Public , Private and Quasi-public goods

• What is a public good?

  A good that is non-rivalrous and non-excludable which can have both positive and negative externalities
• What is the free rider problem?

  Individuals have an incentive not to take direct action if they can benefit without making any direct contribution / paying for it as it is non-excludable
• What is a private good?

  A good that is both rival and excludable
• What are quasi-public goods?

  A good which isn't fully non-rivalrous or non-excludable (has both private and public goods characteristics) e.g roads as it is non-excludable but can be rivalrous during rush hour
• What is Tragedy of the Commons?

  A situation where there is an overconsumption of a good/service, due to irrational decision making, that leads to an outcome that is damaging to social welfare later on.

  
  

  Everyone consumes to maximise utility (rational behaviour) but, if too many individuals do this, they will deplete the resource making everyone worse off in the future.
• How does the free-rider problem affect the Tragedy of the Commons?

  Individuals rely on other individuals to reduce their consumption and thus do not reduce theirs. If everyone free rides, there will be an overconsumption and thus a misallocation of resources.
• What are some policies to combat the Tragedy of the Commons?

  Voluntary agreements - having the community make arrangements voluntarily. This requires a large amount of civic responsibility.

  
  

  Government regulation - the government can put caps on the amount of the good that can be consumed and can put in place policies to help its restoration.

  
  

  Clear Property Right - the owner of the land will now be incentivised to manage resources to an optimal level. This can lead to tragedy of the commons if the owner overproduces in an attempt to maximise short run profits.
• what does non-rivalrous mean?

  the benefit other people get from the good does not diminish if more people consume the good
• what does non-excludable mean?

  consuming the good does not prevent others from consuming it aswell
• what happens when firms do not provide public goods like streetlights?

  public goods are non-profitable as it is non- rivalrous and non-excludable = missing market = complete market failure = gov has to intervene and provide these goods using tax revenue
• what is the significance behind technological change on public goods?

  TV broadcasting is now excludable with subscriptions available for those who pay for them
• how can public goods become private goods overtime with technology?

  • Intellectual property rights - goods become protected = excludable through use of copywriting + patents
  • Monitoring +controlling systems - restricting use of a good e.g congestion charging