The Role of Government

Abstract

Even the most ardent advocates of free markets have always admitted that the provision of social overhead capital ( SOC) is a legitimate role for government in the process of economic growth and development. Social overhead capital—or infrastructure, as it is sometimes called—may be defined as capital goods used directly or indirectly in the production of goods and services generally ( i.e., not tied to the production of a specific good or service). Examples are roads and highways, railroads, communications networks, electric power systems, multiple-purpose river projects, and water and sewer systems. Capital spending on education and health has also been regarded as SOC, but it is useful to consider these activities separately, as we shall do in chapter 7.