Basic Concept of Public Goods

Basic Concept of Public Goods – and why is it important for all of us

Basic Concept Of Public Goods

Goods, they refer to the goods that can be used or consumed by either everybody or nobody. The basic concept behind public good is that it cannot be made for a particular individual or a group of individual mainly due to the astronomical amount of cost associated with this. Taking an e.g. of a Bridge, now bridges are superstructures and they involve huge capital for their construction, now it wouldn’t make any sense if a government spends such huge capital only to allow its use for few selected individuals and hence bridges come under public goods as a public property. Now in technical language a public good is an economic good that has two properties inherent to it and those are non-rivalrous and non-excludable. Few e.g. of public goods include roads, clean air, national defence etc.

Non Rivalrous means that upon using the public good by one person should not exclude the opportunity of another person for using it. For e.g. A rock concert is going on and the organizers only allowed the people who paid for the concert to enter and enjoy the concert. But if the ground is large enough those people who didn’t pay for tickets can watch the show from those part of the ground that were not covered in the concert boundaries, and hence they can enjoy it too without harming the organizers profit or without increasing the concerts running cost.

Non Excludable means those people who can’t afford to pay for the good cannot be excluded from benefitting from the goods. For e.g. Roads, even if he or she can’t pay for the road construction as various taxes levied by the government but still he or she can use it as much as they like. Now public goods are of various types like Impure and Pure. Now impure public goods are those goods that partially provide the two conditions non-rivalrous and non-excludable. For e.g. the Gas connection to your house, the company can exclude your connection if they want, thus making it excludable. Pure goods truly follow the two conditions and there is no way to be excluded from them, for e.g. the National Defence. Till now everything we discussed was about the goods and services that we avail for free and its types which are dependent on two main conditions, but everything in this world has some type of problem is associated with it. In the case of Public goods and services there is also a term which is widely known as the Free Rider problem.

The Free Rider problem is becoming an increasing cause of concern because more and more persons seem to be doing it nowadays. The term free rider refers to any individual who deliberately ignore their social calls, but never back down from reaping the benefit that social call would have served. The easiest e.g. would be a municipal drives like that of cleaning beaches, parks etc. Now a free rider would deliberately ignore these social calls to help the municipalities but would never back down using the services of the clean beach. There are various options present to mitigate the free rider problem which includes abandoning such services which is really not feasible because the services needed outweigh the free rider problem by way too much, taking help from government, well this could be an imperative strategy, the government can force the free riders to contribute at least a little part or to call for support from volunteers.

The free rider problem can also be corrected by issuing Assurance Contracts according to which the person make a pledge that they will contribute a significant something to the society. The other type of solution is what is known as the Coasian solution, in this an individual persons can make an understanding to make their resources work as together which is based on each participating individuals interests. The only way free rider can definitely be solved is, an ideal society where individuals care about their community as much as they care for themselves and is just a utopian dream as such society is really not possible practically as not every one of us has same living and social standards.

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