public good

public good, collective good Public goods were defined initially by Paul Samuelson (‘The Pure Theory of Public Expenditure’, Review of Economics and Statistics, 1954)
as those where person A's consumption of the good did not interfere with person B's consumption. Ezra J. Mishan (Introduction to Normative Economics, 1981) prefers to designate these as ‘collective goods’.

Both terms refer to collectively funded services which either cannot be provided by the market or which particular governments choose to supply from public funds. Some goods and services cannot be priced accurately and hence cannot be efficiently supplied by private industry. ‘Non-excludability’ refers to services which cannot be withheld from any individual, even if they refuse to pay for it—such as street-lighting. ‘Impossibility of rejection’ means people cannot abstain from consumption, even if they wish to do so—such as the ‘protection’ offered by wars and national defence, even to pacifists. ‘Non-rivalness in consumption’ means a service supplied to one person is automatically supplied to others at no extra cost—as illustrated by a radio station, whose transmission costs are not determined by the number of listeners. The arguments for collective provision are often extended to other services, such as education, which are consumed by individuals as well as benefiting the economy and society as a whole.

In societies with exceptional natural resources that are exploited by the state, such as oil-rich countries, public goods are funded by the revenues from state enterprises and equivalent income. In most societies, public goods are funded from direct and indirect taxation, with more or less debate over how the funding burden should be distributed in relation to levels of use or benefit, and over which services should be funded as a public good and which purchased privately on the market. Services often treated as public goods, not always exclusively, include: national defence; public security, education, health services, fire and other emergency services, telecommunications networks, road, rail, and air networks and transport services, the preservation of national monuments, water supply, national radio and television services. Arguments offered in favour of public ownership of such services include economies of scale, national interest, the case for worker participation in enterprises, and the indirect social benefits (externalities) which would be ignored by private producers. Arguments against include the inefficiencies resulting from lack of competition, and unlimited demand generated by the absence of any pricing of services consumed. Many public goods cannot be valued easily—for example by carrying out cost-benefit analyses on their provision.

The concept of public goods has been considerably extended since Samuelson's formulation and a number of competing typologies are now available. For example, some writers prefer to distinguish public goods and welfare goods, the latter being those goods provided by a public agency to consumers (the public) free or at a cost below production cost. The objective of providing these is to redistribute goods in order to increase the total welfare of society.

Similarly, Richard Cornes and Todd Sandler (The Theory of Externalities, Public Goods and Club Goods, 1986) distinguish between public and private goods according to whether consumers are excludable (particular persons can be excluded from the benefits) or non-excludable (particular persons cannot be excluded from the benefits), and whether there is rivalry or non-rivalry in the consumption of the benefits (benefits are divisible or indivisible). By cross-classifying these two dimensions of property rights, one can then distinguish between private goods (excludable, having rivalry in consumption, as with most consumer goods available in the market); public goods (non-excludable, non-rivalry in consumption, such as the protection given to all Americans, whether they pay for it or not, by American nuclear weapons); club goods, or impure public goods, which are excludable but only partly (initially) non-rival in consumption (as in an exclusive golf-club, where an exclusion criterion acts like a boundary, but once you are in the club its resources are a pure public good, unless membership exceeds carrying capacity, such that crowding leads to either deterioration of the good or competition for access to it); and, finally, positional goods, or impure private goods, with rivalry in benefits and where consumers are at least partly non-excludable (as where goods are initially pure private goods, but during their consumption something happens to change their character, for example ‘bandwaggon effects’ among consumers lead even those who do not intend to consume the good to share in some of the benefits or losses, through conspicuous consumption or conspicuous waste).

These sorts of distinctions have had a significant impact on economic theory, and are central to game theory and theories of rational action; however, sociologists have been, on the whole, rather slow to explore their significance (for example for theories of (collective action). See also EXTERNALITY; FREE RIDER.