Public Goods

Public (or collective) goods are commodities that are contrasted with private goods. They are of particular interest because they have features that mean they are often suboptimally supplied. That is, markets often do not provide the number or amount of such goods that the public would ideally want. They are subject to collective action problems. We might say that collective action problems occur because goods often display elements of publicness. A public good can be defined [Page 541]by two conditions: first, public goods are jointly supplied (or nonrival), which means that one person's consumption does not reduce the amount available to others. For example, the nation's defense force protects my neighbor equally with myself from aggression by other nations, and my neighbor's consumption of that protection does not reduce my protection. Second, public goods are nonexcludable, which means that the consumption of the good by one person automatically makes it available to other group members. If I sweep the snow and ice away from the front of my house so I do not slip, I also enable others not to slip when they walk by my house.

We can say that a pure private good is rival and excludable while a pure public good is nonrival and nonexcludable. So if we have a group with i members and a good x where the total amount of the good x available is X, the consumption feasibility constraint is:

Let i = 2 (it is a group of two members) and X =x1+ αx2 (the first expression is what one person consumes, the second what the second person consumes). Then if α = 1 we have a private good. If α = 0 then we have a public good. And if 0 < α < 1 then we have a mixed good. Most goods display some characteristics of both public and private goods; the more public they are, the more subject they are to suboptimal supply.

When we consider collective action problems we often think in terms of pure public goods; but most goods are mixed goods, and collective action problems occur in relation to the degree to which goods displays publicness. So while we might explain collective action problems in terms of pure public goods, the problems themselves translate to mixed goods. Public goods are important when considering the power of groups, because the greater the degree of publicness of a good for a group the greater the coordination that is required for that group to be able to supply the good. The degree of publicness affects the power of the group.

Paul Samuelson provided the first modern discussion of public goods in the 1950s. He suggested that their existence provides a justification for state intervention. However, while some state-provided goods, such as national defense, display a high degree of publicness, many state-provided services are private. Education, health, and most welfare services are private goods publicly supplied. The state supplies such goods for reasons of equity, not suboptimality as such.

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