Notes on Public Goods and Free Riders

Public Goods

Public goods are non-excludable and non-rivalrous. This means no one can be excluded from using the good, and one person’s use doesn’t reduce its availability for others. Public goods have specific characteristics that set them apart from other types of goods. Here are the key features:

1. Non-Excludability: Once provided, it’s difficult or costly to prevent people from using the good. Everyone can access it, whether they pay for it or not.
2. Non-Rivalry: One person’s consumption of the good doesn’t reduce its availability for others. Multiple people can use it simultaneously without depleting it.
3. Non-Rejectability: Consumers can’t opt out of using the good. For example, everyone benefits from national defense, whether they want to or not.

Examples of Public Goods

1. National Defense: This is a classic example of a public good. Once a country’s borders are protected, all residents benefit, regardless of whether they contribute to defense funding. It’s non-excludable and non-rivalrous.
2. Clean Air: Air quality benefits everyone and is hard to exclude people from enjoying. One person breathing clean air doesn’t reduce its availability for others.
3. Public Parks: These are open spaces where anyone can go to relax or exercise. They are non-excludable because they are open to the public, and non-rivalrous because one person’s enjoyment doesn’t take away from another’s.
4. Street Lighting: Lights on public roads benefit everyone who uses those roads. They are non-excludable because everyone can use them, and non-rivalrous because one person using them doesn’t affect another’s use.
5. Public Libraries: These offer free access to books, internet, and other resources. They are generally non-excludable and non-rivalrous, although some resources like computers have limited availability.
6. Fireworks Displays: These are often funded by municipalities and are free for anyone to watch. They are non-excludable and non-rivalrous, as one person watching doesn’t prevent another from doing so.
7. Lighthouses: These guide ships and prevent accidents. They are non-excludable because all ships can benefit from them, and non-rivalrous because one ship’s use doesn’t diminish its utility for others.
8. Public Broadcasting: Services like public radio or TV are available to anyone with a receiver. They are non-excludable and generally non-rivalrous, although congestion can sometimes be an issue.

1. Examples: National defense, clean air, and public parks.
2. Non-Excludability: It’s costly or impossible for one user to exclude others from using a good.
3. Non-Rivalry: One individual’s use of a good doesn’t affect another’s opportunity to use it.
4. Provision: Usually provided by the government because private firms have little incentive to produce them.

Free Riders

In the context of Edexcel A-Level Economics, the concept of “free riders” is closely tied to public goods. Public goods are non-excludable and non-rivalrous, meaning that once they are provided, anyone can benefit from them without diminishing their availability for others.

Free Rider Problem

1. Definition: Free riders are individuals who consume a public good without contributing to its cost.
2. Impact: The free rider problem arises because people can take advantage of public goods without paying for them. This can lead to underfunding and underprovision of the good.
3. Edexcel Focus: In Edexcel A-Level Economics, understanding the free rider problem is crucial for discussing market failure and the role of government.

Solutions

1. Government Intervention: The government often steps in to provide public goods and solve the free rider problem, usually through taxation.
2. Regulations and Policies: Measures like taxes, subsidies, or regulations can address the free rider problem by compelling contributions toward the public good.