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:

Examples of Public Goods

Common examples of public goods include: defense and law enforcement (including the system of property rights), public fireworks, lighthouses, clean air and other environmental goods, and information goods, such as software development, authorship, and invention.

Related Topics:
Defense - Law enforcement - Property rights - Fireworks - Lighthouse - Clean air - Environmental good - Information good - Software development - Authorship - Invention

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Some goods, such as orphan drugs, require special governmental incentives to be produced, but can't be classified as public goods since they don't fulfil the above requirements (Non-excludable and non-rivalrous.)

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The provision of a lighthouse has often been used as the standard example of a public good, since it is difficult to exclude ships from using its services and no ship's use detracts from that of others. However, since in some cases, most of the benefit of a lighthouse accrues to ships using particular ports, lighthouse maintenance fees can profitably be bundled with port fees (Ronald Coase, 1974). This has been been sufficient to fund some actual lighthouses as club goods. Nevertheless, since port fees are much like taxes, this example does not go against the theory of public goods.

Related Topics:
Lighthouse - Ronald Coase - Club good

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A public good's status may change over time. Technological progress can significantly impact excludability of traditional public goods: encryption allows broadcasters to sell individual access to their programming. The costs for electronic road pricing have fallen dramatically, paving the way for detailed billing based on actual use. On the other hand, technological progress can also create new public goods. The simplest examples are street lights: they are relatively recent inventions (by historical standards), one person's enjoyment of them does not detract from other persons' enjoyment, and it is impossible to charge individuals separately for the amount of light they presumably use.

Related Topics:
Broadcasters - Road pricing - Street lights

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