Specific Public Goods and the Nature of Firms:A New Viewpoint

This paper puts forward a new idea that firm is the economic organization for gaining the Pareto optimized specific public goods.Each kind of production needs both public goods and private goods.Constrained by budget,the government is always only able to provide the general public goods, while companies themselves have to produce the specific public goods.When benefit is linear non-separable among contract agents,the output of public goods produced automatically by agents is always less than the Pareto optimum quantities.General public goods provided by the government substitute specific public goods to a certain degree.The model proves that,as the government increases the supply of public goods,when cooperative benefit is relatively high,business tends to expand;or else,it shrinks,which then results in a strengthened market specialization.Moreover,the article carefully examines the content of enterprises' specific public goods.