Question

Illustrate the two characteristics of public goods with examples.

Short answer

Public goods are non-excludable and non-rivalrous, like street lighting and national defense.

Step-by-step solution

Understand Public Goods

Public goods are characterized by two main properties: non-excludability and non-rivalry. These properties distinguish them from private goods and other types of goods.

Define Non-Excludability

Non-excludability means that it is not possible to prevent individuals from consuming the good once it has been provided. For example, a lighthouse provides navigational aid to any ship passing by, regardless of whether they have paid for the service.

Define Non-Rivalry

Non-rivalry refers to the consumption of the good by one person not reducing the availability of the good to others. For instance, when one person watches a fireworks display, it doesn't prevent others from also enjoying the display.

Provide Examples of Public Goods

Examples of public goods include national defense, which keeps a country secure for all citizens; and street lighting, which illuminates roads and public spaces for everyone to use without diminishing its availability to others.

Key concepts

Non-Excludability

Non-excludability is a fascinating characteristic of public goods. It means that once a public good is provided, it is impossible, or at least very difficult, to prevent anyone from using it. This is in stark contrast to private goods, where users can be easily excluded if they haven’t paid. The fundamental idea here is that everyone has access regardless of payment or permission.
Take, for instance, the example of a lighthouse. Whether a ship has contributed to its maintenance or not, the lighthouse will guide all ships through hazardous seas with its light. Ships can't be excluded from the aid, and captains can't be charged each time they benefit from it.
Similarly, consider services like public broadcasting which some people might consume freely without paying for a subscription. This characteristic of non-excludability often creates challenges, such as the free-rider problem, where individuals might opt to use a service without contributing to its provision. The non-excludability feature, though, is pivotal in classifying a good as public.

Non-Rivalry

Non-rivalry is another cornerstone concept of public goods. It means that one person's use of the good doesn't reduce its availability or quality for someone else. Often depicted through the metaphor of a cinema screen, non-rivalry ensures that many can consume simultaneously without diminishing others' enjoyment.
Imagine attending a fireworks show. As spectators gaze in awe at the sky, one person's enjoyment of the display doesn't detract from the experience of others. This simultaneous consumption is a key attribute of non-rivalry.
Another solid example is a public park. Visitors can enjoy a sunny afternoon without impeding others from doing the same. While extremely crowded situations might result in a slight rivalry, true public goods are typically able to cater simultaneously without significant reduction in service.
The non-rivalry principle supports the notion that more people can benefit from public goods without additional costs or reductions in enjoyment or availability, creating shared value for society.

Examples of Public Goods

Public goods are integral to the infrastructure of societies, commonly provided by governments due to their unique features. Here are some key examples that embody these goods' characteristics:

• National defense: It protects all citizens within a country’s borders equally, without the ability to exclude any individual or make its protection diminish with the protection of others.
• Street lighting: Illuminates streets and public areas, maintaining the same level of light regardless of the number of people benefiting from it.
• Clean air: Although becoming more contentious with pollution, theoretically clean air can be consumed by all without one person's breath diminishing the air quality for others.

These examples illustrate how public goods support and enhance community well-being, offering benefits broadly and inclusively. Often, provision by government or collective funding mechanisms is necessary, as the free market struggles to supply these on its own given their non-excludable and non-rivalrous properties.