The function of the library, regardless of its nature or clientele, should be to maximize the social utility of graphic records for the benefit of the individual and, through the individual, of society. The library, as a social invention, was brought into being because graphic records are essential to the development and progress of culture; hence, it is important that the citizen have access to those resources that will best enable him to operate effectively in his several roles as a member of society. The public library, as its name implies, has been predicated on the assumption that it could meet this objective for all strata of the population.3 In any event, consideration of public library financing problems should identify and distinguish among the several purposes and publics served by public libraries. The role and service perspective properly should encompass a library clientele which ranges from the most advanced of researchers to children engaging in their first reading experience. In this context, the public library includes, as Lowell Martin puts it in a later section of this report, both the unique collection of the New York Public Library at 5th Avenue and 42nd Streets and the miscellany of donated books in the upstairs room of the local village hall. The three major functional areas, later defined, which the public library can and should serve are: (1) specialized and research services, (2) information services, and (3) educational-cultural functions and services. The need for these services is broadly defined to include all segments and strata of the general population. In a society featuring the self-realization of each individual, the definition of what is included in specialization, research, information, educational and cultural services is, like beauty and the beholder, in the eye and mind of the seeker-whoever the person and whatever his station in life. The public library is the unique social institution which seeks to meet these widely varying needs. So, while discussion of the role question should not avoid consideration of performance failures, neither should it ignore intrinsic values and societal needs. It should be recognized that the public library is still functioning, welcoming all comers, providing valuable information and resources, and assisting in the search for knowledge and constructive enjoyment of the world in which we live. Accordingly, our social institutions and government must recognize more fully the value of the public library and take actions needed to exploit fully its potential through strengthened organizational support and adequate funding systems. The Library Services Act of 1956 represented the first evidence of national government concern with this problem, but it began as a gap-filling device to spur the growth of rural libraries. Moreover, the level of national fiscal support and the funding mechanism established under the Act cannot be described as a full, adequately supported national commitment for public library development. State support has lagged in its development and is also at a low level. Local support carries the brunt of the load in patterns which vary widely in accordance with tax base capacities and, particularly in urban centers, the need for other essential services. Application of the Public Goods Theory to the Funding of Public Libraries Public library expenditures currently represent only a small proportion of the total cost of governmental services provided by any and all levels of government. The general thrust of this report is to examine the level and assess the pattern of services provided by public libraries, as a basis for outlining alternative funding systems for their support. Such services impact directly on users, but their existence has broader, more indirect effects on individual communities and society at large. Interest and concern have been expressed by the National Commission on Libraries and Information Science and others on the need to explore the public goods theory to assess its relevance to public library finance issues. The objective of this examination is to determine whether the theory can produce guidelines useful in the development of alternative funding systems. Public Goods Theory: "Private Goods" Versus "Public Goods" Public goods theory attempts to offer an explanation of what governments do and a justification for what they should be doing. In this connection, the theory provides distinctions between goods (and services) that are privately versus governmentally provided and between goods that are privately consumed and public goods. Economists refer to "private goods" as those goods and services for which the consumer who purchases the good pays the full cost to the seller. The transaction takes place in the private sector and the individual consumer is thought of as receiving the full benefit of that good. On the other hand, "public goods" are transferred in the public sector, and are thought of as providing societal benefits as well as individual benefits. Such goods are not paid for on an individual basis. The pure public good is not restricted in its consumption to particular individuals. The classic example is national defense. This good is available to all in the nation and no one is prevented from enjoying (consuming) it. Furthermore, it is not desirable to attempt to restrict the consumption of such a good to particular individuals. It is neither desirable nor possible to charge a price for a pure public good. Finally, once such a good is provided for some individuals, it can be almost freely provided for others also. Public goods have been classified as follows: 1. Those services thought of as providing widespread social benefits that are financed from taxes. These taxes generally bear little relationship to individual benefits. These services are part of the "general environment." Hence, user fees cannot be assessed nor prices charged. Examples of such services are national defense, foreign relations, space exploration, public health, and law enforcement. 2. Those services that are also part of the general environment, but for which user fees are assessed. These user fees are determined to cover most or all the costs. 