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What a Public Good Is and Is Not
March 28, 2012 Market Failures

I promised you yesterday that I would repeat this point. A public good is NOT a good that is provided by government. Find a new name for it. I have offered up in the past calling those things “government goods.” Public schooling is far more accurately called government schooling than public.

The word “public” has been appropriated, muddled, mangled, deformed, abused and misapplied so badly that I think if I have one aim in my career as an economist it would be to rescue it (and a couple of other economic ideas) and return it back to its proper place. The term “public” good is used by economists to characterize goods for which the benefits accrue to people other than the consumer and for which it is really, really hard to charge the people who accept those benefits. In other words, a good is “public” when it is hard to exclude non-payers from enjoying it.

It should be clear that whether a good is public or not has nothing at all to do with government. How is the government involved in this area? When goods are non-excludable (and other conditions are present) it is possible that they are massively underprovided by the private sector. Of course, the fact that such goods may be massively underprovided represents an enormous pile of cash on the table for entrepreneurs to figure out a way to make the good excludable, but that point is totally overlooked by those who jump to the idea that if a good is public then there is necessarily a role for government in its provision. If the good is important enough (say, vaccinations) then it may make sense for the government to tax all of us, and then provide the good free of charge to everyone.

I want to keep this short, and will return to it in the future. But for those readers who are thoughtful defenders of government, I encourage you not to be offended by this point. Yes, I want limited government and markets. But if you think through the logic of the above, I am implying not just that “if a good is public does not imply that government should be involved,” but I am also suggesting to you that “if a good is private it does not imply that government should not be involved.” There is, I offer, a use in thinking of symmetry.

Thus, when you hear and use the term “private” good, that again says nothing about who is providing it. A private good refers simply to those class of goods for which most (all?) of the benefits and costs accrue to those actually consuming them, and by extension that it is easy to exclude non-payers from being part of those benefits and costs. But you can easily think of examples of goods like this that it might make sense to have governments have a role in. I’ll leave it as an exercise for you to come up with good examples.

And to the several readers who agonize at my acerbic tone this area is one of the places when I tend to employ it. Why? Because a good number of folks use the term “public good” interchangeably with the that “I simply want government to provide the stuff.” And that is not a defensible way to engage in a discussion. I have nothing I can say to suggest that folks ought not “want” the government to provide stuff, because that is an unpersuadable discussion about the kind of world people want to live in. And those sorts of discussions take away from any chance for folks to actually have a serious discussion about how we can achieve a better life for everyone. So you are right if you are thinking that I have no patience for the “government lovey-dovey nonsense.” I don’t. Just because folks suffer not only from a lack of understanding about what a public good is (because they’ve always seen it done one particular way) but also from a lack of imagination about what reasonably can be done by free peoples with secure property rights does not mean that they oughtn’t try to seek a better understanding. But ask anyone why we have public schools or public roads or a post office and it will be a long time before they invoke anything that resembles some benefit that is non-excludable and an even longer time before they reflect on how reasonable that assumption is, particularly as compared to arguments against it.

"3" Comments
  1. What about water fountains, WC? Inside a baseball park, where one has paid admission, are they public goods? Then there are the water fountains at the golf tournament, which are turned off, so you have to buy a $3 bottle of water.

  2. Note that the tournament could be at Bethpage (run by Nassau County) or Shinnecock (run by country club Republicans). Clearly the water fountain in the men’s locker room is a private good, no?

  3. I am sure that this getting way more complicated that Prof. Rizzo intended… but, having been over this elsewhere, I went back to basic freshman economics texts. His definition is technically correct, but I found it too vernacular. Citing canon, allow me to suggest that a public good is non-rival and non-exclusionary. Anyone can enjoy it and the enjoyment by one does not prevent the use by any other. A sunset is a good example because – unlike water – it cannot be lessened by “consumption.”

    … then comes the problem of my building a high-rise which blocks your view …

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