By Michael Howard
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Extra resources for Public Sector Economics For Developing Countries
Finally, the public sector in the Caribbean needs to improve its information system to ensure that relevant information is fed to managers to improve decision making. GOVERNMENT AND MARKET-ORIENTED DEVELOPMENT Rationale for Market-Oriented Development The market-oriented approach to development is a worldwide strategy 33 Public Sector Economics for Developing Countries which gained ground in the 1980s as a response to government failure. The resurgence of the market was facilitated by the collapse of many socialist command economies.
However, market-oriented development can only be accomplished if there is institutional reform. 3 In developing countries, there were many factors which led to greater reliance on the market. First, the nationalization and state ownership which characterized the economies of the 1960s and 1970s did not work well (Howard 1992). State-owned corporations accumulated significant losses and were unable to adjust to the risks of a changing world economy. The inefficient management of these enterprises also contributed to large fiscal deficits forcing government to borrow heavily from abroad.
Brown and Jackson (1990: 70) also give a diagrammatic derivation of the Samuelson conditions. The Samuelson efficiency conditions rest on certain highly restrictive assumptions. First, the model assumes the existence of a planner who knows the tax prices each individual is willing to pay for public goods. That is, the planner must have information on the pseudo-demand curves of the individuals. Second, since the model assumes preference revelation by individuals, it takes no account of the free-rider problem.