3. In between the above two extremes are a variety of services that could technically be sold at prices to cover costs. For a variety of reasons, however, such services are financed wholly or in part from general taxes and philanthropic gifts. Examples include public housing, sewerage, symphony orchestras, public and secondary schools, and public libraries. Theoretical Rationale for Funding Services Four reasons are generally cited for public funding of the above described intermediate group of public goods which includes public libraries. First, at prices or fees to cover full costs, consumers of all or most income groups may buy less of the service than is in their own longrun interest. The reason may be lack of knowledge or shortsightedness. This argument has been especially prominent in connection with higher education, the belief having become widespread that students and their families may be persuaded by immediate financial considerations to forego investments that would pay off in the long run. Secondly, the good or service, though capable of being consumed individually and yielding individual benefits, also provides "external" benefits or by-products to society-at-large in forms that improve the general environment. Higher education, or public libraries, may help produce an enlightened citizenry or may enrich and advance the culture to the benefit of those who never attend college or enter public libraries. Third, the distribution of opportunity may be widened. The prices of strategic goods or services such as housing, food, health services and education may exclude low income people from opportunity. One way to spread opportunity is to sell such critical goods or services at below cost or no cost. THE PUBLIC LIBRARY FINANCE PROBLEM IN PERSPECTIVE 9 Finally, the distribution of income may be altered. The price of a good or service may prevent low income people from consuming as much as they might wish or even prevent them from consuming any of it. One way to increase the real income of the poor is to sell goods and services to them at below cost or at no cost. Examples are food stamps, medicaid, and education at all levels. Sale of particular goods and services at below cost is chosen in preference to grants in cash because society wishes to encourage the consumption of particular goods and services rather than to leave consumer choices up to the beneficiaries. In practice, all four of these reasons tend to be intermingled. Society wants to accomplish all of these goals simultaneously. Public Goods Theory Applied to Higher Education Finance In higher education, lowering tuition below full cost in public and private colleges and universities of all types has been the response to the above-mentioned societal goals. The costs of higher education have been divided between students or their families and "society" as represented by government and philanthropy. Behind this allocation of costs is the idea that this division should be related to the benefits from higher education. But there are two versions of the benefit theory and these are not necessarily congruent: One is concerned with justice in the allocation of costs among different persons and groups. The assumption is made that the beneficiaries should pay and that the costs should be divided among them in proportion to total benefits received. The other version of the theory is concerned with efficiency in allocation of resources. The assumption is made that when a good or service yields both individual and social benefits, its production should be increased beyond the amount that would be called for by individual demand alone. This idea applied to higher education means that tuition should be lowered below cost per student until the combined marginal benefits to both individuals and society are equal to the marginal cost. The deficit should be made up from taxes or gifts. Application of the Efficiency of Allocation of Resources Line of Reasoning to Public Libraries A strict application to economic principles of efficient allocation of resources would indicate that libraries should not be devoting much of their resources to supplying the informational needs of business or to leisure time activities, which are viewed in economic analysis as private goods and therefore not to be provided for out of public funds. On the other hand, educational functions and direct services to govern 10 ALTERNATIVES FOR FINANCING THE PUBLIC LIBRARY ment are viewed as providing public goods. However, no clearcut blueprint for fiscal support of public libraries can be derived from this sort of analysis. Difficult definitional problems arise, for example, in classifying reading as an educational, informational, or leisure time activity. It can be argued that virtually all reading conveys some benefit to society beyond those benefits accruing to the individual engaging in the reading activity. Hence, the appropriate allocation of fiscal responsibility as between private and public sectors cannot be given by any simplistic calculus of internal versus external effects. Also, even if assume that the proportion of a particular type of public library activity that redounds to the benefit of the general public could be clearly identified, it is not at all clear what proportions of fiscal support for this activity should be forthcoming from Federal, state, and local levels of government. we A difficulty in the above type of allocation is given by the following example. If "x" percent of a school child's reading of a book borrowed from a public library results in a societal benefit in the form of an improved family and community member and a more enlightened citizen, what proportions of this enhancement accrue to society at the national, state, and local levels? In view of the mobility of our population, the school child who reads a book in a public library of one community may very well live most of his adult life in others. Hence, his contributions will be made in communities other than the one in which he received public library services. Although such an example probably provides a basis of argument for increased fiscal support for public libraries from state and Federal levels of government, the allocation difficulties are manifest. Use of Public Goods Theory in Developing Alternative Methods of Funding Public Libraries Despite all of the aforementioned problems, public goods theory can assist in providing a framework for analyses and for casting up normative models against which practical options in public library financing may be measured. Although, as indicated earlier, it may not be very practical to construct a quantitative calculus for the toting up of benefits for individuals and groups, public funds analysis can help to structure ideas about the relationship between the functions and purposes of public library services and the methods of financing these services. However, considerations of justice and social values are clearly important as well as economic efficiency principles. For example, let us consider a problem of allocation of funds for public libraries among public library systems. Suppose that, since public library service is considered to be socially beneficial, financial support were to be |