A Theory of the Theory of Public Goods

The standard theory of public goods is an established part of the theory of public finance. It is critically examined in the article. The author has demonstrated that the theory of public goods could be neither an empirical explanation nor a normative justification for government production of any good. Then he develops a political-economic theory that explains the fact that some goods are produced by government by reference to the government's self-interest which consists of its own power and wealth buildup. In this context the theory of public goods and its propagation are explained as an integral part of the institutional system which secures maintenance and expansion of the government's power over society.