2.9 Public Goods Flashcards
What are public goods?
Goods that are non-excludable and non-rivalrous.
Public goods are accessible to everyone without diminishing their availability for others.
Define a public good.
A good that every person can benefit from, and one person’s use does not diminish the benefit for others.
Example: National defense.
What distinguishes public goods from common pool resources?
Public goods are non-excludable and non-rivalrous, while common pool resources are non-excludable but rivalrous.
Common pool resources suffer from overuse, diminishing availability for others.
Give an example of a public good.
National defense.
It provides security for all citizens without reducing its effectiveness for any individual.
How does the entry of more people affect a public good?
Their presence does not decrease the value of the public good for others.
For instance, more citizens do not reduce national defense capabilities.
What happens when more people access common pool resources?
Increased strain on the resource, diminishing supply and quality for others.
Example: More people using a watershed leads to water scarcity and pollution.
What is market failure in relation to public goods?
It occurs when private firms have no incentive to provide goods due to their universal benefits.
Example: Fire services are often provided by the government because they cannot charge individuals for their use.
What are some examples of public goods?
- Roads
- Sidewalks
- Street lights
- Fire departments
- Police services
- Legal/justice systems
These goods do not diminish in value when used by multiple individuals.
Why do private firms generally not provide public goods?
It is impossible to charge each individual who benefits, making it unprofitable.
The lack of profitability creates a gap in provision for these goods.
What is the ultimate market failure regarding public goods?
The absence of a market for pure public goods.
This is why government provision is often necessary for services like military defense.
What is a forced rider problem?
A situation where individuals cannot be excluded from using a good, leading to under-provision.
This problem is common with public goods like national defense.
