✅Public goods

• What is a public good?

  (1) Public goods are goods that have the characteristics of being non-excludable, non-rivalrous, non-rejectable, and have zero marginal cost.
• What is the free-rider problem?

  (2, p1) Public goods can lead to market failure because they can be consumed by individuals who have not had any market interaction. These consumers who have not paid their fair share are known as free riders, leading to the free rider problem.
• Solution to free-rider problem with government

  (2, p2) The government can solve this issue by providing public goods itself, such as through financing the NHS. However, this raises questions about opportunity cost, as funding public goods may limit government spending in other crucial areas, like education. For example, focusing on healthcare might result in fewer resources available for the educational sector, leading to potential under-provision in that sector. This could cause inequalities if certain sectors receive more funding than others based on public demand.
• Reducing the negative externality

  (3, p1) Public goods were implemented for the benefit of all, and ensures everyone has access to essential goods, or resources regardless of their ability to pay. They can also provide for environmental resources such as clean air, which would benefit society as a whole, and promote sustainable development.
• Public goods creating welfare gain

  (3, p2)This could lead to businesses being more aware of their CO2 emissions, and therefore, try to reduce their pollution. This would mean that external costs such as noise pollution and blight, from negative externalities of production (such as coal mines), would reduce. Thus, this would lead to a welfare gain.
• Better quality of life from provision of healthcare

  Additionally, the provision of public goods like healthcare will mean that there would be better public health outcomes, leading to a better quality of life for everyone. Moreover, most public goods are thought to have positive externalities or are merit goods, and therefore, their under-provision would lead to a market failure and a loss of social benefit.
• Eval: Healthcare as a private good

  However, healthcare does have many characteristics of a public good but it can also have many characteristics of a private good. This means that countries do not have to have government provision of healthcare. Therefore, economics agents could focus on improving the other market failures such as externalities and information failure. Although, there are many public goods that would lead to the free-rider problem.
• Eval 2 (p1): Public perception public goods are ineffective/unnecessary expense in certain times

  However, there is a public perception that public goods can affect their effectiveness. During the COVID-19 pandemic, the public good of the NHS was highly valued. Yet, in times when the nation is healthy, it may be perceived as an unnecessary expense. It can also be used to decide what public goods to finance, leading to inconsistency and potential underinvestment, especially during periods of economic stability.
• Eval 2 (p2): Social and media coverage confliciting priortisation

  This is because it would be influenced by media coverage and social trends, which would lead to conflicting prioritisation. Politics can also affect the application of this. Traditionally, left-wing governments would prioritise the provision of public goods whereas right-wing governments tend to believe that the free-market is a better solution.
• Conclusion

  On balance, the provision of public goods are important as they can lead to positive externalities and welfare gain, as long as they are efficiently allocated and accessible to all members of society.
• Evaluate government provision of public goods and services, such as parks, streetlights and flood defences.


  ...