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Public Goods and Services

Public goods are those goods and services provided by the government because a market failure has occurred and the market has not provided them. Sometimes it is in our benefit to not allow for a market provision. In the case of police, national defense and public education it can be argued that private provision of these services would be less desirable for a variety of reasons.

Public goods are economic products that are consumed collectively, like highways, sanitation, schools, national defense, police and fire protection.

All members of society should theoretically benefit from the provision of public goods but the reality is that some need them more then others. For example the wealthy do not need welfare and the elderly still pay for school taxes. This leads to the inevitable argument about paying for public goods.... taxes!

What goods and services should be provided and why do we provide them? Our society, depending on locality, has provided such public goods and services as public education, sanitation, police services, fire protection, libraries, infrastructure maintenance (roads, bridges, communications networks, etc..) and street lighting. Since we live in a market economy whenever we decide to provide a good or service publicly we must answer a variety of questions such as:

  • Is its use available to all. ex. Street Lighting.
  • Does it provide for public health and safety. ex. Police, Military
  • Does it provide for the general welfare of society. ex. Education
  • Should the services be provided by both public and private means. ex. Sanitation, water.

We should always ask whether or not a good is best provided by the market. If it can be efficiently provided by private means then this reduces the tax payers load.

Some goods can be provided, or may be provided as this is often debatable, by the market but society is better served by providing the service or good publicly. Consider the case of education as an example. While it may be possible to efficiently and cheaply provide education privately, the good of society is better served by public provision.

Some goods are what we call a pure public good. These are goods which cannot easily be divided or in which people cannot be excluded from. In this case provision by these public means is necessary.


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