Public and Private Goods

12 Key excerpts on "Public and Private Goods"

• 

  eBook - PDF

  Limiting Resources

  Market-Led Reform and the Transformation of Public Goods

  • LaDawn Haglund(Author)
  • 2010(Publication Date)
  • Penn State University Press

    (Publisher)

  In later chapters, I will build upon this analysis by evaluating how these organizing principles interact and/or clash in concrete institutional and political environments. I will then 24 LIMITING RESOURCES show how neoliberalism, by choosing a narrow view of public goods, pro- motes policies that shrink the pool of resources considered ‘‘public’’ and that preclude several important nonmarket alternatives. When Markets Fail: An Economic Approach to Public Goods The field of economics frames goods provision primarily in reference to markets rather than to the public or state. Markets are deemed the most efficient mechanisms for distributing goods and services so that nobody can be made better off without someone else made worse off. Public goods are those that markets are unable to provide efficiently because of the char- acteristics of the goods themselves. In these cases, state intervention is justified to remedy or prevent ‘‘market failure.’’ Two criteria used to distin- guish public goods are rivalry and excludability (Musgrave 1969). Rival- rous goods are those that, once taken or consumed by one person, are not available for use by another, such as goods sold in supermarkets or fish in common waters. Nonrivalrous goods are those that are available regardless of how many people use them, such as policing and lighthouses. Exclud- able goods are those that can be denied to people without a great deal of difficulty, such as most goods bought and sold for a market price. Nonex- cludable goods are those for which it would be costly or impossible to exclude users, as with common land or military protection. Although many goods we consume are ‘‘private’’ in this rendering (both excludable and rivalrous), our most essential goods are generally ‘‘public’’ (non- rivalrous and nonexcludable) or ‘‘semipublic,’’ or ‘‘mixed’’ (either rivalrous or excludable but not both) (see table 2).

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Encyclopedia of Governance

  • Mark Bevir(Author)
  • 2006(Publication Date)
  • SAGE Publications, Inc

    (Publisher)

  Pure public goods are generally rare and econo-mists have created a number of useful subdivisions that describe a good by its excludability and rivalrous-ness. Nonexcludability and rivalrousness leads to open access, common property resources, and free goods. Excludability and nonrivalrousness character-izes toll goods such as a bridge. Public goods also have a regional quality to them, and economists gen-erally distinguish between local, regional, national, international, and global public goods. Economists have identified two instances in which public goods may be supplied by the market. In the first case, one consumer would purchase the good no matter the free riding resulting from subsequent bene-fits accrued by other consumers who cannot be excluded. In the second case, if a group of consumers is small enough, pressure can be brought to bear on those who do not contribute, and each marginal con-tribution can make a significant difference. In light of the free-rider problem, there are four possible strategies of intervention. The first involves government provision after collection of contributions from varied consumers in the form of taxes. One prob-lem with this mode of intervention is that it is difficult to ascertain the amount of demand for a good and thus how much to supply. A second strategy involves gov-ernment subsidies to private firms to encourage them to produce the public good. A third mode involves the aforementioned privileged group. Fourth, the govern-ment can create excludability through legislation. Intellectual property schemes follow this model by prohibiting the free flow of information as a pure public good. —Karthik Srinivasan See also Contracting Out; Free Riding; Market Failure Further Readings and References Olson, M. (1973). The logic of collective action. Cambridge, MA: Harvard University Press.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Political and Civic Leadership

  A Reference Handbook

  • Richard A. Couto(Author)
  • 2010(Publication Date)
  • SAGE Publications, Inc

    (Publisher)

