Public Goods and Services

Public Goods and Services

Public goods are those goods and services
provided by the government because a market failure has occurred and
the market has not provided them.
Sometimes it is in our benefit to not
allow for a market provision. In the case of police, national defense
and public education it can be argued that private provision of these
services would be less desirable for a variety of reasons.

Public goods are economic products that are
consumed collectively, like highways, sanitation, schools, national
defense, police and fire protection.

All members of society should theoretically
benefit from the provision of public goods but the reality is that
some need them more then others. For example the wealthy do not need
welfare and the elderly still pay for school taxes. This leads to the
inevitable argument about paying for public goods…. taxes!

What goods and services should be provided and
why do we provide them? Our society, depending on locality, has
provided such public goods and services as public education,
sanitation, police services, fire protection, libraries,
infrastructure maintenance (roads, bridges, communications networks,
etc..) and street lighting. Since we live in a market economy
whenever we decide to provide a good or service publicly we must
answer a variety of questions such as:

  • Is its use available to all. ex. Street

  • Does it provide for public health and
    safety. ex. Police, Military

  • Does it provide for the general welfare of
    society. ex. Education

  • Should the services be provided by both
    public and private means. ex. Sanitation, water.

We should always ask whether or not a good is
best provided by the market. If it can be efficiently provided by
private means then this reduces the tax payers load.

Some goods can be provided, or may be provided
as this is often debatable, by the market but society is better
served by providing the service or good publicly. Consider the case
of education as an example. While it may be possible to efficiently
and cheaply provide education privately, the good of society is
better served by public provision.

Some goods are what we call a pure public good.
These are goods which cannot easily be divided or in which people
cannot be excluded from. In this case provision by these public means
is necessary.

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