INTRODUCTION

 Name- DHAVAL ASHAR

 STD/DIV-SYBCOM/A
 ROLL NO-005
 Email- dhavalashar3@gmail.com
 Contact- 9594299061
 Topic - public goods.
 Mode of presentation- ppt
 PUBLIC GOODS
 In economics, a public good (also referred to as a social good or collective good) is a good that is both non-excludable and non-rivalrous. For
such utilities, users cannot be barred from accessing and/or using them for failing to pay for them. Also, use by one person neither prevents access of
other people nor does it reduce availability to others. Therefore, the good can be used simultaneously by more than one person. This is in contrast to
a common good such as wild fish stocks in the ocean, which is non-excludable but rivalrous to a certain degree. If too many fish were harvested, the
stocks would deplete, limiting the access of fish for others. A public good must be valuable to more than one user, otherwise, the fact that it can be
used simultaneously by more than one person would be economically irrelevant.
 Capital goods may be used to produce public goods or services that are "...typically provided on a large scale to many consumers."   Unlike other
types of economic goods, public goods are described as “non-rivalrous” or “non-exclusive,” and use by one person neither prevents access of other
people nor does it reduce availability to others. Similarly, using capital goods to produce public goods may result in the creation of new capital
goods. In some cases, public goods or services are considered "...insufficiently profitable to be provided by the private sector.... (and), in the absence
of government provision, these goods or services would be produced in relatively small quantities or, perhaps, not at all."  
 Public goods include knowledge, official statistics, national security and common languages. Additionally, flood control systems, lighthouses,
and street lighting are also common social goods. Collective goods that are spread all over the face of the earth may be referred to as  global public
goods. For instance, knowledge is well shared globally. Information about men, women and youth health awareness, environmental issues, and
maintaining biodiversity is common knowledge that every individual in the society can get without necessarily preventing others access. Also,
sharing and interpreting contemporary history with a cultural lexicon, particularly about protected cultural heritage sites and monuments are other
sources of knowledge that the people can freely access. Popular and entertaining tourist attractions, libraries and universities are other examples of
public goods.
 Many public goods may at times be subject to excessive use resulting in negative externalities affecting all users; for example air
pollution and traffic congestion. The closeness of the people while interacting with other people in the public utilities also has appeared to cause
negative impact to people. The result of this is a faster and increased spread of infectious diseases such as SARS and COVID-19. Public goods
problems are often closely related to the "free-rider" problem, in which people not paying for the good may continue to access it. Thus, the good may
be under-produced, overused or degraded. Public goods may also become subject to restrictions on access and may then be considered to be club
goods; exclusion mechanisms include toll roads, congestion pricing, and pay television with an encoded signal that can be decrypted only by paid
subscribers.
 There is a good deal of debate and literature on how to measure the significance of public goods problems in an economy, and to identify the best
remedies.
 LITERATURE
 Paul A. Samuelson is usually credited as the economist who articulated the modern theory of public goods in a mathematical formalism,
building on earlier work of Wicksell and Lindahl. In his classic 1954 paper The Pure Theory of Public Expenditure, he defined a public
good, or as he called it in the paper a "collective consumption good", as follows:
 [goods] which all enjoy in common in the sense that each individual's consumption of such a good leads to no subtractions from any other
individual's consumption of that good...
 A Lindahl tax is a type of taxation brought forward by Erik Lindahl, an economist from Sweden in 1919. His idea was to tax individuals,
for the provision of a public good, according to the marginal benefit they receive. Public goods are costly and eventually someone needs
to pay the cost. It is difficult to determine how much each person should pay. So, Lindahl developed a theory of how the expense of
public utilities needs to be settled. His argument was that people would pay for the public goods according to the way they benefit from
the good. The more a person benefits from these goods, the higher the amount they pay. People are more willing to pay for goods that
they value. Taxes are needed to fund public goods and people are willing to bear the burden of taxes. Additionally, the theory dwells
people's willingness to pay for the public good. From the fact that public goods are paid through taxation according to the Lindahl idea,
the basic duty of the organization that should provide the people with this services and products is the government. The services and
public utility in most cases are part of the many governmental activities that government engage purely for the satisfaction of the public
and not generation of profits. In the introductory section of his book, Public Good Theories of the Nonprofit Sector, Bruce R.
Kingma stated that;
 In the Weisbrod model nonprofit organizations satisfy a demand for public goods, which is left unfilled by government provision. The
government satisfies the demand of the median voters and therefore provides a level of the public good less than some citizens'-with a
level of demand greater than the median voter's-desire. This unfilled demand for the public good is satisfied by nonprofit organizations.
These nonprofit organizations are financed by the donations of citizens who want to increase the output of the public good.
TERMINOLOGY, AND TYPES OF
GOODS
 Non-rivalrous: accessible by all whilst one's usage of the product does not affect the availability for subsequent use.
 Non-excludability: that is, it is impossible to exclude any individuals from consuming the good.
 Pure public: when a good exhibits the two traits, non-rivalry and non-excludability, it is referred to as the pure public good.
 Impure public goods: the goods that satisfy the two public good conditions (non-rivalry and non-excludability) only to a
certain extent or only some of the time.
 Private good: The opposite of a public good which does not possess these properties. A loaf of bread, for example, is a
private good; its owner can exclude others from using it, and once it has been consumed, it cannot be used by others.
 Common-pool resource: A good that is rivalrous but non-excludable. Such goods raise similar issues to public goods: the
mirror to the public goods problem for this case is the 'tragedy of the commons'. For example, it is so difficult to enforce
restrictions on deep-sea fishing that the world's fish stocks can be seen as a non-excludable resource, but one which is finite
and diminishing.
 Club goods: are the goods that excludable but are non-rivalrous such as private parks.
 Mixed good: final goods that are intrinsically private but that are produced by the individual consumer by means of private
and public good inputs. The benefits enjoyed from such a good for any one individual may depend on the consumption of
others, as in the cases of a crowded road or a congested national park. Sandmo, Agnar (20 March 2017). "Public Goods". The
New Palgrave Dictionary of Economics. Springer Link. Retrieved 10 December 2020.
 MATRIX
Excludable Non-excludable
Rivalrous Private goods Common-pool resources
food, clothing, cars, fish stocks, timber, coal
parking spaces
Non-rivalrous Public goods
Club good
free-to-air television, air,
cinemas, private parks,
national defense
satellite television

