The Principles of Economics

11   Public Goods and Common Resources

11-1 The Different Kinds of Goods

-excludability: the property of a good whereby a person can be prevented from using it. 

-rivalry in consumption: the property of a good whereby one person's use diminishes other people's use. 

-private goods: goods that are both excludable and rival in consumption. 

-public goods: goods that are neither excludable nor rival in consumption. 

-common resources: goods that are rival in consumption but not excludable. 

-club goods: goods that are excludable but not rival in consumption. 

11-2 Public Goods

11-2a The Free-Rider Problem

-The free-rider problem keeps private markets from supplying public goods. 

-The Government believes that they can collect taxes and use revenue to solve the Free-Rider problem. 

-free rider: a person who receives the benefit of a good but avoids paying for it. 

11-2b Some Important Public Goods

-National defense is not excludable nor rival in consumption.

-The U.S. federal government spent $744 billion on national defense in 2017. 

-Both small and big government agree that national defense is good for the public. 

-Technological knowledge includes longer-lasting batteries, smaller microchips, or better digital music players.

-Patents give inventors exclusive rights to the knowledge for a period of time. People have to pay inventors to use their patented information. 

-Once a theorem is proven, it enters society's general pool of knowledge that anyone has access to. 

11-2c The Difficult Job of Cost-Benefit Analysis

-cost-benefit analysis: a study that compares the costs and benefits to society of providing a public good. 

-Public projects consist of building new highways...etc...

-Cost benefit analysts find mere rough approximations on the costs and benefits of public projects.

11-3 Common Resources

11-3a The Tragedy of the Commons 

-Tragedy of the Commons: a parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole. 

-A person's use of a common resource makes the resource less enjoyable or special to others because common resources tend to be used more excessively. 

-To reduce consumption of a resource, the government can implement regulations or taxes. 

11-3b Some Important Common Resources

-Clean air and water, and congested roads are forms of common resources. 

-Fish, whales, and other forms of wildlife are common resources with great importance, too. 

11-4 Conclusion: The Importance of Property Rights 

-Property rights can make the allocation of resources more efficient if they're well-run and planned. This could raise the economy's well-being.