Public goods provide an example of market failure resulting from missing markets. Which goods and services are best left to the market? And which are more efficiently and fairly provided as collective consumption goods by the state? This is at the heart of your revision of public goods.
Check out our short revision video on public goods
Central to your revision will be to understand why public goods may not be provided by the market. You can work this out by distinguishing between public and private goods and focusing on the ideas of rivalry and excludability in consumption.
Students should understand the free rider and valuation problems – there are big debates in economics about the optimum size of the state. Rapid changes in technology are also changing the nature of what is and what is not a public good.
What are the main characteristics of pure public goods?
The characteristics of pure public goods are the opposite of private goods:
There are relatively few examples of pure public goods.
Examples include flood control systems, some of the broadcasting services provided by the BBC, public water supplies, street lighting for roads and motorways, lighthouse protection for ships and also national defence services.
Policing – is policing a public good?
The general protection that the police services provide in deterring crime and investigating criminal acts serves as a public good. But resources used up in providing policing means that fewer resources are available elsewhere. Private protection services such as private security guards, privately bought security systems and detectives are private goods because the service is excludable and rival in consumption and people and businesses are often prepared to pay a high price.
Why are public goods an example of market failure?
What is meant by the Free Rider Problem?
What are Quasi-Public Goods?
A quasi-public good is a near-public good i.e. it has many but not all the characteristics of a public good. Quasi public goods are:
The air waves – a public good or quasi public good?
The case for government intervention with public goods
Overcoming the Free-Rider
Direct provision of a public good by the government can help to overcome the free-rider problem which leads to market failure