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Even though this study does not fully dwell on a particular theory, but the collective theorems and contributions of past researchers in this field, the under listed theories are seen as more relevant to the phenomenon being studied. This section is focused on related concepts and theories that can enable an effective model to improve public housing policy implementation in the region. The theories examined are public interest economic theory and theory of distributive justice. An attempt is made in this section to discuss some aspects of these theories which can contribute to the conceptualisation of the model which could improve implementation of affordable public housing policies in Nigeria, especially in the scope region.

2.19.1. Public Interest Economic Regulation Theory

Public interest economic regulation theory sometimes referred to as the normative theory of market-failure is one of the groups of economic regulation theories. Its distinct characteristics are that it is based on the idea of an existence of common interest (public interest) of which governments are more suited to provide and protect through regulation. Regulation in this

89 discourse refers to legislative and administrative restraints on market actors' behaviours to influence prices, production, and a market entry including government intervention in the form of quotas, tariffs, subsidies, and taxes. Public interest here represents conditions and processes that guarantee best allocations of scarce resources for individual and common goods in the society. Theoretically, it could be shown that under certain conditions (perfect competition) the market mechanism ensures the optimal allocation of resources (Ndubueze, 2009). This fact is evident in the theory that if there is a competitive market for all resources used in production and for all commodities valued by individuals, the economic outcome will be efficient (Arrow and Debreu, 1954). However, in practice this is usually not so, many forces in the real world often influence the market to allocate resources less efficiently than the ideal competitive market and thus provide the justification for exploring other alternative resource allocation methods. Thus, this public interest regulation theory is essentially built around contentions on competitive market conditions and deviations from the socially efficient use of scarce resources, in an attempt to set a scientific foundation for social engineering. Although it is difficult to trace the origin of this theory to specific authors, the theory was ironically consolidated by some of its ardent critics such as George Stigler and Richard Posner who conceive regulation as seeking to protect and benefit the public at large (Hantke-Domas, 2003). The theory grew out of the welfare economics tradition which ironically is concerned with promotion and protection of individual utility or welfare. Within this tradition, the aggregation of individual utilities or welfare in the society is taken to represent social welfare or the public interest.

However, there remained a major problem of making interpersonal utility comparisons and determining what constituted a marginal increase in individual utility (in other words how best to meaningfully operationalise public interest) (Ndubueze, 2009). A breakthrough was provided by Vilfredo Pareto (1848-1923) who developed two criteria for measuring or verifying public interest; Pareto optimality and Pareto Superiority. Pareto reasoned that since it is difficult to compare the individual utilities, one can only be sure that a given change would increase social welfare if at least one person is made better off by that change without anybody being made worse off (Ndubueze, 2009). Thus, any change cannot be certainly taken to be in the public interest if it made some people better off while it made others worse off. Based on this view, a situation is optimal if no one can be made better off without making somebody worse off. Thus, it is accepted that most appropriate resource allocation mechanism is the system that guarantees Pareto efficiency or optimality where no individual can be made better off without another being

90 made worse off. Pareto efficiency was later complemented by the Kaldor-Hicks criterion that postulates that an outcome is more efficient if those that are made better off could, in theory, compensate those that are made worse off and still be better off, which would result in a Pareto optimal outcome. It is thus assumed that Pareto optimality would occur when both productive efficiency and allocative efficiency are simultaneously achieved (a change in which gains would exceed losses) (Ndubueze, 2009).

However, given the fundamental requirement of the ideal competitive market, it is recognised that any Pareto efficient allocation of resources can only be achieved as a competitive equilibrium with an appropriate initial distribution of factor endowments. Thus, the free market system can achieve Pareto efficiency under the following set of conditions: (a) that there are complete set of markets for all possible goods; (b) all markets are in full equilibrium; (c) markets are perfectly competitive; (d) transaction costs are negligible; (e) there must be no externalities; and (f) market participants must have perfect information; (g) no problems of enforcing contracts (Ndubueze, 2009). While Greenwald and Stiglitz (1987) have demonstrated that outcomes will always be Pareto inefficient in the absence of perfect competition or complete markets, it should however be noted that Pareto optimality can also be achieved outside a perfectly competitive market in systems that replicate the outcomes of such markets such as ‘perfect' central planning or ‘market socialism'. It is however evident that in the real world, most markets rarely operate within such ideal conditions. That leads to inefficiency in the allocation of goods and resources due to ‘market failures’ for example, natural monopoly, incomplete markets, externalities, public goods and imperfect information. In taking market failure as a point of departure, the public interest regulation theory argues that market failure is principally caused by the self-seeking behaviour of agents and lack of incentives to act cooperatively or take account of social costs of their actions within market process. This situation justifies a third party (usual government) coercive enforcement or intervention to mediate, remedy or enhance cooperative behaviour among agents within the society (Ndubueze, 2009). The theory predicts that regulation will be instituted to improve economic efficiency and protect social values by correcting market imperfections. If the benefits of government regulation outweigh their costs, then the allocation of resources here would be considered as efficient. Thus, the affirmative view of governments' and other public agencies' ability to ameliorate identified market failures at low cost, or adjust inequitable market practices using regulatory techniques, has been coined the public interest theory (Hägg, 1997).

