The Welfare Economics of Global Public Goods

This paper studies the conditions for a welfare-maximizing allocation of resources to the production of global public goods, such as biodiversity, the global climate, the cultural heritage, knowledge, and world peace. A global social welfare function is maximized subject to production constraints and alternative assumptions about the possibility of international transfers. It is shown that the desirability of global production efficiency is closely linked to the existence of international lump-sum transfers. Global public goods are considered both as consumption and production goods, and the theory is also applied to the issue of the uniformity of a global carbon tax