文档介绍：Public Goods
Introduction
Some markets do not work very well because the good in question has public good characteristics to it.
For example, in Dhaka, Bangladesh, public trash collection is fairly inefficient, but attempts at privatization have not fared any better.
The key problem with private collection of garbage is the free rider problem–with a private, voluntary system, each resident could simply sneak his garbage into his neighbor’s garbage and avoid making payments.
Eventually, everyone would figure this out, and no one would be willing to pay trash collection voluntarily.
In fact, most residents have figured out the incentive to “free ride” or not to be free-ride. Only 50 of 1,100 neighborhoods have private garbage collection, however.
This lesson explores the role of government in providing goods like this, and shows that the private sector tends to underprovide them.
The role of public goods is important in economics. The subsequent lessons explore issues related to:
Cost-benefit analysis
Political economy (skipped)
State and local government
Education (skipped)
OPTIMAL PROVISION OF PUBLIC GOODS
Pure public goods have two traits:
They are non-rival in consumption: The marginal cost of another person consuming the good is zero; in other words, it does not affect your opportunity to consume the good (with the same quality).
They are non-excludable: There is no way to deny someone the opportunity to consume the good.
Table 1 gives some examples.
Table 1
Defining pure and impure public goods
Is the good rival in consumption?
Yes
No
Is the good
excludable?
Yes
Ice cream
Cable tv
(natural monopoly)
No
Crowded city sidewalk
(commons)
National defense
This table shows examples of pure public goods, impure public goods, and private goods.
If a good is both rival and excludable, it is a private good.
Ice cream is rival, because my consumption of it precludes you from consuming the same ice cream. The only way for you to consume it is to make mo