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In Economics a public good is defined as something that is non-excludable (no need to pay) and non-rivalrous (unlimited in supply). The syllabus also teaches us that the private sector won’t supply such services as there are no profits to be made (there’s a free rider problem – people using without paying for it).
| Rivalrous (If I use, you can’t have it) | Non-rivalrous (Both of us can use together) |
Excludable (need to pay) | Movie Tickets Country Club membership House | Bridge Road Netflix |
Non-Excludable (no need to pay) | Fish in the ocean | National Defence |
Essentially the theory boils down to how the private sector won’t step up to provide public goods and hence only the government will be providing public goods., using taxpayers’ money.
The Singapore government has been trying to pursue a strategy of operating public assets (or assets built from taxpayers' money) using private companies, in the hope that these companies have the know-how to operate them with a profit so that the financial baggage of the government is minimized (and which government won’t like their public assets to be running on profits.)
The PPP idea of course did not come up from a vacuum, historically governments used to run entitles like public transport and utilities themselves but the operations got too bloated, and inefficient till the 80s when governments of the day decided to sell off those entities to the private sector (including listing some on the Stock Exchange), and slowly we evolved to the current PPP (which I personally think stems from one wanting to have the cake and eat it).
In Singapore, it seems the trend has been to sustain the entities (public transport, sport) on minimum subsidy and hopefully turn in a profit. I wish to argue here how sometimes it makes sense to subsidize those entities (even at a loss) in order to turn in a second-degree profit. I will explain using transportation and healthcare below:
Healthcare – Governments should be subsidizing a healthy lifestyle (gym, a balanced diet, etc) as a healthy population is a more productive workforce, also the public healthcare cost won’t be burdened with people seeking treatment for chronic illness resulting from lack of exercise or poor diet. Of course, you can argue that one does not need access to the gym for a healthy lifestyle but that just misses the point I’m trying to make. In fact, I have always wondered why we haven’t instilled a nationwide voluntary IPPT system with monetary incentives, despite having so many ex-generals around.
Transport – A great public transport infrastructure is a source of national pride (look at the Germans, Japanese, and Koreans). Buses and trains arriving and getting to their destinations on time also mean people can plan their schedule better (more sleep, leisure time, etc, all leading to higher quality of life). Conversely, it sucks vitality and productivity from society when commuters need to budget for extra time in their commute considering buses running late or over-crowdedness resulting in an inability to board.
Under a PPP system, we have a desire that every organization must be profitable but when the government has a stake in every organization it is more important to operate at a level where the grand net (corollaries included) is maximized rather than making sure every entity is positive.
The solution to maximizing x^2 + y^2 is not always achieved when x and y are maximized.
Before I get too carried away on the topic of government subsidies.
To summarise, my humble opinion is that a PPP will not work out due to varied shareholders' interests, it sounds good on paper but it smells like a perpetual motion machine.