Laura Jackson Young Characteristics of Goods Excludability A person can be prevented from using it Rivalry in consumption One persons use diminishes other peoples use Different Types of Goods ID: 1027731
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1. Chapter 11: Public Goods and Common ResourcesLaura Jackson Young
2. Characteristics of GoodsExcludability: A person can be prevented from using itRivalry in consumption: One person’s use diminishes other people’s use
3. Different Types of GoodsPrivate goodsExcludable & Rival in consumptionPublic goodsNot excludable & Not rival in consumption Common resourcesRival in consumption & Not excludableClub goodsExcludable & Not rival in consumption
4. Important Public GoodsNational defenseBasic researchAnti-poverty programs (finance by taxes)Welfare for needy familiesFood stampsSubsidized housing
5. Public Goods and Common ResourcesExternalities arise because something of value has no price attached to it Private decisions about consumption and production can lead to an inefficient outcome
6. Public GoodsFree rider: Person who receives the benefit of a good but avoids paying for itPublic goods are not excludable, so people have an incentive to be free ridersPrevents the private market from supplying the goodsMarket failure
7. Public Goods and Market FailureDSSocial value 050,00010,00015,00020,000$25,0000102030PQ (in thousands)Additional benefits not privately accounted for25UnderproductionPrivate value (WTP)Where is DWL?
8. Free-RidersHow can the government remedy the free-rider problem with streetlights (a type of public good)?
9. Government RemediesIf total benefits of a public good > total costsGovernment could provide the good, paying with tax revenueSociety would be better offHowever, measuring the “benefit” can be difficult What is the value of the benefit provided by streetlights?
10. Common ResourcesNot excludableCannot prevent free riders from usingLittle incentive for firms to provideRole for government: seeing that they are providedRival in consumptionEach person’s use reduces others’ ability to useRole for government: ensuring they are not overused
11. Important Common ResourcesClean air and waterCongested roadsFish, whales, other wildlife
12. Common ResourcesTragedy of the commons: shows why common resources are used more than desirableSocial and private incentives differNegative externalities result
13. Common Resources and Market Failure0123450102030Q (gallons)P $SupplyOveruse reduces benefits for all OverconsumptionDPrivate benefitSocial benefitWhere is DWL?
14. The Parking Spacehttps://www.yadayadayadaecon.com/clip/38/
15. Government RemediesRegulate the use of a resourceCorrective taxesHunting and fishing licensesEntry fees to congested parksSelling permits to allow for use of the resourceCap and trade
16. Sell Me Your Climate BombsNPR Planet Money
17. How would an economist address the problem?Public Goods, Common Resources, and ExternalitiesHow can the government prevent the overconsumption of common resources?How can government policies protect and preserve exhaustible natural resources?Application: The Wicked Problem of Water Quality in the Mississippi River Watershed