  P ublic goods are goods that are consumed collectively, and it is not possible to exclude someone from con-suming a public good. For instance, a sea is a public good since all people, unless restricted by an authority, can swim, sail, fish, or draw water; or, for example, radio broad-casting can reach many people via radio waves, satellite, and the Internet. Another example is the national defense: Once it is supplied, it affects all citizens within the bound-aries of a nation-state. There are two main characteristics of public goods that differentiate them from private goods: First, they are nonexclusive in consumption, and their ben-efits influence the general public. All citizens, even if they are not contributing with taxes to the provision of national defense, can benefit and cannot be excluded from the ser-vice. Second, contrary to private goods, public goods are nonrivalrous, which means that they can benefit many citi-zens at the same time without any extra cost—or at a very low marginal cost. The cost of the national defense to the new citizens is almost zero. In a market society, goods and services are provided either through a market mechanism or through the govern-ment. Because of their characteristics, some goods have to be provided by the government. However, the provision of which goods—or which public goods—should be under the responsibility of the government is a normative question that has fundamental importance for social life. For this rea-son, we face different conceptualizations and classifica-tions of public goods. On the one hand, one can find literature full of discussions about the normative questions on public goods in different branches of social science such as in political science, economics, public administration, sociology, and philosophy; on the other hand, there is a large number of works on technical questions regarding the provision of public goods in the field of public finance.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  How to Regulate

  A Guide for Policymakers

  • Thomas A. Lambert(Author)
  • 2017(Publication Date)
  • Cambridge University Press

    (Publisher)

  Consider, for example, this passage from a law school text authored by five acclaimed economists: It is apparent that public goods will not be adequately supplied by the private sector. The reason is plain: because people can’t be excluded from using public goods, they can’t be charged money for using them, so a private supplier can’t make money from providing them. . . . Because public goods are generally not adequately supplied by the private sector, they have to be supplied by the public sector. 9 That last claim seems demonstrably false. A moment’s reflection calls to mind all sorts of public goods that are supplied by private actors without government coercion. For example: a) Having one’s downtown be free of orphans and impoverished beggars is a benefit that is both non-rivalrous and non-excludable, yet privately funded orphanages, homeless shelters, and soup kitchens are common. b) A beautiful, well-kept garden provides a vista that multiple users can enjoy without depletion (non-rivalrous) and from which passersby cannot easily be barred (non-excludable), yet many homeowners in populated areas 9 Howell E. Jackson, Louis Kaplow, Steven Shavell, W.Kip Viscusi, and David Cope, Analytical Methods for Lawyers (La Habra, California: Foundation Press, 2003) 362–63 (emphasis added). 70 Public (and Quasi-Public) Goods expend significant sums, not to mention hours of hard labor, tending their yards. c) A highly educated citizenry tends to make better political decisions and to generate a richer cultural environment – both benefits that are non- rivalrous and largely non-excludable – yet people routinely spend great sums educating their children. d) Private groups regularly clean up roadsides, even though the benefit they are creating is not depleted as more drivers use the road (non-rivalrous) and cannot be limited to people who contribute to the clean-up (non- excludable).

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Social Entrepreneurship Business Models

  Incentive Strategies to Catalyze Public Goods Provision

  • K. Sommerrock(Author)
  • 2010(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  For exam- ple, conflict is more noticeable than peace, which is often taken for granted. Similarly, people realize that they are ‘part of the market’ much more when a stock market crashes and the value of their investments tumbles. Or they recognize the close links between gen- eral health conditions when a flu epidemic strikes. 12 Rosen and Windisch even cite sincerity, societal stability or the distribu- tion of income as examples of public goods. If every citizen did business with sincerity, all members of society would benefit from the resulting decrease in information and transaction costs. 13 The Challenge of Public Goods Provision 77 The two criteria differentiating private and public goods – ‘exclusivity of access’ and ‘rivalness in consumption’ – can serve to develop a typol- ogy of goods which allows the classification of public goods within the spectrum of all goods. Only those goods that are characterized by non-exclusive access and non-rival consumption can be defined as public goods. The ambiguity of ownership and usage rights of public goods differ- entiates them from private goods, which are characterized by completely exclusive access and rival consumption. 14 As soon as public goods become rationalized – that is, the number of users is controlled or restricted, while still maintaining non-rivalry in consumption for those people with access to the good – they are defined as club goods. Their characteristics allow for a price to be charged – for example, entrance or membership fees – thus distributing the cost of supplying the good over several users. 15 Typical club goods include public swimming pools or museums, tennis courts and golf courses. If a good is characterized by non-excludable access but rivalness in consumption, it can be classified as a collective good or collec- tive resource base. An example of collective goods are fishing grounds, offering access to anyone, but providing only a limited amount of fish.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Welfare Economics

