1.3.3 Public Goods - 1.3.4 Information Gaps

What is a Public Good

A public good is…
Non-rivalrous —> meaning one person using it does not reduce how much is available for others.

Non-excludable —> meaning you cannot stop people from using it, even if they don’t pay.

What is a Private Good

A public good is…

Excludable —> meaning people who don’t pay can be stopped from using the good.

Rival in consumption —> if one person uses it, less is available for others.

Pricing and profit —> meaning goods are sold in markets, people pay for them, and firms aim to make profit.

Why are Public Goods financed by government

• Non-excludability —> Taxes make everyone pay for public goods, so people can’t use them for free without contributing.

• Economies of scale —> Providing public goods to many people lowers the cost per person.

• Public interest and equity —>The government uses taxes to provide goods fairly and based on what society needs.

Case for Higher State Spending on Public Goods

• Economies of scale: It is more efficient to provide public goods at state level leading to a lower long run cost per user

• Access and affordability: The absence of profit motive makes public goods affordable – this is important for equity

• Investment: Public goods can lead to higher private sector investment such as the regeneration of economically-deprived areas attracting entrepreneurs