Public Goods Definition
Public goods, as the name suggests are available to the entire public, within a society. These goods might be available in nature like sunlight or might be provided by the government through collective taxation like defense services.
For a commodity to be classified as public good, it must have two characteristics:
- Non-Excludability – that is, no particular person(s) can be excluded from the consumption of this commodity
- Non-Rivalry – use of this commodity by one person does not reduce the amount available for others. If this would happen, then the first property of excludability would not hold true.
Public goods are the complete opposite of private goods, for which one needs to pay in order to consume them and unlike public goods, they are scarcely available.
Examples of Public Goods
- Defense Services – The most common example of public goods, that are provided by the government with taxation money, is defense services. The security provided benefits all the citizens (non-excludable) and it does not reduce with consumption (non-rivalrous).
- Social services viz healthcare and public education, provided by governments in developed countries like Canada, UK etc. are also examples of public goods as the government makes them available to all.
- Natural Air is another example of public good, but this, unlike the previous two examples, is available in abundance in nature and not provided by the government.
Public goods face a free-rider and lack of ownership problem
If we look at the public goods provided by the government through taxation, we can see that while these goods are available to all, not everyone pays taxes. Thus, people who have not paid for the use of these goods are ‘free-riding’ on the use of such goods.
In terms of public goods that are naturally available to everyone, lack of ownership means that people who are using these goods, might be callous in the way they are using them, leading to an overall negative impact for others. Taking the example of natural air – it’s unchecked and careless use that led to high pollution levels across the world.