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Wettenhall, Roger, 1978. "Public Enterprise in Eight Countries: A Comparative Survey". Australian Journal of Public Administration 37 (December): 398-403.GOVERNMENT FAILURE . A segment of economic theory that explains the conditions under which governmental provision of public goods and services is inefficient. Charles Wolf, Jr. ( 1979) described a variety of circumstances under which government intervention in the private economy to correct market failures may produce new inefficiencies and conditions under which government may over- or underproduce public services or provide them at too high of a cost.Government failure is an important component in the theory of private nonprofit organizations. In particular, this body of theory has been used to explain why private nonprofit organizations arise to provide public goods and services on a voluntary basis, even in the presence of governmental provision. Government failure theory applied to nonprofit organizations focuses on the limitations of government and how private nonprofit organizations may fill in the niches left unserved by governmental action ( Hansmann 1987). James Douglas ( 1983, 1987) identified five sources of constraint on governmental action that create unsatisfied demands for public service to which private nonprofits may respond:
|1. The "categorical constraint" results from the necessity of governments to provide goods and services on a uniform and universal basis. This constraint implies that the demands of individuals whose preferences for public services differ from the norm will go unsatisfied. This situation creates niches for nonprofit organizations to provide additional public services on a voluntary basis. Moreover, since government must provide its services universally to all its citizens, it is limited in its ability to experiment on a small scale with new programs, which creates another niche for private nonprofit organizations.|
|2. The "majoratarian constraint" of government reflects the fact that in a diverse population there may be multiple conception of the public good and what government should be doing. If government responds to the majority, it leaves niches for private nonprofit organizations to respond to minority issues and demands.|
|3. The "time horizon" constraint of government reflects the relatively short tenures of government officeholders and their consequent incentive to focus on short term-issues and results. This constraint leaves another area of action for private nonprofit organizations-the addressing of long-term societal issues and concerns.|
|4. The "knowledge constraint" connotes that government bureaucracies are organized in a relatively monolithic, hierarchical way and, hence, cannot be expected to generate all of the relevant information, ideas, and research needed for intelligent decisionmaking on public issues. This, too, creates a niche for private nonprofit advocacy groups, research centers, and other institutions.|
|5. The "size constraint" reflects the view that government bureaucracy is typically large and intimidating, thus, it is difficult for ordinary citizens to engage government. This situation creates a niche for nonprofit organizations to serve as "mediating institutions"|