This chapter considers exclusion and jointness of use or consumption as two essential defining characteristics in distinguishing between private and public goods. It examines basic differences in measurement and degree of choice that have a significant bearing upon the organization of public services. The chapter focuses on some inherent problems of organizing economic relationships that involve public goods. As long as appropriate collective consumption units are organized, several alternative options can be used for the production and delivery of public goods and services. The public sector is generally viewed as being organized only through governmental institutions where services are delivered through a system of public administration. Economists studying public sector investment and expenditure decisions have observed that institutions designed to overcome problems of market failure often manifest serious deficiencies of their own. Patterns of organization that can mobilize coercive sanctions are necessary for the operation of a public economy.
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