Public Goods

Public Good

A good that is simultaneously non-excludable and non-rivalrous in consumption, leading to underprovision or non-provision by the free market.

Non-excludable

It is impossible or prohibitively costly to prevent individuals who have not paid from consuming the good.

Non-rivalrous

Consumption of the good by one individual does not reduce the amount available to others — the good is not depleted by use.

Free Rider Problem

The tendency to consume a public good without contributing to its cost because the good is non-excludable, leading to underprovision by the private market.

Private Good

A good that is both excludable and rivalrous. The market provides private goods efficiently.

Club Good

A good that is excludable but non-rivalrous up to a point of congestion. Can be provided by the private sector.

Common Good

A good that is non-excludable but rivalrous. Subject to the tragedy of the commons without government intervention.

Government Provision of Public Goods

Because the free rider problem prevents private firms from recovering costs, the government provides public goods financed through taxation.