12/14/2023 0 Comments Public good free rider problem![]() The second main characteristic of a public good, that it is non-rival, means that when one person uses the public good, another can also use it. You cannot choose to be unprotected, and national defense cannot protect everyone else and exclude you. Even if you strongly disagree with America’s defense policies or with the level of defense spending, the national defense still protects you. However, if national defense is provided, then it includes everyone. If Larry buys a private good like a piece of pizza, then he can exclude others, like Lorna, from eating that pizza. The first characteristic, that a public good is nonexcludable, means that it is costly or impossible to exclude someone from using the good. Instead, public goods have two defining characteristics: they are nonexcludable and non-rival. However, public goods are not separate and identifiable in this way. We can buy and sell a piece of pizza fairly easily because it is a separate and identifiable item. To understand the defining characteristics of a public good, first consider an ordinary private good, like a piece of pizza. The Definition of a Public GoodĮconomists have a strict definition of a public good, and it does not necessarily include all goods financed through taxes. Then we will see how government may step in to address the issue. Let’s begin by defining the characteristics of a public good and discussing why these characteristics make it difficult for private firms to supply public goods. ![]() Spending on national defense is a good example of a public good. ![]() What about a situation where the positive externalities are so extensive that private firms could not expect to receive any of the social benefit? We call this kind of good a public good. Identify several sources of public goodsĮven though new technology creates positive externalities so that perhaps one-third or one-half of the social benefit of new inventions spills over to others, the inventor still receives some private return.Identify a public good using nonexcludable and non-rival as criteria. ![]() By the end of this section, you will be able to: ![]()
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