CHAPTER 11 – PUBLIC GOODS AND COMMON RESOURCES
Public goods have many positive externalities, typically
Producers can’t get paid for it and so can’t cover their costs
Thus the "market" will not provide it because no firm can see the prospect of covering its cost–the market "fails"
The government then gets pulled in by public demand to provide the good, using its "coercive power of taxation" to finance its provision.
Formal definitions:
Excludable:
Benefits from the good can be denied–at a reasonable cost to the seller–to those who are not willing to pay for it once it is provided.
Non-excludable:
Benefits from the good can not be denied–at a reasonable cost to the seller–to those who are not willing to pay for it once it is provided.
Rival:
One person’s consumption of the good does diminish (eliminates) another person’s ability to enjoy the good.
Non-rival:
One person’s consumption of the good does not diminish or change any other person’s ability to enjoy the good.
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