The Public Sector

The public sector is integral to economic and social welfare, prioritising service and equity over profit. This section examines its structure, significance, and comparison with the private sector.

1. Definition and Characteristics of the Public Sector

• Public Sector: The public sector comprises services managed and funded by the government.
• Characteristics:
  • Maintains economic stability through policy-making and regulatory frameworks.
  • Prioritises public welfare above profit motives.
  • Utilises regulations to ensure equity and serve the public interest.

2. Comparison with the Private Sector

• Private Sector:
  • Operates on a profit-driven model.
  • Emphasises competition and efficiency.
  • Example: Private banks and healthcare facilities.
• Public Sector:
  • Focuses on service and welfare.
  • Promotes equity and public service.
  • Example: National Health Service (NHS, UK).

Feature	Private Sector	Public Sector
Objective	Profit-driven	Service-driven
Funding Sources	Private investments, capital	Government funding, taxes
Accountability	Shareholders, market forces	Public, via elections
Example	Private clinics, logistics firms	NHS (UK)

3. Understanding Key Terms

Public Goods

• Public Goods:
  • Non-excludable: Accessible to everyone without restriction.
  • Non-rivalrous: Usage by one individual does not lessen availability for others.
  • Example: Street lighting available to all.

Externalities

• Externalities:
  • Positive Externalities: Benefits extend beyond the buyer, e.g., education enhancing community knowledge.
  • Negative Externalities: Costs not borne by the creator, e.g., pollution affecting everyone.

4. Importance of Public Goods and Services

• Non-excludability: Essential services are provided universally, e.g., public parks.

• Non-rivalry: Shared usage does not reduce availability for others.

Components of the Public Sector

Introduction to Government Structures

• The government is organised into different levels:
  • National: Manages comprehensive governance nationwide.
  • Provincial: Handles regional concerns specific to areas.
  • Local: Addresses community needs and services.

State-Owned Enterprises (SOEs)

• State-Owned Enterprises (SOEs): Government-owned and -operated businesses.

• Importance of SOEs:
  • Deliver essential services such as energy.
  • Support economic infrastructure.

Purpose and Function of Public Corporations

• Public Corporations offer goods and services that are not commercially driven.
• Examples include public broadcasting and water services.

Organisational Structures

• Designed to enhance collaboration and efficiency, similar to a car factory where each component operates efficiently.

1. Introduction to Market Failures

Market Failures: Occur when resources are misallocated, leading to reduced societal welfare.

• Public Goods:

  • Characteristics: Non-excludable and non-rivalrous.

• Externalities:

  • Positive Externalities: Provides benefits to third parties, e.g., education.
  • Negative Externalities: Imposes costs on third parties, e.g., pollution.

2. Connection to Economic Stability

Unchecked market failures can jeopardise economic stability. The public sector stabilises markets and ensures fair resource distribution.

Methods of Public Sector Involvement

Indirect Taxes and Subsidies

• Indirect Taxes: Imposed on specific goods/services to curb demerit goods, like tobacco consumption.

• Subsidies: Financial support to reduce production and consumption costs of merit goods, e.g., renewable energy.

Impact on Market Prices

• Supply Curve Shifts:

  • Taxes shift the curve left, increasing price and decreasing quantity.
  • Subsidies shift the curve right, decreasing price and increasing quantity.

  

Introduction to Minimum Wages and Public Production

Minimum Wage: Minimum legal pay established by the government to safeguard worker rights.

Public Production: Ensures government provision of essential goods.

Conclusion Highlights

• Balance: Striking a balance in public sector interventions is vital to minimise market distortions and satisfy public needs.
• Adaptability: Custom-tailored policies for economic conditions are essential.
• Rigorous policy evaluation is crucial for sustainable economic management.