Public goods Flashcards
What are public goods ?
Public goods= goods that cannot normally be provided by the private sector; they are commodities or services provided without profit to all members of society.
eg defence (army/navy), lighthouses, street lights, clean air
What are the two traits of public goods, and what are public goods that only possess one of these two traits?
Non-excludable- once provided, no person can be excluded from benefiting or suffering (pollution)
Non- rivalrous- consumption of the good by one person does not reduce the amount available for another person
Quasi-public goods possess one or the other of these traits
Examples of Public goods and quasi public goods
Public goods= a lighthouse, the malvern hills
Quasi public goods= police service (its non excludable, but one persons consumption reduces the amount available for others who also require their help at the same time)
Why are public goods market failure??
They would be completely underprovided by the private sector (no one wants to set up a street light company), resulting in a shortage which is allocatively inefficient. If provided by the private sector you’d get free riders who choose not to pay for the service.
Whats the free rider problem??
Once a public good is provided you can’t stop people experiencing the benefits and there are little incentive to pay for it.
Why is government intervention required??
Needed to ensure that sufficient quantities of public goods are provided eg govt pay private contractors to carry out work ie G45 has started running some prisons as they’re more efficient than the government but wouldn’t earn money from providing them in the free market.
