Public Goods
ECON 100A Public Goods and Coase theorem
April 29-May 2
Part I Public Goods
A good is a (pure) public good if once produced it meets two criteria:
1. Non-rival - A good is non-rival if consumption of additional units of the good involves zero social marginal costs of production.
2. Non-excludable - A good is non-excludable if it impossible, or very costly, to exclude individuals from benefiting from the good.
Taking these two criteria we can categorize goods into four groups.
Rival Non-rival
Excludable Private goods Club goods
Non-excludable Common goods Public goods
What are some examples of goods in each category?
Private goods: hot dogs, cars, houses
Club goods: bridges, swimming pools, satellite television transmission (scrambled)
Common goods: fishing grounds, public grazing land
Public goods: national defense, mosquito control, justice
Exercise 1: True/False/Uncertain
American National Monuments (like the Lincoln Memorial) are no public goods, because not everyone enjoys the benefits from them since they are located in one particular place.
False
A public good is defined as a good that is no-excludable and no0rival. The fact that not everyone has the opportunity to enjoy the benefits of national monuments is irrelevant. It only matters that, if someone decided to enjoy the benefits of them, they could not be excluded, and that one person's consumption of the good does not diminish the value of another's consumption.
That said, national monuments still may not be public goods, Have you ever been tot he Lincoln Memorial on a Friday afternoon in the spring? Or on the fourth of July? Seems pretty rival to me... Of course, if people derive benefits simply from knowing that such monuments exist, then they are public goods in the truest sense.
One example of a public good is mosquito spraying and we'll explore that more now.
Exercise 2: Suppose there are only two individuals in society. The demand curve for mosquito control
April 29-May 2
Part I Public Goods
A good is a (pure) public good if once produced it meets two criteria:
1. Non-rival - A good is non-rival if consumption of additional units of the good involves zero social marginal costs of production.
2. Non-excludable - A good is non-excludable if it impossible, or very costly, to exclude individuals from benefiting from the good.
Taking these two criteria we can categorize goods into four groups.
Rival Non-rival
Excludable Private goods Club goods
Non-excludable Common goods Public goods
What are some examples of goods in each category?
Private goods: hot dogs, cars, houses
Club goods: bridges, swimming pools, satellite television transmission (scrambled)
Common goods: fishing grounds, public grazing land
Public goods: national defense, mosquito control, justice
Exercise 1: True/False/Uncertain
American National Monuments (like the Lincoln Memorial) are no public goods, because not everyone enjoys the benefits from them since they are located in one particular place.
False
A public good is defined as a good that is no-excludable and no0rival. The fact that not everyone has the opportunity to enjoy the benefits of national monuments is irrelevant. It only matters that, if someone decided to enjoy the benefits of them, they could not be excluded, and that one person's consumption of the good does not diminish the value of another's consumption.
That said, national monuments still may not be public goods, Have you ever been tot he Lincoln Memorial on a Friday afternoon in the spring? Or on the fourth of July? Seems pretty rival to me... Of course, if people derive benefits simply from knowing that such monuments exist, then they are public goods in the truest sense.
One example of a public good is mosquito spraying and we'll explore that more now.
Exercise 2: Suppose there are only two individuals in society. The demand curve for mosquito control