Overview
Keywords: Well-being, public goods, common goods, free-rider problem, externality, social welfare, welfare state, liberal welfare state, social-democratic welfare state, conservative welfare state
In general, countries are created by the people with the aim of increasing their well-being. In the European cultural space, well-being is based on good health; comfortable living conditions; personal liberty; safe working conditions; and guarantees in case of unemployment. These elements of well-being can be divided into economic well-being and general cultural well-being, which in turn are associated with fundamental societal values. Well-being can be achieved by satisfying people’s needs and/or eliminating their unnecessary desires.
Based on economic principles, meeting peoples’ needs requires the consumption of different types of goods and services. We are much less aware that well-being depends on the consumption of goods but it also depends on the quality of our social and natural environment. A sense of security is created by a state with an independent judiciary, a free media, internal and external security guaranteed by police and army, state support to education, science, transport, environmental protection and culture, and a functioning social security system.
All the aforementioned goods and services are called ‘public’ or ‘common goods’. In terms of a market economy, public and common goods are a market failure. According to Neoclassical economics, the solution to this problem would be to turn public and common goods into private goods. According to Keynesian economics, the government must intervene and organize the supply of public and common goods itself. How governments organize the provision of public and common goods depends on governmental policy.
Social welfare is a system aimed at securing various freedoms in society and towards creating better opportunities for economic development via human resource development. To achieve this aim, the state organizes the distribution of public and common goods. Social welfare includes also a social security system that supports people in case of sickness, accidents at work, incapacity for work, and unemployment. A country that takes responsibility for social welfare is called a welfare state.
How governments organize the delivery of public and common goods depends on the government’s political approach. The specific goals the government chooses in order to increase the well-being of its citizens, and the means it uses to do so, depend on the socio-political views of the ruling party or coalition. Based on socio-political approaches, the Danish sociologist G. Esping-Andersen (1990) has developed three main clusters of the welfare state: liberal, social democratic and conservative.
After acquiring this study material the learner has an overview of how well-being is defined and the consumer goods on which it depends; why the market cannot cope with the distribution of public and common goods; what the options for addressing these market failures are; and how welfare states are classified according to how they address the delivery of public and common goods. In conclusion, the learner is able to perceive how the government of their country organizes the provision of public and common goods and has improved their skill of making an informed choice in the next round of elections.
