Public Goods and Market Failure

Public goods provide an example of market failure resulting from missing markets. Which goods and services are best left to the market? And which are more efficiently and fairly provided as collective consumption goods by the state? This is at the heart of your revision of public goods.

Central to your revision will be to understand why public goods may not be provided by the market. You can work this out by distinguishing between public and private goods and focusing on the ideas of rivalry and excludability in consumption.

Students should understand the free rider and valuation problems – there are big debates in economics about the optimum size of the state. Rapid changes in technology are also changing the nature of what is and what is not a public good.

What are the main characteristics of pure public goods?

The characteristics of pure public goods are the opposite of private goods:

Non-excludability: The benefits derived from pure public goods cannot be confined solely to those who have paid for it. Indeed non-payers can enjoy the benefits of consumption at no financial cost – economists call this the 'free-rider' problem. With private goods, consumption ultimately depends on the ability to pay
Non-rival consumption: Consumption by one consumer does not restrict consumption by other consumers – in other words the marginal cost of supplying a public good to an extra person is zero. If it is supplied to one person, it is available to all.
Non-rejectable: The collective supply of a public good for all means that it cannot be rejected by people, a good example is a nuclear defence system or flood defence projects.

There are relatively few examples of pure public goods.

Examples include flood control systems, some of the broadcasting services provided by the BBC, public water supplies, street lighting for roads and motorways, lighthouse protection for ships and also national defence services.

Comments

What if the two largest apex predators of all time, fought each other

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Is overpopulation a myth

In Bangladesh, NO . 1,500 people per km². In Russia, YES . 8.4 people per km². The little red zone, which features Bangladesh, holds more people than the blue zone, which features Russia, in the following map. Not a myth for everyone. EDIT: For some strange reason some of the commenters think that this answer is advocating that the western countries should take in our extra population. Sorry to break the bad news, this is not advocating any such thing. For some even more bizarre reason some commenters are upset that I have compared overcrowded lands with unihabited lands (to the point of calling me “dishonest”). I don’t even know what to say to that. May be they just needed something to be upset about.

Can the Philippines become a developed country

keep growing its economy. get the Islamist insurgency under control and defeated. solve its traffic problem. The last is the hardest. I’ve the long term solution. First, why doesn’t Grab work everywhere? Remove the regulatory barriers. Second, while ride sharing helps, for a country of the density of the Philippines, mass transit rail is the only solution. However bringing mass transit rail directly to the cores of the cities like Manila is not practical. Instead, for now, take advantage of the growing population, and introduce mass transit rail with every development in the suburbs. Eventually there will be concentric rings of rail around each city, which will reduce the surface traffic in the cores because if it takes 50 times longer to move along the radius as as circumference, people will choose the circumference even if the distance is 6.28 times longer (circumference = 2 * radius * pi). Eventually people will abandon the cores, and this will be an opportunity for ...

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