 Elinor Ostrom proposed additional modifications to the classification of goods to identify fundamental differences that affect the incentives facing individuals
 Replacing the term "rivalry of consumption" with "subtractability of use".
 Conceptualizing subtractability of use and excludability to vary from low to high rather than characterizing them as either present or absent.
 Overtly adding a very important fourth type of good—common-pool resources—that shares the attribute of subtractability with private goods and difficulty of exclusion with
public goods. Forests, water systems, fisheries, and the global atmosphere are all common-pool resources of immense importance for the survival of humans on this earth.
 Changing the name of a "club" good to a "toll" good since many goods that share these characteristics are provided by small scale public as well as private associations.
 CHALLENGES IN IDENTIFYING
PUBLIC GOODS
 The definition of non-excludability states that it is impossible to exclude individuals from consumption. Technology now allows radio or
TV broadcasts to be encrypted such that persons without a special decoder are excluded from the broadcast. Many forms of information
goods have characteristics of public goods. For example, a poem can be read by many people without reducing the consumption of that
good by others; in this sense, it is non-rivalrous. Similarly, the information in most patents can be used by any party without reducing
consumption of that good by others. Official statistics provide a clear example of information goods that are public goods, since they are
created to be non-excludable. Creative works may be excludable in some circumstances, however: the individual who wrote the poem
may decline to share it with others by not publishing it. Copyrights and patents both encourage the creation of such non-rival goods by
providing temporary monopolies, or, in the terminology of public goods, providing a legal mechanism to enforce excludability for a
limited period of time. For public goods, the "lost revenue" of the producer of the good is not part of the definition: a public good is a
good whose consumption does not reduce any other's consumption of that good.
 Debate has been generated among economists whether such a category of "public goods" exists. Steven Shavell has suggested the
following:
 when professional economists talk about public goods they do not mean that there are a general category of goods that share the same
economic characteristics, manifest the same dysfunctions, and that may thus benefit from pretty similar corrective solutions...there is
merely an infinite series of particular problems (some of overproduction some of underproduction, and so on), each with a particular
solution that cannot be deduced from the theory, but that instead would depend on local empirical factors.
 There is a common misconception that public goods are goods provided by the public sector Although it is often the case that
government is involved in producing public goods, this is not always true. Public goods may be naturally available, or they may be
produced by private individuals, by firms, or by non-state groups, called collective action.
 The theoretical concept of public goods does not distinguish geographic region in regards to how a good may be produced or consumed.
However, some theorists, such as Inge Kaul, use the term "global public good" for a public good which is non-rivalrous and non-
excludable throughout the whole world, as opposed to a public good which exists in just one national area. Knowledge has been argued as
an example of a global public good, but also as a commons, the knowledge commons.
• Graphically, non-rivalry means that if each of
several individuals has a demand curve for a
public good, then the individual demand
curves are summed vertically to get the
aggregate demand curve for the public good.
This is in contrast to the procedure for
deriving the aggregate demand for a private
good, where individual demands are summed
horizontally.
• Some writers have used the term "public
good" to refer only to non-excludable "pure
public goods" and refer to excludable public
goods as "club goods".
 COMMON EXAMPLES OF PUBLIC

GOODS INCLUDE
Common examples of public goods include
 public fireworks
 clean air and other environmental goods
 information goods, such as official statistics
 open-source software
 authorship
 public television
 radio
 invention
 herd immunity
 Further Examples of Public Goods are
Class and type of Good Nonexcludable Nonrival Common problem
Ozone Layer Yes No Overuse
Atmosphere Yes No Overuse
Universal human rights Partly Yes Underuse (Repression)
Knowledge Partly Yes Underuse (lack of access)
Internet Partly Yes Underuse (Entry Barriers)
 SHEDDING LIGHT ON SOME

