4.1.8.3 Public Goods

Question 1

Public Good Definition

Answer 1

A non-excludable and non-rivalrous good, which means that the person using the good cannot prevent anyone else from also using the good. Large external benefits relative to cost, so it is socially desirable but not profitable to supply.

Question 2

Free Rider Problem

Answer 2

Individuals have an incentive to use good without contributing towards cost.

Question 3

Public Good Examples

Answer 3

National Defence - If you protect the country from invasion, it benefits everyone in the country.
Street Lighting - If you provide light at night, you can’t stop anyone consuming the good. Walking under a street light doesn’t reduce the amount of light for others.
Police Service - If you provide law and order, everyone in the community will benefit rom improve security and reduced crime.
Flood Defences - Protecting the coastline against flooding provides benefits for the whole community.

Question 4

Tragedy of the Commons

Answer 4

• An essay written by William Forster Lloyd in 1833.
• If all people were permitted to let their livestock graze on common land then the resource would be depleted.
• This concept was updated by Garret Hardin in 1968.
• Any area where there are no restrictions on usage will likely see demand outstrip supply to the detriment of all users in the future.