, 182–184 Global Compact on Refugees 184 global development cooperation 154 global governance 100, 179 global health V, 66, 96, 163, 179 global infrastructure 112 Global Mindset Institute 52 global order 2 Global Partnership for Education 97 Global Partnership for Effective Development Cooperation 97, 154, 175 Global Partnerships 97 global partnerships for health 96

Global Polio Eradication Program 96 global PPPs 97 global public goods 36, 38 global public interest 100 Global Reporting Initiative 75, 135 global value chain 158 global warming 15, 46, 155 globalization 36, 58, 169, 180, 188 good livelihood 1 Good Manufacturing Practice 163 goods of fortune 42, 44 governance 36 governance structure 91 government control 46 government effectiveness 44 government ownership 68 government schools 95 Greece 114, 172 green growth 176 green investment 177 Green New Deal 113 Green Shipping Africa 183 green taxonomy 113–114 greenhouse gas emissions 16, 113, 137 grievance procedures 162 Guidelines for Effective Philanthropic Engagement 175 Guiding Principles on Business and Human Rights 72, 97, 153 habitual obedience 8 health V, 1, 10, 45 health determinants 150 health education 48, 50, 74, 93 health expenditure 92 health inequity 50 health insurance 51, 56 health management 11 healthcare 15, 17, 21, 27, 29, 48, 50, 69, 107 healthcare partnerships 93 high-school certificate 116 HIV 93, 96, 125, 180 Hobbes, Thomas 6 Honda 70 hospital privatizations 107 hospital treatment 29 hospitals 11, 48, 88, 92–93 housing 11, 17, 172 human abuse 161

Index

human capital 75–77, 79–80 human rights 4, 23–24, 26, 41, 161, 182 Human Rights Council 72, 152, 161 human trafficking 161–162 Hume, David 6 Hungary 119, 144 hygiene 48, 94 identifiability 20 IFIwatchnet 181 impact investing 16, 177 impact of vaccines 48–49 impure public good 31 impure public goods 9 India 19, 23, 56, 92, 95, 126, 147, 162 individual preferences 18, 25 individualistic benefit 118 Indonesia 161–162 industrial revolution 2, 80 infectious disease 48, 50 Inflation Reduction Act 113 innovation 16, 27 input-output matrix 149 insecure jobs 116 Institute for the Advanced Study of Sustainability 159 institutional capital 141 institutional safeguards 107 instrumental value’ 130 intellectual property 27, 125, 167 Intellectual Property Committee 180 Inter-American Development Bank 98 intergenerational 37–40 Intergovernmental Panel on Climate Change 38, 137, 158 International Aids Vaccine Initiative 96 International Chamber of Commerce 169 International Fund for Agricultural Development (IFAD) 157 International Health Partnership 175 International Integrated Reporting Council 75, 77 International Integrated Reporting Framework 75 International Labor Organization 161 international law 71 International Maritime Organization 161, 183 International Monetary Fund 98 International Telecommunications Union 158 internet 34, 46, 65

223

Internet Corporation for Assigned Names and Numbers 46 Internet Engineering Task Force 46 internet governance 46–47 Interpol 169 intervention policies 106 intrinsic value 130 investment 105, 138 investment in education 54 invisible hand 43 Irresponsible 71 irresponsible behavior 71 irresponsible business 70 irrigation 10, 15, 17, 31, 40–41 Istanbul Principles 175 Italian Cities Sustainable Development Index 144 Italy 123, 140, 144, 172 iuris consensus 4 jailhouses 88, 90 Japan 33, 51, 60, 109, 147–148, 167 Japan Bank for International Cooperation 112 job opportunities 2, 98, 141–142, 170 Johnson & Johnson 70 joint and several liability 60 jointness 10 jointness in consumption 9 Kampala Principles 154 Kenya 53, 153 Kickstarter 17 Kimberley Process 173 knowledge 27, 30, 36, 52, 82 knowledge management 148 Kuznets Curve 80 labor market V, 19, 51 labor market mobility 146 labor market policies 115–116 labor market reforms 115–116 laissez-faire 106 landscape resilience 74 Last Generation 85, 120 Latin America 95 Latvia 144 law and order 19, 87, 135 Law on Charitable Purposes 86 Least Developed Countries 16, 100, 169

