Private Provision of Public Goods via Crowdfunding
Journal of Institutional Economics, Forthcoming
38 Pages Posted: 7 Feb 2016 Last revised: 24 Mar 2017
Date Written: March 23, 2017
For various reasons, governments sometimes fail to provide public goods. Private provision of such goods might then be used if it succeeds in overcoming three main problems: high organization costs, the assurance problem, and the free-rider problem. We argue that technologies that enable crowdfunding — the method of funding projects by raising small amounts of money from a large number of people via the internet — have enabled these problems to be overcome more readily. Such technology has lowered organization costs and enabled the employment of more efficient mechanisms to reduce the assurance and free-rider problems. To illustrate these effects, we present two case studies of private provision of public goods via crowdfunding: police services in Rockridge in Oakland, California, and the Ukraine Army.
Keywords: civic crowdfunding, public goods, private provision of public goods, organization costs, assurance problem, free-rider problem
JEL Classification: H41, D70
Suggested Citation: Suggested Citation