Private vs. Public goods: KONCZAL

http://growth.newamerica.net/sites/newamerica.net/files/policydocs/Konczal_Mike_PublicOption_NAF_Dec2012.pdf


"More generally, public options working with private-market vouchers combine the strengths and weaknesses of democracy and
market-based capitalism. Democracy and accountability are essential to the social goods the government provides, as the items
we want the government to ensure citizens have, from education to health care to retirement in old age, aren’t just narrow
consumer goods but the basis of our civic society and form the promise to the future of our country."


This element of democratic accountability will shape the provisioning of public goods, with citizens arguing for more or less of a
good, and with the possibility of exit to the private market making the voice of the democratic process more effective. In turn, if
consumers feel a lack of accountability or voice in the private market, or if they feel private providers are exploiting them, they
are more likely to return to the public option. This in turn makes private providers more accountable to the democratic process.

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Take the example of higher education. Since the 1970s the government has created several voucher mechanisms to fund access
to private colleges and universities, including Pell Grants, government-subsidized student loans and tax-subsidized savings
vehicles. Meanwhile, public funding is being lowered and tuition raised at the equivalent public option, state public colleges and
universities.
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There’s a set of arguments stating that private institutions of higher education largely capture these vouchers by raising tuition
in order to compensate for the extra demand vouchers produce.
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If this logic is flipped, directly reducing the price of a college
degree through public education will also reduce the tuition costs at the private institutions, as they are forced to reduce margins
in order to compete. So in these instances, money spent on providing cheaper public options will amplify their effect throughout
the market, while money spent through vouchers is simply captured by incumbent institutions and prices rise across the board.