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An original book of a teacher at the Public Finance Department of University of Economics in Prague appeared in a well-known publishing house of economic literature Management Press, supported by Jan Hus Education Foundation; its readership should be those who are interested in decision-making processes in the public sector. The book consists of six parts and twenty-two chapters. This well-structured book contains a lot of graphs, useful vocabulary of elementary terms, list of references, subject index and a list of keywords at the end of each chapter. A discussion about decisions in the public sector and analysis of instruments and techniques supporting the efficient allocation of sources can bring about interesting incentives for a better understanding of the public sector functions.

Part 1 Public Sector, Public Goods and Efficient Allocation is devoted to an exposition of elementary terms in the field of demand and supply of public goods at constant marginal costs. The author believes that the public sector is a consequence of natural market absence in some spheres of economic life.

Part 2 The Role of the Government in Public Sector and its Instruments of Influencing the Allocation of Sources describes how the government can influence the allocation of sources. Relationships between subsidies and effectiveness, rent regulation by the government and negative externalities are analyzed in this context.

Part 3 Public Choice, Instruments of Public Choice and Decision Effectiveness deals with the influence of the supply side (political party) and demand side (electorate) of political market on decisions in the public sector, with the influence of public choice instruments on the effectiveness of selection of a basket of public goods, and with fundamental decision rules (electoral systems).

The subject of an exposition in Part 4 Political Market and Economic Rationality is preferences of individuals shown through political voting in the sphere of public goods, and a summary analysis of the behavior of electorate, politicians and political parties.

Part 5 Effective Selection of Investment Activities in Public Sector is focused on quantitative cost-output, financial and managerial methods of optimization and objectification of the choice of a variant of source allocation and on the influence of time factor on its yield.

Part 6 The Background of Public Sector Transformation and Public Administration Reform and their Effectiveness contains a discussion about methodological aspects of necessary and expected changes in administering the affairs of state in the Czech Republic, with emphasis on the analysis of factors influencing its success, and about the influence of centralization and decentralization on the effectiveness of territorial administration decisions.

The author says that the exposition of the problems is to reflect dynamic development of public sector in globalization economy while the inconstantly changeable world should be described by means of instruments indicating the world changeability (p. 113). If the author’s efforts are compared with the goals set by him from this aspect, some limitations may arise. The author uses a definition that the public sector is the part of economy that is not in private ownership (D. W. Pearce), but in accordance with somewhat free, not always quite precise interpretation of J.W. Stiglitz (p. 51) he confusedly includes in his exposition some spheres of the private sector regulated by the government (see Part II), even though the exposition of these problems can be considered as interesting. Taking into account the above definition of public sector, the author should be concerned with the activities of central bank, other public institutions and national enterprises.

It is to state that the conceptual analysis of decision-making in the public sector is a mere outline of several more or less important topics, not a synthetically well-thought-out complex of topics in which the outcomes of the exposition of one problem would gradually be used to explain other themes, e.g. relationships between decisions in the political market and selection of investment activities in the public sector, resulting in a theoretical evaluation of the public administration reform in progress. The author would not have to use such confusing phrases as lofty social targets (p. 49), politically lofty targets (p. 68), superindividual interest (p. 206) (a better term is interpersonal interest). Himself speaks about the intersection of individual interests, about sharing the values, so negating the method of rational analysis of political market he used in one of the chapters, and he contended himself with an appeal to the consensus of political parties in the reform of public administration (p. 220).

More attention could be paid to a better utilization of the theory of decisions and complex theory of goods at the present level. In the society of private owners only such a production of public goods is meaningful that will lead to higher production of private goods, i.e. the situation when the curve of production opportunities is shifted upwards and to right, and/or the situation when with increasing production of public goods there is a decrease in marginal costs per unit of such production as a result of additional effects (including the equal conditions of competition) or economies of scale, and to a release of sources for the private sector growth. The expenditure for national defense is useful only if it is accompanied by greater construction of family houses (cf. p. 51). But the author is concerned with a mutual substitution of private and public goods and constant marginal costs only. He believes that the changing ratio of public to private goods does not implicitly influence the extent of sources and goods that are at the individual s disposal. The analysis in question should be dynamized. Only static analysis can highlight such phenomena as a prisoner s dilemma, voting rules, etc. The voting is unanimous in dynamic analysis if the minority behavior conforms to the majority behavior after the voting. The processes of learning, adaptation and preference changes should be considered.

Taking into account historical experience, the importance of participation in elections is perhaps different for the population in the USA than in the heart of Europe , where it was decided on the territorial integrity of the state and on its character several times in the past century. So it is questionable whether the conclusions of Downs’s analysis of political market are fully applicable in the latter case.

University education is mentioned as an example of public goods (p. 21), where rivalry as well as exclusion from consumption can exist. In this case. and in other cases (public health, infrastructure) as well, the members of the society of private owners have agreed on subsidizing this kind of goods by their taxes to avoid that the individual s decision on the acquisition of this kind of goods is (temporarily) dependent on its purchasing power only for its (positive) impacts on other individuals or to achieve (the extension) of a certain level of supply. The society can also ban the consumption of some goods or make it more difficult.

The most appreciable parts of the book are devoted to a discussion about cooperation and non-cooperation in politics but these types of behavior are not characteristic of the political market only, they exist in the whole spectrum of social life. It is therefore desirable to compare differences in these phenomena in the particular spheres of society. The political market may be, and should also be, analyzed from other aspects, not from the only one presented by the author. Politicians and political parties are not only on the supply side of political market (p. 156, 166). Sometimes, they can be on the demand side. It is not enough to understand the functioning of political parties, it is necessary to study their origin and history. The population (electorate) offer their votes, money, property, intellect and lives requested by political parties, for which they are obliged to provide public and/or mixed (club and position) goods of one or another structure.

Tiebout s hypothesis is mentioned only marginally (p. 213); a discussion about it should be the theoretical basis of all other considerations about decision-making in the public sector. Nevertheless, the reviewed book contributes to an improvement of the knowledge of the public sector functioning because the problem is treated systematically and clearly with respect to decision-making processes.

The book can be recommended to readers, university students and public servants who are interested in extending their knowledge of instruments and analytic methods of processes taking place in this sphere.

Publ. in PRAGUE ECONOMIC PAPERS, N.4, 2001, p. 400-402.