Public vs Private goods: - University of Vermont
Public vs Private goods:
Determined by excludability and subtractability (rivalness).
| |Easy to exclude |Hard to exclude |
| | |(hard to enforce payment per unit of benefit) |
| | | |
|highly subtractable |private goods |common-pool goods |
|(rival) | |ocean fisheries |
| |sandwich |Colorado River |
| |car | |
| | | |
|hardly subtractable |club goods |public goods |
|(non-rival) | | |
| |boy scout badges |national defense |
| |cable TV |broadcast TV, radio |
| |camaraderie |good/ bad feelings |
| |gym equipment? |clean/dirty air |
| | |information? |
book? pine cone?
beach? forest?
How do we get public goods at all?
1. Market (businesses) ( Usually as externalities
2. Public sector ( decision to produce or regulate (forced)
3. “3rd” sector (non-profits) ( decision to produce (voluntary)
Theoretically, the market most efficiently produces private goods at levels that meet demand.
However, Private goods can be underproduced – usually the result of “market failure”
e.g. imperfect information
transaction costs
Overcoming market failures is what governments and non-profits are often trying to do!
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