Public Goods and Common Resources参考.ppt

Public Goods and Common Resources Chapter 11 “The best things in life are free. . .” Free goods provide a special challenge for economic analysis Most goods in our economy are allocated in markets… “The best things in life are free. . .” When goods are available free of charge, the market forces that normally allocate resources in our economy are absent. “The best things in life are free. . .” When a good does not have a price attached to it, private markets cannot ensure that the good is produced and consumed in the proper amounts. “The best things in life are free. . .” In such cases, government policy can potentially remedy the market failure that results, and raise economic well-being. The Different Kinds of Goods When thinking about the various goods in the economy, it is useful to group them according to two characteristics: Is the good excludable? Is the good rival? The Different Kinds of Goods Excludability People can be prevented from enjoying the good. Laws recognize and enforce private property rights. The Different Kinds of Goods Rivalness One person’s use of the good diminishes another person’s enjoyment of it. Four Types of Goods Private Goods Public Goods Common Resources Natural Monopolies Types of Goods Private Goods Are both excludable and rival. Public Goods Are neither excludable nor rival. Types of Goods Common Resources Are rival but not excludable. Natural Monopolies Are excludable but not rival. Types of Goods The Free-Rider Problem A free-rider is a person who receives the benefit of a good but avoids paying for it. The Free-Rider Problem Since people cannot be excluded from enjoying the benefits of a public good, individuals may withhold paying for the good hoping that others will pay for it. The free-rider problem prevents private markets from supplying public goods. Solving the Free-Rider Problem The government can decide to provide the public good if the total benefits exceed the costs. The government can make everyone better off b