Merit Goods

Abstract

Richard Musgrave coined the terminology of merit wants and merit goods in the 1950s in the context of the theory of public finance. He pointed out that certain goods such as free school lunches or subsidies to low cost housing did not have pure public or private good characteristics. If a government is dissatisfied with the level of consumption of such goods in the free market, it may intervene to increase consumption, even against the wishes of consumers, to promote their private, as well as some social interests. Mainstream economic theory tends to reduce all normative concerns to individual preferences and analyse any domain of the economy, or perhaps of social life, with the same methods. This methodological stance implies some tension between the normative ideas and the standard conceptual tools of economic thinking about public finance. While the concept of merit goods has played a minor role in modern economics, it has the potential to both reveal the continuity with earlier collectivist conceptions of economic and political life and to open the stage for ethical discourses which go beyond rigid versions of libertarianism and welfarism. Hence the continuing relevance of Musgrave’s conceptual innovation for social and political theorizing.

Keywords: Merit Goods, Merit Wants, Government Intervention, Public Economics, Public Goods, Normative Individualism, Paternalism

JEL Classification: A13, B21, B31, H00, H40, H41, H42, H49