224

Index

Leipzig 66 level playing field 108, 152 Lever Brothers 17, 66 Leviathan 6 liability in tort 117 life-long learning 83 Limits to Growth 176 living conditions 16, 22, 46, 70, 140 living wage 77 local public good 33–34 Locke, John 6 low carbon investment 61 malaria control 179 Malaysia 95 Mali 159 malnutrition 48, 93 managing collective efforts 121 Managing of PPPs 126 marine litter 155, 179 Maritime Just Transition Task Force 183 Maritime Safety Committee 161 maritime states 161 market failure 10, 42, 101, 106–107 market return 72 Maslow Hierarchy of Needs 134 Max Planck Institute for the Study of Societies 127 McGregor, Douglas 77 means value 130 Merck 69, 72 Mercosur 179 Mexico 63, 148, 162 Middle Ages 6, 10 Milieudefensie 24 Mill, John Stuart 6 Millennium Development Goals 80, 95 Millennium Goals 175 Millennium Summit 80, 87 minerals and metals governance 113 Ministry of International Trade and Industry (MITI) 33, 112 Modena 144 monetary value 62–64, 130, 132–133, 137–138, 140, 144, 146–147, 149 monetization 23, 46, 64, 137 Money Laundering Directives 174 monitoring 48, 150, 182 moral business 70 moral capitalism 69

moral culture 68 moral organization 68, 70 morality of a cooperative society 108 morbidity 50 mortality 47, 50, 150 Motorola 68 Multilateral Environmental Agreements 61 multiple capitals 73, 75, 80 Myanmar 60, 104 NAFTA 179 National Accounting Matrix of Environmental Accounts 148 National Audit Office 115, 122 National Bureau of Economic Research 154 National Health Service 19, 27, 48 natural capital 76, 80, 137 natural desires 42 natural habitats 30, 39 negative externality 59, 62 neoliberalism 56, 103, 137 Netherlands 24, 51, 94, 116, 126, 148 New Public Management 57 New Zealand 167 Nigeria 60, 92 nitrous oxide 167 non-excludable 30 non-exclusive 1, 4, 27 Non-Financial Reporting Directive 79 non-monetary value 64, 129, 133 non-rivalrous 1, 26, 30 non-rivalry 9, 40 non-state actors 10 non-use value 63–64 normative economics 18 Northern Chemical 68 Norway 58, 162 Nuclear Safety Directive 60 nuclear technology 39 nuclear waste 39, 60 Nuclear Waste Policy Act 60 numerical values 23 nursing 16 nutrition 21, 48, 50, 93 nutritional wellbeing 156 Obama, Barack 162 occupational hazard 48, 93 Occupational Health 136

Index

Occupy Wall Street 85 OECD 21–23, 55, 88, 99–100, 132, 153, 170, 175, 177 OECD Development Assistance Committee 175 OECD-Wellbeing Framework 21 Official Development Assistance 100, 152 Ohio 126 oil-producing businesses 85 old age pension 56 oligopolistic 110 Olympus 172 Open Government Partnerships 162 open-door policy 70 Oslo Paris Commission 155 Ostrom 10–11, 14, 17, 21, 31, 40, 65, 125, 128 over-consumption 19 over-usage 15, 19–20, 31 ownership 4, 11–12 Oxfam 181 Pakistan 95 Palermo Protocol 162 Panama Papers 174 pandemic V, 2 partnerships for development 96 pasturelands 12 Patagonia 70 peace V, 9, 30, 36 Pepsi-Co 69 perfluorocarbons 167 philanthropy 8, 65–67, 72, 95 Philippines 69, 95, 162 physical infrastructure 19, 46, 144 Pigou, Arthur Cecil 10, 59 plastic waste 155, 179 Plato 5 policymaking 24, 101 political patronage 90 polluter pays strategy 154 pollution 16, 19, 27, 36, 48, 72 Pope Francis 1 positive economics 18 positive externalities 38, 59, 62, 167 positive externality 10 potential utility 27 poverty trap 48, 93 PPPs 88, 95–97, 121–122 Prince of Wales 79 prisoner’s dilemma 109–110 prisons 88, 107

