1 - Introduction

Summary

Description: Governments use taxes, public spending, and other instruments to promote collective goods, determined by democratic processes. Aggregation of individual needs is obviously difficult. In the last century the need for some income redistribution, for economic stabilization and for the correction of market failures, was added to the government role. This need was assumed to be that of normal times. Fiscal rules were created to deal with this.

Risks for which the statistical probabilities of occurrence can be determined attracted attention and led to the creation of insurance markets. However, still little attention was paid to events that were uncertain or random. These events occasionally affected countries and economies, such as pandemics, famines, natural disasters, and climate change. For these, statistical probabilities could not be calculated and countries did not prepare for their possible coming. This could be considered a failure of the theory that guided government and market behavior. Global public goods or public bads were often ignored before they occurred. Some of them may have become progressively more important in recent times.