Following an efficiency criterion
alone, the provision of a global public good can, at times, result in a
highly inequitable outcome. Consider, for instance, the fact that tropical
rain forests lie in a belt that covers about 30 developing countries—most
within 20 degrees of the equator. They are home to more biological species
of life than any other ecosystem on earth and they comprise the
"lungs" of the planet. From the viewpoint of global production
efficiency, it would be best if these developing countries shouldered all
of the costs of ensuring climate stability. They might be able to provide,
for example, a certain reduction of CO2 at a lower cost than industrial
countries could achieve. However, such a single-minded concern with global
production efficiency might unfairly burden the developing countries
concerned.
In effect, even the textbook
definitions of efficiency state that a resource allocation is
efficiency-enhancing if it makes at least one agent better off, without
making others worse off—the Pareto efficient criterion. This
condition can often be met only if the "winners" compensate the
"losers". The rationale behind this fairness dimension of the
efficiency criterion is that policies must make economic sense for all.
Otherwise, why would individual actors support them?
International cooperation in
support of global public goods consists, in large measure, of cross-border
cooperation among sovereign states. Therefore, in order to succeed,
international cooperation must generate some net-benefits for all, in both
the short and long run. Returning to the example of international
cooperation in the area of CO2 emissions, it would therefore be necessary
that the international community—notably the countries that contributed
most to current pollution levels—adequately compensate the developing
countries that can offer least-cost carbon sequestration services. In this
case of an "exchange," efficiency and fairness must go hand in
hand in order to ensure that no one (neither rich nor poor) loses. But the
fairness, or equity, that matters here deals more with the market or trade
relationship between two actors and it is therefore different from the
equity concerns that underpin income transfers.