  Towards a More Complete Analysis

  • Y. Ng(Author)
  • 2003(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Two persons may share an apple but they will each eat only half. Hence such goods as apples, bread, and so on are private goods. However there are goods that fall between the polar cases of purely public and purely private. For example books in libraries can be borrowed by different readers over different periods but not at the same time. In fact even the books on my own shelves have some degree of publicness since my students and colleagues quite often drop in to borrow them. However in this 164 case, since there is a prime beneficiary/owner, they are best regarded as goods with external effects – that is, a common consumption externality – instead of public goods (the borrowing imposes negligible costs on me except when, occasionally, some borrowers forget to return the books and I forget who borrowed them). The second proposed characteristic of public goods is ‘non-excludability’. That is, once a good is provided to some individuals it is impossible, or at least very costly, to exclude others from benefiting from it. Defence is again a good example. It is also difficult to exclude people from receiving tele- vision signals. But licensing can be used as a (usually not very effective) method and cable television as an effective but costly method of exclusion. Moreover the exclusion cost is almost never zero, even for purely private goods, since the production and distribution of all goods require the main- tenance of law and order. A characteristic that is both similar to and the opposite of non-excludability is ‘non-rejectability’. Defence can again be cited as an example. If your country has been defended from foreign invasion you too are defended, even if you would prefer the chaos created by invasion. But non-rejectability is more important in respect of public bads (pollution and so on). If a good is perfectly non-rivalrous, once provided it can be made available to all the individuals concerned at no additional cost.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Production, Growth, and the Environment

  An Economic Approach

  • William L. Weber(Author)
  • 2014(Publication Date)
  • CRC Press

    (Publisher)

  In contrast, a private good is rival in consumption and excludable. When Sid drinks a soda, the benefits he receives from that particular soda are not available to Alice: the soda is rival in consumption. In addition, prices serve as an exclusionary mechanism for private goods. If Alice does not have enough money to cover the price of the soda, she is legally excluded from consuming it. Very few goods meet the strict characteristics of nonrivalry and nonexclud-ability. Environmental amenities like clean air or diverse ecological systems 147 148 Production, Growth, and the Environment have public good qualities to some degree. However, environmental ameni-ties are sometimes subject to some degree of rivalry or exclusiveness, even if they are better thought of as “public” rather than “private” goods. Figure 7.1 provides a two dimensional representation of alternative degrees of nonrivalry and nonexcludability for different goods. Rival Non-rival Excludable Non-excludable A-soda C-climate G-open access fishery E-parks P-pollution B-movie at theater with empty seats D-highways Figure 7.1: Degrees of Rivalry and Excludability for Public–Private Goods. Point A corresponds to a pure private good like a can of soda which is both rival in consumption and excludable. Point B corresponds to a good for which it is easy to exclude individuals but for which there is a high degree of nonrivalry. For example, attending a movie at a theater is nonrival when the theater does not sell all available tickets. In such a case more people can be added to the theater without reducing the benefits of watching the movie to those already there; that is, as long as the marginal person does not wear a top hat, sit right in front of you, and talk throughout the movie. However, the movie theater can exclude people by requiring people to buy a ticket before they gain admitance. Point C represents a pure public good, like climate, which is both nonrival and nonexcludable.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  A Course in Public Economics

  • John Leach(Author)
  • 2003(Publication Date)
  • Cambridge University Press

    (Publisher)

