ABSTRACT

Most economic decisions are taken in the private sector that is to say by private individuals pursuing their own private interests. Economic theories of public choice have been built on these individualistic foundations, which perhaps explain why they have only recently become sufficiently sophisticated to reflect the greater complexity of the public sector. Exchange transactions are, of course, the bread and butter of economics, but grants are clearly of major importance in the public sector. The usefulness of the grant concept is that it emphasizes the distributional aspect of public sector activities and offers a framework for their measurement. The analysis presented so far has been developed in the context of public agencies undertaking investments on behalf of society. However, there are many governmental activities which require no investment, although their economic implications may be profound.