225

privacy protection 117–118 Private Finance Initiative 122 private ownership 6, 12 private sector participation 90 privatization 20, 89, 105 privatization of schools 94 Procter & Gamble 66 Program on Reducing Emissions from Deforestation and Forest Degradation (REDD) 175 property 11–12, 14, 128 property rights 4, 11–12, 18, 26–27, 104, 127–128 property values 53 provisional property interest 104 public consultation 123–124 public education 44, 51 public finance 4, 9, 11 public health 18, 37, 44, 47–48, 50–51, 91, 93–94, 104, 111, 117, 136, 141, 149, 172 public housing 43, 115 public infrastructure 21, 90, 112, 124 public interest entities 79 public investment 105 public parks 31 public procurement 88 Public Procurement Directive 121 public purpose 67 Public Purpose Capitalism 67, 69 public responsibilities 36 public sector, role of 43–44 public sector spending 33, 56 public statistics 147 public stockholding 160 public television 13 public transport 20, 65, 115 publicness, degrees of 10 public-private interaction 4, 20 public-private partnerships 42, 88, 95 public-versus-private resentment 108 Punjab 95 pure public goods 9 Quality Assurance Agency 119 race to the bottom 34, 71 rationality 5, 25 Rawls, John 20, 38 reciprocal obligations 121 Recovery and Resilience Plan 114

226

Index

recycling firms 154 referendums 133–134, 178 Regenerative Organic Certification Standard 166 Regional Action Plan for Marine Litter 155 Regional Centers of Expertise 159 regional public good 34 rent capitalization 138 res publica 4–5 resource effectiveness 142 resource flows 147 resource stocks 147 resources policy 112–113 responsibilities, shared 103 Responsible Care 82 Responsible Jewelry Council 173 responsible management 82 restriction of movement 162 right to privacy 117 Rights of Indigenous Peoples 136 rising waterlines 153 risk allocation 122 risk sharing 122–123 roads 2, 11, 88, 90 Rockefeller Foundation 66, 98 Roundtable on Sustainable Biomaterials 165 Rowntree 17, 66 rule of law 79 Rule of Law Indicators 135 Ruskin, John 130 Russia V, 57–58, 109, 113 Rwanda 159, 181 Safe Injections Global Network 96 safety 30 safety for fishermen 161 safety regulations 104 Saint Augustine 4–5 Samuelson, Paul 9, 21 Sanctions 129 sanitation 11, 88 satellites 31 Save the Children Fund 158 Scarcity and Growth 176 Schumpeter, Joseph 18 SDG Knowledge Platform 182 Search for Common Ground 70 security 1, 6, 9–10, 26, 30, 36, 45, 81–82, 107 security on the streets 45 self-actualization 134

self-governance 36 separation of powers 135 Seveso 164 sewage treatment 88 shared understanding 111 shareholder value 69 Shell 24, 60 shipping agencies, 161 Siemens 71 SIGMA Project 75 silent expropriation 104 skills 52 slavery 161–162 Slovakia 144 Small Is Beautiful 76 Smart Cities 144 Smith, Adam 6, 13, 42–43 Social Accounting Matrices 149 social business 69 social capital 79, 140–142, 145, 182 social coherence 34, 70 social cohesion 141, 170 social collaboration 108 social contract 6, 102 social corruption 170 social cost 59, 62, 73 social democratic 57 social development 47, 71 social efficiency 38, 178 social entrepreneurship 69 social externalities 60 social impact 15 social impact investing 97 social inclusiveness 176 social infrastructure 88, 114, 144 social institutions 14, 56, 140–141 social movement 36, 85, 164 social order 5, 14 social partnerships 17 social peace 6 social processes 7, 108 social protection 48, 93 social relations 1 social responsibility 72, 83 social returns 72 social skills 134 social support 140 social value 59, 131, 141 social values 7