  Police and fire protection, parks and recreational facilities, roads and bridges, and national defense are all members of this group. Goods that are non-rivalrous or partially rivalrous are called public goods. The market system generally fails to provide adequate quantities of these goods. The clearest demonstration of the problem arises with Samuelson’s pure public good, which combines non-rivalrousness with non-excludability. A non-excludable public good is one whose use cannot be controlled by the provider. Conventional (air-borne) radio and television signals are pure public goods. One person’s decision to listen to a particular radio program does not impair anyone else’s enjoyment of that program, so the signal is non-rivalrous. The provider of the signal cannot allow some people to listen to the program and prevent others from hearing it, so the signal is non-excludable. Non-excludability implies that the users of a pure public good cannot be charged for its use. They can enjoy the benefits of the good and pay for it, or enjoy the benefits and not pay for it. They will generally prefer not to pay for it, or to pay too little for it. Consequently, private firms find that the provision of pure public goods is an unprofitable venture. Pure public goods are more easily provided by the government, which can fund them from its general tax revenues. Other kinds of public goods – impure public goods – have different kinds of prob-lems associated with them. Freeways, for example, are a congestible public good whose access can be controlled. If access is not controlled, how extensive should the freeway system be? Increasing the capacity of the system to ease congestion encourages people to drive more often, so that the congestion returns. Building a freeway system with enough capacity to eliminate congestion cannot be the government’s goal.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Microeconomics

  Theory and Applications

  • Edgar K. Browning, Mark A. Zupan(Authors)
  • 2019(Publication Date)
  • Wiley

    (Publisher)

  Thus, a person can benefit from a good’s production regardless of whether he or she pays for it. Although the concepts of nonrivalry and nonexclusion often go together, they are distinct. Nonrivalry means that consumption by one person need not interfere with consump- tion of others; although a good may be nonrival in consumption, restricting consumption to selected persons may still be possible. For example, when a website is posted, anyone with Internet access can go to the website and view its contents without interfering with another person’s ability to view the same site. (An exception would be if the site suddenly got a huge number of hits, overloading the server.) It is possible to deliberately exclude access to a website, however, and in fact, it is often done. For instance, the website for the Wall Street Journal, www.wsj.com, includes free content that anyone can access. However, only subscribers can access more detailed information, such as front-page stories from the Journal. Clicking on those areas brings up the message, “The page you requested is available only to subscribers.” Subscribers must supply a user number and a password, and nonsubscribers are denied access. The Web illus- trates how some things can be nonrival and yet have the possibility of exclusion. Thus, it does not meet the criteria to be a public good. externalities the harmful or beneficial side effects of market activities that are not fully borne or realized by market participants 20.1 nonrival in consumption a condition in which a good with a given level of production, if consumed by one person, can also be consumed by others nonexclusion a condition in which confining a good’s benefits, once produced, to selected persons is impossible or prohibitively costly • What Are Public Goods? 511 In contrast, national defense is an example of a good with both characteristics.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  A New Approach to the Economics of Public Goods

  • Thomas Laudal(Author)
  • 2019(Publication Date)
  • Taylor & Francis

    (Publisher)

  Malkin and A. Wildavsky criticize economists for using a definition of public goods that rests on the inherent properties of the good itself (Malkin & Wildavsky, 1991). 9 They argue that it is not possible to locate goods that have inherent properties which make them best suited for government provision. We should rather discuss what kind of goods we believe ought to be financed publicly. The position of Malkin and Wildavsky (1991) seems to equate analysis of whether technology and social organization influence goods’ excludability and jointness/rivalry, or not, with political discussions about whether a good should be provided by the public or private sector. However, one of the most important advantages of discussing the status of public goods seems to be omitted. Joint and non-rivalrous goods may be subject to market forces (e.g. entrance to national parks and monuments or domestic household services). And there may be political consensus among all political factions that an excludable good should be provided by the government (e.g. hospital treatment and equipment for handicapped persons in Scandinavia). If we did not have precise concepts developed for the specific purpose of analyzing the nature and provision of goods, we would be left with a debate about “private or government provision” – a discourse which often becomes superficial without considering the nature of public goods

