ECO324 Reading
1.
Source: http://marketurbanism.com/2011/02/22/urbanism-legend-public-good/
In a recent post, commenter Jeremy H. helped point out that the use of the term “public good” is
grossly abused in the case of transportation. Even Nobel economists refer to roads as “important
examples of production of public goods,” ( Samuelson and Nordhaus 1985: 48-49).
As Tyler Cowen wrote the entry on Public Goods at The Concise Library of Economics:
Public goods have two distinct aspects: nonexcludability and nonrivalrous consumption.
“Nonexcludability” means that the cost of keeping nonpayers from enjoying the benefits of the
good or service is prohibitive.
And nonrivalrous consumption means that one consumer’s use does not inhibit the consumption
by others. A clear example being that when I look at a star, it doesn’t prevent others from seeing
the same star.
Greg Mankiw thinks (in his “Principles of Economics”), in some cases roads are public goods.
“If a road is not congested, then one person’s use does not affect anyone else. In this case, use is
not rival in consumption, and the road is a public good. Yet if a road is congested, then use of
that road yields a negative externality. When one person drives on the road, it becomes more
crowded, and other people must drive more slowly. In this case, the road is a common resource.”
2.
Source: Public Goods, 131 Undergraduate Public Economics, Emmanuel Saez, UC Berkeley
Private trash collection, financed by a voluntary fee paid by neighborhood residents, faces the
classic free rider problem. Goods that suffer from this free rider problem are known in
economics as public goods.
Private provision of a public good creates a positive externality (as everybody else benefits). And
goods with positive externalities are under-supplied by the market.
A major function of governments at all levels is the provision of public goods. In some cases, the
private sector can provide public goods, but in general it will not achieve the optimal level of
provision.
When there are problems with private market provision of public goods, government
intervention can potentially increase efficiency. Whether that potential will be achieved is a
function of both the ability of the government to appropriately measure the costs and benefits of
public projects and the ability of the government to carry out the socially efficient decision.
3.
Firs protection is called congested public goods in some literature. See the attached article.