Index

social welfare 5 socially fair 13 societal control 87, 178 societal divisions 55 socio-economic benefits 82 soil enrichment 166 solidarity 1, 20 Solidarność 85 Solow, Robert Merton 38 South Africa 39, 104 South African Breweries 73–74 South America 154 South Korea 167 Soviet Union 57 Sozialstaat 56 sport programs 48, 93 Sri Lanka 92 stakeholder 36, 70, 163 stakeholder cooperation 85 stakeholder engagement 124 stakeholder relations 70 standards 26, 82, 163, 177 standards for fisheries 163 Starbucks 181 state-owned firms 68 Statistical Office of the EU 150 stewardship 71, 101 Strabag 72 strategic objectives 56 strong sustainability’ 137 subsidiarity 1, 57 subsidies 55, 95 subsistence farming 157 Suez Canal 89 supply chain V, 71, 74, 113, 136, 164, 166, 179 supranational institutions 41 Susa Valley 123 sustainability reporting 73, 80, 135, 144 sustainable capital 75 Sustainable Development Goals 15, 23, 47, 52, 112 sustainable investment 114 sustainable tourism 114 sweatshops 163 Sweden 35, 58, 132, 144 Swissair 172 Switzerland 51, 133 synergies, inter-institutional 50 Syria 184 System of Environmental-Economic Accounts 147

227

System of National Accounts 147 systemic governance 45, 47, 55 systemic risks 111 Takings Law 104 Tanzania 53, 92–93 Task Force on Social and Solidarity Economy 153 tax evasion 99, 171 tax evasion. 174 teacher training 95 television 20, 30 textile firms 76 Thailand 92, 161–162 The Economics of Ecosystems and Biodiversity Initiative 139 The Great Transformation 102 The Human Side of Enterprise 77 The Maintenance of Life 130 The Tragedy of the Commons 65 Tirole, Jean 1–2, 5, 14–16, 35, 116 Toyota 70 trade agreements 41, 179 Trade-Related Aspects of Intellectual Property 180 Tragedy of the Commons 12 transfer policies 6 Transparency in Supply Chain Act 72 Transparency International 86, 169, 173 transport 11, 88 triangle of publicness 101 Triple Bottom Line 73, 75, 80 Tyco 68, 71 Uganda 53, 154, 158–159 UK Treasury 122 Ukraine V, 2, 23, 58, 99, 113, 115 UN Department of Peacekeeping Operations 135 UN High Commissioner for Human Rights 135 UN Partnerships for SDGs 99 underground economies 172 unemployment 2 unemployment protection 56 Unilever 69 Union Carbide 164 unitarian 6 United Kingdom 19, 51, 57, 92, 114–115, 122, 148, 162 United Nations 23, 47, 87, 98, 152, 180, 182 United Nations Development Policy Committee 51 United Nations Environment Program (UNEP) 139, 153

228

Index

United Nations support programs 153 United States 51, 107, 116, 158, 168 United States Agency for International Development 158 unity of purpose 188 University of Toronto 126 UPS 70 Urmia Lake Basin 142 use-value 63–64 utilitarian 25, 131 utilitatis communio 4 utilities 36, 69 utility 27 utility versus rationality 5 UTZ 164 vaccination 10, 31, 50 value chain 75, 77 value creation 72, 75–76, 140 value judgments 18, 21, 131 values and attitudes 52 Verizon 76–77 Victorian Department of Treasury and Finance 124 Vietnam 162 Volkswagen 68, 71 von Bismarck 56 vouchers 95 wage subsidies 5 waste 39, 60, 82 waste management 115, 139 waste prevention 155 wastewater 8, 58, 128 water 11, 15, 88, 90 water allocation 18 water gardens 74

water governance 125 water treatment 126, 139 weak sustainability 137 wealth assets 80 welfare 14, 56, 66 welfare capitalism 57 welfare state 2, 55–57, 65, 171 welfare-state-retrenchment 55 wellbeing economy 178 well-educated 51 West Bank 87 Western Lake Erie Basin 126 white supremacy 119 wild capture fisheries 161 Willingness to Accept Compensation 63 Willingness to Pay 63 woke 119 Work and Security Act 116 Work in Fishing Convention 162 working conditions 35, 48, 77, 93, 116, 161–162, 165, 184 workplace 2, 48 World Bank 98, 133, 140 World Bank Development Reports 44 World Economic Forum 72, 84, 169 World Food Program 157 World Food Summit 156 World Health Organization 47, 96, 149, 179 World Justice Project 135 World Trade Organization 41, 61, 152 WorldCom 68, 71, 76 youth organizations 96 3M 68, 72 5G licenses 111