A Deeper Look at Public Goods
What do we mean by “nonexcludable” and “nonrival” when talking about public goods? Public goods challenge markets because it’s difficult to charge non-payers and it
What do we mean by “nonexcludable” and “nonrival” when talking about public goods? Public goods challenge markets because it’s difficult to charge non-payers and it’s inefficient to exclude anyone — so, how do we produce them? Public goods provide an argument for taxation and government provision. But how do we know which public goods should be provided? In this video we cover the free-rider problem and the forced-rider problem in regards to public goods. We also discuss examples of the four different categories of goods which will be covered in future videos: private goods, commons resources, club goods, and public goods.
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I'm not quite sure how Yosemite National Park is a nonrival good. It seems to me if you pack enough people into it, you are bound to impair the utility to both the newcomers and the people already there.
Isn't it true that one of the solutions to the problem raised by public goods is to try to create a balance between the coercive approach (ie. taxation) and a voluntary user pays approach? I suppose that still obviously wouldn't work with asteroid protection, but maybe it would with health care for example. But is health care a public good? - See more at: http://www.mruniversity.com/courses/principles-economics-microeconomics/...
Health care is a name for many kinds of services, some of which are private goods, some of which have public goods features. Many goods under the heading health care are private goods, such as an aspirin for my headache or a surgical intervention to fix my broken leg are private. But vaccines against contagious diseases are goods with public goods features. They pose a problem for markets.
Imagine we are colleagues working in the same office and you don't know if you should get the vaccine for you or not. If you get the shot, then you also protect me. If you get the shot, you cannot exclude me from benefitting from a safe environment at work, which you created by having it yourself. Neither am I preventing you from staying healthy just by being there at work and enjoying that protection. Since the shot is expensive, you might want to wait for me to have the shot and protect you as a side effect. We both want to free ride on the other, so it is possible that neither of us gets it. We might then get sick.
However, the fact that a public good poses a problem for markets does not mean that markets cannot anticipate and prevent that problem. Our employer competes with other employers. She cannot afford the risk of having us both sick. To prevent this problem she makes a proviso in our employment contract whereby at the beginning of the cold season one of us is randomly drawn to have the flu shot, while we both take equal cuts from our paychecks to cover the cost of that one shot. The flu shot is still a public good, but no taxation was needed to pay for it. We voluntarily agreed to work for this company under this proviso.
The type of solution here is called a tied sale. Our employer tied a condition (a cost to us) to the job offer (which is otherwise a benefit to us). She sold us the entire package.