Provision and Production of Public Goods

This chapter shows that private goods possess the properties of rivalry in consumption and excludability, while public goods are characterized as nonrival in consumption and nonexcludable. Goods that are both nonrival in consumption and for which exclusion is impossible are pure public goods. At the national level, governments often step in to facilitate the collective action needed to avoid overproduction of public bads or underprovision of public goods. The transfer of income changes the Pareto-efficient level of public goods to a new point. To make the concept of a global public good tangible, consider, for example, the obliteration of smallpox. Once the eradication of smallpox is accomplished, all of humanity benefits — people in all parts of the world, regardless of wealth or generational considerations. Global public goods have similar difficulties in determining “publicness” as did our earlier discussion of public goods.