Public goods: Difference between revisions
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The term "club goods" is applied to products and services that are non-rivalous, but from which "non-members" are excluded. They are usually, but not necessarily, financed by designated "members" (an exception is the altruistic provision of non-rivalous benefits to designated recipients who do not finance them - for example, by charities such as "help the aged"). | The term "club goods" is applied to products and services that are non-rivalous, but from which "non-members" are excluded. They are usually, but not necessarily, financed by designated "members" (an exception is the altruistic provision of non-rivalous benefits to designated recipients who do not finance them - for example, by charities such as "help the aged"). | ||
There are products and services that cannot be assigned to any of any of those categories | There are groups of products and services that cannot be assigned entirely to any of any of those categories | ||
==References== | ==References== | ||
<references/> | <references/> | ||
Revision as of 12:28, 26 October 2009
Public goods are products and services, such as lighthouses and national defence, that can only be collectively financed (usually, but not necessarily, by a government) because it is not possible to devise a pricing system that would enable them to be marketed.
The origins of the concept
In the 18th century, Adam Smith wrote:
- "The third and last duty of the sovereign or commonwealth is that of erecting or maintaining those public institutions and those public works, which, although they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could not repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain ."[1];
- in the 19th century, John Stuart Mill elaborated the idea, arguing as an example that it would be impossible to charge seamen according to their use of lighthouses[2];
- and in the 20th century, Paul Samuelson (who at first referred to public goods as "collective consumption goods") derived a formal proof of the proposition that "no decentralized pricing system can serve to determine optimally the levels of collective consumption" [3]
Qualifications to those statements are discussed below
Defining characteristics
Pure public goods are held to be:
- non-rivalous, meaning that anyone can benefit from them without diminishing their benefits to other people;
- non-excludable, meaning that no-one can be prevented from benefiting from them;
- and they are often:
- non-rejectable, meaning that nobody can avoid benefiting from them.
Citizendium is non-rivalous and is constitutionally non-excludable, and is thus a public good (collectively financed by its supporters). Although roads and bridges are usually government-financed and are no-rivalous (except when congested), they are not public goods because barriers can be used to exclude those unwilling to pay tolls.
The term "club goods" is applied to products and services that are non-rivalous, but from which "non-members" are excluded. They are usually, but not necessarily, financed by designated "members" (an exception is the altruistic provision of non-rivalous benefits to designated recipients who do not finance them - for example, by charities such as "help the aged").
There are groups of products and services that cannot be assigned entirely to any of any of those categories
References
- ↑ Adam Smith: An Inquiry into the Nature And Causes of the Wealth of Nations, Book 5, Chapter 1, Part 3, (first published 1776)
- ↑ John Stuart Mill: Principles of Political Economy, Book 5, Chapter 10, Longmans, Green, 1848
- ↑ Paul Samuelson: The Pure Theory of Public Expenditure, Review of Economics and Statistics, vol 36 1954