91 Underlying the theory is the implicit presumption of the existence of "the public interest," that the government officials act by the public interest and that the separation of policy making and policy implementation has no effect on maximizing efficiency (Hertog et al., 2003). Applying this theory to affordable low-income housing provision would mean that governments are indeed expected to eliminate housing market failures and indeed moderate such markets through appropriate intervention through the implementation that delivers adequate and affordable housing to its citizens. Under this theory, intervention in the low-income public housing market will be considered as economically efficient if the benefits of providing such housing outweigh the costs of such intervention. In this light, government regulation could be seen as an efficient instrument to correct imperfect competition, unbalanced market operation, missing markets and undesirable market results (Hertog et al., 2003).

Thus, regulation/intervention (policy) is seen within this theory as a corrective interference to socially inefficient market mechanisms. This thinking provided the rationale for regulation and intervention as a means of achieving social/public goals and objectives. It should be noted that in the 1960s and 70s the notion of government intervention increasingly acquired a negative outlook and criticisms especially in the United States by counter views which suggest that even though regulation may be conceived to serve public interest, they do not protect the public at large but rather tend to serve only the private interests of groups (Ndubueze, 2009). As a result, regulation began to be primarily conceived as “matter of redistribution” that negatively affects market efficiency (Hantke-Domas, 2003). However, from the 1980s onwards, the negative and gloomy view of regulation came to be questioned (Mackaay, 1999). For instance, Becker (1983; 1986) argued that the fact that politicians may tend to favour particular interest groups does not imply that government cannot correct market failures. He argued that in striving to enhance their welfare through political means, pressure groups cannot neglect social waste affecting them. He was of the view that privileges sort by interest groups would stimulate their counterweight for other interest groups and concluded that ensuring forms of regulations benefit all actors, not just a specific interest group. Many authors have often seen regulation theory as a positive theory (Ndubueze, 2009), Nigerian government should also follow suit.

2.19.2. Theory of Distributive Justice

The concept of justice as fairness was first developed by Emmanuel Kant in the 18th century. This concept has in turn given rise to theories of social justice, which are increasingly being used to evaluate social policies (Burke, 1981). Distributive Justice refers to justice in assigning

92 benefits (and burdens) as if from a common source, and the challenge here is how to fairly allocate scarce resources among diverse members (individuals, groups, sectors, etc.) that make up any given society. Often, the fair allocation of resources is less concerned with the total value of goods to be distributed and more with the procedure of distribution and the resultant outcomes and pattern of the distribution mechanism. It is a common consensus that resources should be distributed in a reasonable manner which guarantees each a fair share of the distributed resources (Ndubueze, 2009). It implies that the common criteria to consider in the resource allocation consideration in many societies include such principles as; equality, equity, and need. Each of these criteria suffers considerable limitations.

This theory explores the causes of political and social discontent, asserts that people are aroused to political action as a result not of absolute change in their material condition but of changes relative to the circumstances of those with whom they compare themselves (Runciman, 1989). Thus, a sense of injustice is aroused when individuals come to believe that their outcome is not in balance with the outcomes received by people like them in similar situations. It has been aptly observed by Maiese (2003) that; “when people have a sense that they are at an unfair disadvantage relative to others, or that they have not received their fair share, they may wish to challenge the system that has given rise to this state of affairs which leads to insecurity. It could therefore be inferred from a social deprivation perspective that societies in which resources are distributed unfairly can become quite susceptible to social unrest and instability which serves to limit growth as it is today seen in Nigeria with the Boko Haram militants in the North, the Niger Delta Militants in the South and the Biafra secession agitation from the East. In such a situation, redistribution of benefits can help to relieve tensions and allow for a more stable society. Therefore, to relate the principle of this theory to housing affordability in Nigeria, it could be argued that the maximisation of the utility households derived from their housing is seen as being morally important and as well as a means of improving the economic welfare of society.

It is indeed desirable for the government to intervene and improve housing conditions of households provided it does not as a consequence decrease the housing conditions of anybody else or result in a situation where losses are greater than gains. If the principles highlighted in this theory which points to justifiable implementation, distribution, and allocation of social policies such as housing can be fairly applied to all regions of Nigeria, it will reduce the struggles as seen in the security situations of the country from the regional unrest. The agitations seen across the

93 regions which have risen to become a very harsh security situation in the country is a result of years of neglection and injustices in the system; and unfair treatment and distribution of available resources such as housing. The images provided by figure 4 and 6 in chapter 2 suggests that the oil money from the South-South region has always been used to develop other regions while her people suffer in abject poverty and the excruciating pain of underdevelopment. Living in deplorable housing condition which is the main factor that builds up the anger which has developed into agitation and calls for secession coming from the youths of the region who are now taking to arms that have unbalanced and put a heavy burden on the security system of the country.

Furthermore, this theory suggests an evaluation of the Nigerian housing policy implementation strategy, especially the method of distribution and allocation of produced housing stock to reflect justice and fairness. It also appeals that resources such as housing should be distributed in a manner which guarantees individual satisfaction and a fair share of the distribution especially for the low-income groups in the South-South region. This theory also highlighted that policy is a powerful tool for achieving social justice, it, therefore, suggests that if Nigerian policy makers can introduce an effective system in the housing sector where policy is seen as a mechanism to deliver social justice, it will motivate growth and a positive turnaround in the entire public housing system especially the low-income housing sector to improve affordability.