Public good  

From The Art and Popular Culture Encyclopedia

Jump to: navigation, search

Related e



In economics, a public good is a good that is nonrival and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability means that no one can be effectively excluded from using the good.<ref>For current definitions of public goods see any mainstream microeconomics textbook, eg.: Hal R. Varian, Microeconomic Analysis ISBN 0-393-95735-7; Mas-Colell, Whinston & Green, Microeconomic Theory ISBN 0-19-507340-1; or Gravelle & Rees, Microeconomics ISBN 0-582-40487-8.</ref> In the real world, there may be no such thing as an absolutely non-rivaled and non-excludable good; but economists think that some goods approximate the concept closely enough for the analysis to be economically useful.

For example, if one individual visits a doctor there is one fewer doctor's visit for everyone else, and it is possible to exclude others from visiting the doctor. This makes doctor visits a rivaled and excludable private good. Conversely, breathing air does not significantly reduce the amount of air available to others, and people cannot be effectively excluded from using the air. This makes air a public good, albeit one that is economically trivial, since air is a free good. A less straight-forward example is the exchange of MP3 music files on the internet: the use of these files by any one person does not restrict the use by anyone else and there is little effective control over the exchange of these music files and photo files.

Non-rivalness and non-excludability may cause problems for the production of such goods. Uncoordinated markets driven by self-interested parties may be unable to provide these goods in optimal quantities, if at all. There is a good deal of debate and literature on how to measure the significance of public goods problems in an economy, and to identify the best remedies. These debates are highly relevant to political arguments about the role of markets in the economy. While it does not follow that because markets will not spontaneously provide pure public goods, the state should do so, it may well be that if some public agency does not provide them, they will simply not be provided at all, notwithstanding effective demand for them. Public goods problems are also closely related to externalities—complex multilateral externalities are typically accompanied by the same "free-rider" problem that occurs with non-rival, non-excludable goods and services.

Graphically, non-rivalry means that if each of several individuals has a demand curve for a public good, then the individual demand curves are summed vertically to get the aggregate demand curve for the public good . This is in contrast to the procedure for deriving the aggregate demand for a private good, where individual demands are summed horizontally.

See also

Unless indicated otherwise, the text in this article is either based on Wikipedia article "Public good" or another language Wikipedia page thereof used under the terms of the GNU Free Documentation License; or on research by Jahsonic and friends. See Art and Popular Culture's copyright notice.

Personal tools