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Understanding Public Goods and Common Property

Explore the concepts of public goods, nonrivalry, nonexcludability, tragedy of the commons, property rights, and drawbacks of private property rights. Learn about the four categories of goods and discuss the role of government in providing both public and non-public goods.

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Understanding Public Goods and Common Property

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  1. Public Goods and Common Property

  2. Public Goods • Nonrival -- quantity available to other people does not fall when someone consumes it • Nonexcludable -- prohibitively expensive to provide the good only to people who pay for it

  3. Public Good

  4. Public Good • In graph, private market would not produce Q=1 because no individual consumer would pay MSC. Once firm has produced product, it can’t exclude others who might enjoy it • Consumers could cooperatively purchase Q=1, but there is the free rider problem

  5. Tragedy of the Commons • Fishing experiment • Rival, but not excludable • Property Rights as solution • Social norms as alternative to property rights

  6. Drawbacks of private property rights • High costs of defining or enforcing property rights • Difficulty of charging for use • High transactions costs • Fairness

  7. Four Categories of Goods • Private Goods • Rival and excludable • Public Goods • Nonrival and nonexcludable • Common Resources • Nonexcludable, but rival • Natural Monopolies • Excludable but nonrival

  8. Discussion • Classify the following • Police protection • Education • The Internet • Globally • Web access at the Colleges • Why does government provide items that are not public goods?

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