Fiscal Policy and Economic Regulations
Public Goods - Free for All ( Yet paid by everyone)
A Closer Look at Public Goods
Were you aware that not every public good belongs to the state? But wait, what are public goods? In economics, "public goods" is the term for a unique kind of good that functions differently than the kind of thing we typically purchase in shops. Public goods have two characteristics: they are non-excludable and non-rival.
That's a bit technical, perhaps, but it's simpler with a few examples: and once you've caught on, you'll begin to see them everywhere.
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What Makes a Good “Public”?
Let’s start with what most goods are like. Take a packet of noodles in the supermarket. If you buy it, no one else can. That’s a rival good—your consumption reduces what's left for others. Also, if you don’t pay for it, the store won’t let you have it. That makes it excludable.
Now imagine something different. A non-rival good is one that can be consumed by many people at once without reducing anyone’s enjoyment. Think of a fireworks show. Your watching it doesn’t stop someone else from doing the same. In fact, the more people enjoy it, the better it might be.
A non-excludable good is one where you can’t easily stop someone from using it, even if they don’t pay. Take street lighting. If the lights are on, everyone walking down the street benefits—even those who didn’t pay taxes or help install them.
So, a public good is something that is both non-rival and non-excludable. Classic examples include national defense, street lighting, public radio, and basic scientific research.
But not all goods fit neatly into categories. For instance, a toll highway is non-rival if there’s no traffic, but it’s still excludable. Fishing in the ocean is rival (once fish are gone, they’re gone), but it’s hard to stop people from trying, making it non-excludable.
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Why Do They Matter for Public Policy?
Public goods present a challenge for markets. Since people can benefit without paying, private companies often have little reason to provide them. This is known as a market failure.
That’s where the government comes in. To make sure essential services—like security, clean air, or public parks—exist and function well, the state usually steps in to fund or provide them directly. Without this support, many public goods simply wouldn’t be available.
Understanding public goods also helps explain why taxation exists. When everyone benefits from something that no one would provide alone, collective funding through taxes becomes essential.