Public good

In economics, a public good is a good that is hard or even impossible to produce for private profit, because the market fails to account for its large beneficial externalities. By definition, a public good possesses two properties:

Related Topics:
Economics - Good - Profit - Externalities

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• Non-rivalrous — its benefits fail to exhibit consumption scarcity; once it has been produced, everyone can benefit from it without diminishing other's enjoyment.
• Non-excludable — once it has been created, it is very difficult to impossible to prevent access to the good.

"Pure" public goods possess these properties absolutely. Because pure public goods are rare (though they include such important cases as national defense and the system of property rights), in common parlance among economists "public goods" usually refers to impure public goods or those confined to particular localities. A public good is for society as a whole (the public), while a "collective good" is merely for a sub-set of society.

Related Topics:
National defense - Property rights

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A pure public good is the opposite of a private good, i.e., a good that can easily be divided into parts to sell on the market, because it is excludable and rivalrous. A loaf of bread, for example, is a private good: its owner can exclude others from using it, and once it has been consumed, it cannot be used again.

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A free market is highly unlikely to produce the optimum amount of any public good. Such important goods like national defense will be underproduced due to the free rider problem. In practice, this problem is solved by government intervention and state provision of public goods. These solutions are not without their own critics, however, since some argue that this can lead to too many resources being allocated to a public good's production. In the case of national defense, this is the alleged problem of the military-industrial complex. Also, centralized governments are not the only substitute for markets: in theory, tradition and decentralized democracy might play a similar role.

Related Topics:
Free market - Free rider problem - Military-industrial complex - Democracy

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The economic concept of public goods should not be confused with the expression "the public good", which is usually an application of a collective ethical notion of "the good" in political decision-making.

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Public good: Examples of Public Goods ►