Public Goods Flashcards
Excludability
Property of a good whereby a person can be prevented from using it if they do not pay.
Free rider problem
Because public goods are non-excludable it is difficult to charge people for benefitting once a product is available. The free rider problem leads to underprovision of a good and thus causes market failure. Free riders have no incentive to reveal how much they are willing and able to pay for a public good because they can enjoy benefit without paying.
Global public goods
Global public goods benefit every country, irrespective of which ones provide them – they have become more important recently. Examples might include: Security from war, violence, and crime, the rule of law, property rights, and contract enforcement, eradication of smallpox, Ebola and other diseases.
Missing markets
Missing markets are associated with the difficulties that the free market has in providing pure public goods. Public goods are non-excludable meaning that the benefits derived from them cannot be confined solely to those who have paid for it. Non-payers can enjoy the benefits of consumption at no financial cost to themselves (aka free riders).
Non-excludability
A characteristic of public goods. Benefits derived from pure public goods cannot be confined solely to those who have paid for it. This gives rise to the free-rider problem.
Non-rival consumption
Non-rivalry means that consumption of a good by one person does not reduce the amount available for others. Non-rivalry is one of the key characteristics of a pure public good.
Public goods
Pure public goods are non-rival – consumption of the good by one person does not reduce the amount available for consumption by another person, and nonexcludable – where it is not possible to provide a good or service to one person without it being available for others to enjoy.
Quasi-public good
A quasi-public good is a near-public good. It has some of the characteristics of a public good. Quasi-public goods are:
Semi-non-rival: up to a point, more consumers using a park, beach or road do not reduce the space available for others. But eventually beaches become crowded as do parks/leisure facilities. Open-access Wi-Fi networks become crowded.
Tragedy of the commons
When no one owns a resource, it may get over-used, for example fish stocks and deforestation - people use and benefit from a common pool resource such as grazing land without regard to the effects on others. Over-use of a renewable resource can lead to a long-term decline in maximum sustainable yield.
