The Principles of Economics
11 Public Goods and Common Resources
11-1 The Different Kinds of Goods
-excludability: the property of a good whereby a person can be prevented from using it.
-rivalry in consumption: the property of a good whereby one person's use diminishes other people's use.
-private goods: goods that are both excludable and rival in consumption.
-public goods: goods that are neither excludable nor rival in consumption.
-common resources: goods that are rival in consumption but not excludable.
-club goods: goods that are excludable but not rival in consumption.
11-2 Public Goods
11-2a The Free-Rider Problem
-The free-rider problem keeps private markets from supplying public goods.
-The Government believes that they can collect taxes and use revenue to solve the Free-Rider problem.
-free rider: a person who receives the benefit of a good but avoids paying for it.
11-2b Some Important Public Goods
-National defense is not excludable nor rival in consumption.
-The U.S. federal government spent $744 billion on national defense in 2017.
-Both small and big government agree that national defense is good for the public.
-Technological knowledge includes longer-lasting batteries, smaller microchips, or better digital music players.
-Patents give inventors exclusive rights to the knowledge for a period of time. People have to pay inventors to use their patented information.
-Once a theorem is proven, it enters society's general pool of knowledge that anyone has access to.
11-2c The Difficult Job of Cost-Benefit Analysis
-cost-benefit analysis: a study that compares the costs and benefits to society of providing a public good.
-Public projects consist of building new highways...etc...
-Cost benefit analysts find mere rough approximations on the costs and benefits of public projects.
11-3 Common Resources
11-3a The Tragedy of the Commons
-Tragedy of the Commons: a parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole.
-A person's use of a common resource makes the resource less enjoyable or special to others because common resources tend to be used more excessively.
-To reduce consumption of a resource, the government can implement regulations or taxes.
11-3b Some Important Common Resources
-Clean air and water, and congested roads are forms of common resources.
-Fish, whales, and other forms of wildlife are common resources with great importance, too.
11-4 Conclusion: The Importance of Property Rights
-Property rights can make the allocation of resources more efficient if they're well-run and planned. This could raise the economy's well-being.