There are two themes in the broader privatization debate: first, a "political economy" consideration of the role and size of government in an economy, which focuses on whether or not there is a failure of private markets; and, secondly, an expressed need to reduce government outlays. While many reassessments of publicly funded extension have reflected the second theme, it is worth considering the rationale for public versus private activity in an economy.

 

In mixed economies, the prevailing economic justification for government involvement in an activity such as agricultural extension is market failure, whereby the market mechanism alone cannot perform all economic functions for appropriate resource allocation. Market failure may arise because some goods or services are public goods (such as publicly funded agricultural research knowledge) which can be consumed in a non-rival fashion by all members of society without any individual's consumption reducing the amount available for other individuals. Because the benefit of providing such goods cannot be appropriated by individuals, individuals generally will not provide such goods in a society even though there may be significant gains for producers and consumers. Some extension activities are clearly concerned with public goods subject to market failure. Other activities (such as individually tailored advice) confer appropriable private benefits which could be adequately supplied by private markets.

 

Private goods sometimes are subject to market failure, whereby the operation of private markets does not provide certain services at a socially optimal level or where external costs or benefits are accrued by others rather than the provider of the goods. Market failure also may arise when current generations place insufficient value on preservation of resources for future generations. These latter circumstances are particularly characteristic of land and water degradation. Publicly funded conservation extension is often directed to overcoming such market failures.

 

Government support for the provision of extension services may reflect that such services would be inadequately provided without intervention or, for reasons of equity, because services would not be available to the extent thought socially desirable. Some situations for agricultural extension clearly reflect private goods; other situations clearly are characterized as public goods. There is a lot of fuzzy ground in the middle where it is not particularly clear that an extension activity is conferring a public or private good. In such situations, the extent of publicly funded extension is likely to be determined by the political influence brought to bear by relevant interest groups.

 

The philosophical thrust of the general privatization debate has centred, on the one hand, on whether certain government activities could be performed more efficiently by private agencies operating in private markets and, on the other hand, on whether inequities may arise because not all individuals have access to resources to purchase privately supplied services.