Examples of public goods, a list of public goods - FreeEconHelp.com, Learning Economics... Solved!

8/14/18

Examples of public goods, a list of public goods

This post was updated in August of 2018 with new information and examples.

Remember the definition of a public good is something that is non-rival, and non-excludable.

Non-rival means that if one person consumes a good, that good can still be consumed by someone else.  For example, a radio station, just because I am listening to a radio station doesn't mean that someone else can't.  An example of a rival good is an apple.  If I eat the apple, you certainly cannot eat it after I am done.

Excludable means that you can prevent someone from consuming the good.  If someone wants to listen to the radio, then they can and no one is able to stop them (as long as they have a radio).  But if someone wants to consume the apple, I can hide it from them, or refuse to sell it to them.  So for something to be non-excludable means that anyone can use it, anytime they want (within reason).

If you do a search on the internet for a "list of public goods", or "examples of public goods", you are going to find the common examples such as national defense, roads/highways, radio stations, and the like.  The truth is that it can be very hard to come up with examples that are both truly non-rival and non-excludable.

The strategy when thinking about public goods is to first think of things that are non-rival, things that if one person consumes or enjoys, another person can as well.  Here the list could be things like:

Open space,
Air,
TV shows,
Movies (or concerts),
Parks,
Scenic views,
Radio,
Hiking,
Water (recreation/use),
Roads,
Websites,
Books,
Benches,
Sunlight,
Museums,
Knowledge,

You get the idea, the majority of these are naturally occurring and aren't available for sale in most stores.

Some of these goods are also non-excludable such as:

air,
antenna TV,
public parks,
antenna radio,
public roads,
open space,
books in libraries,
public beaches,
most websites,

You will notice that many of the public goods have the term "public" in front of them because they are managed by the government.

By their very nature public goods are non-excludable and therefore do not require any payment for them to be enjoyed by users. This leads to a "free-riding" problem because payment is not requirement for consumption.  Free riding means that someone can enjoy the good without paying for it.  This is why most public goods have to be supported by either the government or advertising, because most people will attempt to use the good for free.

Because of this most public goods are managed by the government (think of the road and education system, national defense, clean water and air, those sorts of things).  But some public goods are still managed by private firms.  Because they are non-excludable, firms cannot charge people to use them.  Generally, the public goods managed by private firms use advertising to support their supply of the public good. Examples of privately managed public goods are:

Websites (like this one, and wikipedia)
Radio stations
Antenna TV

Notice that each of these goods are a form of media, or information sharing.  They lend themselves to get money through either donations or advertising.  This is why public goods in this form can be privately managed.  Thinks such as clean air, and parks do not lend themselves to be profitable through either donations or advertising and are thus left to the government for management.

Some people confuse common resources with public goods. Generally both of these types of resources need help with management. The key difference between common resources and public goods is that common resources are rival. This means that when one person consumes the good or service another person cannot. The result of a good being rival and non-excludable is depletion of that resource. You can think of global fisheries or global forests being processed. Hardin developed the idea of the tragedy of the commons to show how rival non-excludable common resources could be mismanaged and destroyed without some form of regulation or management.

To help develop a better intuitive understanding of public goods in the real world you can watch the video below:

 

13 comments:

  1. Anonymous06 November

    Hi, thanks for this post. It was very concise and easy to follow. Many thanks from Toronto, Canada!

    ReplyDelete
  2. You write:

    "Hardin came up with the idea of the tragedy of the commons, which basically said that public goods will be underfunded and over used if they are not regulated"

    Hardin writes of open access resources, not of public goods (though some of the tenets apply to both). While it is true that public goods are under-supplied by a free market, they cannot be overused (by definition).

    Your examples are a mix of open access resources and public goods. Roads are not a public good because additional drivers eventually cause traffic and slow down all other drivers on the road. Similarly with hiking, trails, movie theatres, and parks.

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