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  The Right Privatization

  Why Private Firms in Public Initiatives Need Capable Governments

  • Sergio G. Lazzarini(Author)
  • 2022(Publication Date)
  • Cambridge University Press

    (Publisher)

  chapter 1 Public or Private? The Conceptual Foundations Should a public activity be outsourced to private firms? The answer to this complex question often comes with a simple and somewhat redundant answer: governments must take care of public activities. A more inform- ative response, of course, requires a precise definition of what “public” means. Scholars initially proposed that governments should guarantee the pro- vision of public goods. The economist Paul Samuelson (1915–2009) origin- ally talked about goods that an individual can consume without subtracting from the amount of goods available to other people. Subsequent definitions further specified that individuals cannot be excluded from accessing public goods and enjoying their benefits. Clean air, shared knowledge, and safe streets are all illustrations of public goods. 1 Yet not all public activities involve pure public goods. For instance, public schools can target certain local communities (i.e., families outside the community are excluded) and some schools, especially the best ones, may not be able to accommodate all applicants. In other words, they can potentially exclude some beneficiaries, even if they are free of charge. However, they have a sense of “publicness” because they are accessible to a broad population, at least to a higher extent than expensive private schools targeting handpicked students and wealthy families. It is easy to see how these goods create formidable challenges to private provision. In the example of private schools, accepting and sponsoring disadvantaged students implies that the schools’ owners will have to forgo profits that they would reap if they focused on affluent customers. In the case of pure public goods, the situation is even more complicated, as, by definition, nobody is supposed to be excluded. Interestingly, groups at opposite ideological sides similarly consider that public goods require public delivery.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  The Economics of Law, Order, and Action

  The Logic of Public Goods

  • Jakub Bozydar Wisniewski(Author)
  • 2018(Publication Date)
  • Routledge

    (Publisher)

  An Austrian critique of the theory of public goods

  2.1 Introduction

  Perhaps the most common argument describing a putatively beneficial function performed by a monopoly of force refers to its alleged ability to supply society with certain crucial, otherwise unattainable classes of goods. There are many names to designate such goods and many ways to categorize them, but for my purposes I shall regard them as falling into two relatively broad classes: club and common goods, which together constitute the category of public goods.

  Various theorists writing on the subject in question identify the said goods according to various characteristics. Malkin and Wildavsky (1991) provide an illuminating insight into the degree to which there is no final agreement on the matter. Although in general the literature on public goods is “terminologically over-endowed” (Hummel 1990, p. 90), which engenders a great deal of semantic confusion, I believe that it is fair to say that since the publication of Samuelson’s classic articles on the subject (Samuelson 1954, 1955), one strand of terminological convention has come to dominate the picture. According to this convention, club goods are defined as possessing the characteristic of joint (or non-rival) consumption (Buchanan 1965; Olson 1971; Berglas 1976; McNutt 1999), whereas common goods are defined as possessing the characteristic of non-excludability (or the existence of related externalities) (Musgrave and Musgrave 1980; Kim and Walker 1984; Ostrom 1990).

  The former means that the consumption of a unit of a given good by a particular person does not in any way diminish the ability of others to consume that same unit, whereas the latter means that a given good produces spillover effects, which enable non-payers (most notably the so-called “free riders”) to benefit from the good without in any way contributing to its production. Some standard examples of the former type of goods – that is, pure club goods (non-rival but excludable) – would be TV signals and computer software. Some examples of the latter type – that is, pure common goods (rival but non-excludable) – would be air and fish in the ocean. Finally, some paradigmatic examples of the goods combining the previous features, oftentimes called pure public (Leach 2003, pp. 171–86) or collective (Demsetz 1970) goods, include lighthouses and national defense.

  Sign up to read

  Learn more about book