There are many fields (e.g. education, health, postal services) where the working of market, focusing on profitability, can not serve a broader view-of public interest, and the Government (State) has to act as a problem-solver through subsidization or nationalization. These situations are considered to be the presence of externalities, with economic decisions creating costs or benefits for the society other than the decision-taker in the business sector. These are the so-called social costs or social benefits. The mentioned fields and situations are considered as public (or government) sector which supplies public goods and services. Its public expenditure is divided between goods and services (purchased by the state) and cash transfers (to individuals or industry) in the national budgeting.
Today, on the analogy of national public goods, the growing importance of global public goods (e.g., environmental sustainability, health or financial stability) is widely recognized. Accordingly, there exists need for a theory global public goods and appropriate supporting policies at both national government level and global level. Without them the efforts could hardly be successful to overcome the key weakness in the current arrangement for providing global goods. Such weaknesses are the following:
- The jurisdictional gap, that is, the discrepancy between the globalized world and national, separate units of policy-making. To close it a circular policy-making process in needed for between the national level actions and global-level ones.
- The participation gap. To enhance participation in determining global public goods priorities it is indispensable to ensure equity in global policy-making in the fields of North-South representation in the governance of international organizations (G-8 group, International Monetary Fund, etc.), the participation of civil society and business sector, the sustainable development, and the role of enhanced inter-disciplinarity in the newer, more issue-oriented international organizations.
- The incentive gap. Beside the equity and access only on an issue-by-issue basis it is also important that poor countries have financial means to play an active role in global cooperation based on a preferred strategy. To attain this role of international agreements appear to be decisive.
By closing these gaps the available new toolkit of global cooperation will promote the capacity of national governments in both developing and industrial countries to achieve their national policy objectives which are increasingly influenced by international forces through such global public goods as environment, financial stability, food security, health, culture and peace. To attain it there are need for two important changes: first, international cooperation must form an integral part of national public policy making, second, international cooperation must be a fair proposition for all countries if it is to be successful.