Abstract: The political nature of modern country and the non-exclusivity and non-competitiveness of public goods have decided that the providing of public goods is an important function of the government. Efficiency and equity are values that the government should pursue while providing public goods. The publicity of public goods and the degree of scale economy have decided the relativity between efficiency and equity’s realization and the government’s hierarchy and size. Therefore, the theory of public goods has a significant function in helping to establish the local government’s hierarchy.

Key words: equity, efficiency, publicgoods, governmentalhierarchy