How to make a profit from a free good
If a free good is defined as one which is not scarce and no cost is involved when consuming it, then a Welsh mountain stream must surely fit the bill, particularly after the rain over the last week or two (although I guess that its scarcity will be seasonal). This video report shows how that free resource can be used to create profit for the farmers whose land it happens to flow through – by installation of a turbine that generates power which is fed back into the National Grid. Given the incessant need for more power and desire for low-carbon sources of that power, this looks like an allocatively efficient solution – provided that it has no negative externalities associated with installation of the equipment and re-directing the water to pass through the turbine. It is unlikely to benefit from economies of scale but even so the finances certainly make it look productively efficient, although you might question whether, given the swift payback of the initial investment, a grant is really a necessary incentive to help to fund the investment. But given the recent debate over whether we can afford to eat meat because of the negative externalities that sheep and cattle emissions create, it is good to know that carbon-neutral Welsh lamb can be eaten with a clear conscience.