MIS-CLASSIFIED PUBLIC GOODS
Some goods, like orphan drugs require special governmental incentives to be produced, but cannot be classified as public goods since
they do not fulfill the above requirements (non-excludable and non-rivalrous.)
 Law enforcement, streets, libraries, museums, and education are commonly misclassified as public goods, but they are technically
classified in economic terms as quasi-public goods because excludability is possible, but they do still fit some of the characteristics of
public goods.
 The provision of a lighthouse is a standard example of a public good, since it is difficult to exclude ships from using its services. No
ship's use detracts from that of others, but since most of the benefit of a lighthouse accrues to ships using particular  ports, lighthouse
maintenance can be profitably bundled with port fees (Ronald Coase, The Lighthouse in Economics 1974). This has been sufficient to
fund actual lighthouses.
 Technological progress can create new public goods. The most simple examples are street lights, which are relatively recent inventions
(by historical standards). One person's enjoyment of them does not detract from other persons' enjoyment, and it currently would be
prohibitively expensive to charge individuals separately for the amount of light they presumably use.
 Official statistics are another example. The government's ability to collect, process and provide high-quality information to guide
decision-making at all levels has been strongly advanced by technological progress. On the other hand, a public good's status may
change over time. Technological progress can significantly impact excludability of traditional public goods: encryption
allows broadcasters to sell individual access to their programming. The costs for electronic road pricing have fallen dramatically, paving
the way for detailed billing based on actual use.
 Some question whether defense is a public good. Murray Rothbard argues:
 "'national defense' is surely not an absolute good with only one unit of supply. It consists of specific resources committed in certain
definite and concrete ways—and these resources are necessarily scarce. A ring of defense bases around New York, for example, cuts
down the amount possibly available around San Francisco."
 Jeffrey Rogers Hummel and Don Lavoie note,
 "Americans in Alaska and Hawaii could very easily be excluded from the U.S. government's defense perimeter, and doing so might
enhance the military value of at least conventional U.S. forces to Americans in the other forty-eight states. But, in general, an additional
ICBM in the U.S. arsenal can simultaneously protect everyone within the country without diminishing its services".
 Public goods are not restricted to human beings. It is one aspect of the study of cooperation in biology.
 FREE RIDER PROBLEM
 The free rider problem is a primary issue in collective decision-making, An example is that some firms in a particular industry
will choose not to participate in a lobby which purpose is to affect government policies that could benefit the industry, in
assumption that there are enough participants that would cause a favourable change. Free rider problem is also a form
of market failure, in which market-like behavior of individual gain-seeking does not produce economically efficient results.
The production of public goods results in positive externalities which are not remunerated. If private organizations do not reap
all the benefits of a public good which they have produced, their incentives to produce it voluntarily might be insufficient.
Consumers can take advantage of public goods without contributing sufficiently to their creation. This is called the free rider
problem, or occasionally, the "easy rider problem". If too many consumers decide to "free-ride", private costs exceed private
benefits and the incentive to provide the good or service through the market disappears. The market thus fails to provide a
good or service for which there is a need.
 The free rider problem depends on a conception of the human being as homo economicus: purely rational and also purely
selfish—extremely individualistic, considering only those benefits and costs that directly affect him or her. Public goods give
such a person an incentive to be a free rider.
 For example, consider national defense, a standard example of a pure public good. Suppose homo economicus thinks about
exerting some extra effort to defend the nation. The benefits to the individual of this effort would be very low, since the
benefits would be distributed among all of the millions of other people in the country. There is also a very high possibility that
he or she could get injured or killed during the course of his or her military service. On the other hand, the free rider knows
that he or she cannot be excluded from the benefits of national defense, regardless of whether he or she contributes to it. There
is also no way that these benefits can be split up and distributed as individual parcels to people. The free rider would not
voluntarily exert any extra effort, unless there is some inherent pleasure or material reward for doing so (for example, money
paid by the government, as with an all-volunteer army or mercenaries).
 The free-riding problem is even more complicated than it was thought to be until recently. Any time non-excludability results
in failure to pay the true marginal value (often called the "demand revelation problem"), it will also result in failure to
generate proper income levels, since households will not give up valuable leisure if they cannot individually increment a
good. This implies that, for public goods without strong special interest support, under-provision is likely since cost-benefit
analysis is being conducted at the wrong income levels, and all of the un-generated income would have been spent on the
public good, apart from general equilibrium considerations.
 In the case of information goods, an inventor of a new product may benefit all of society, but hardly anyone is willing to pay
for the invention if they can benefit from it for free. In the case of an information good, however, because of its characteristics
of non-excludability and also because of almost zero reproduction costs, commoditization is difficult and not always efficient
even from a neoclassical economic point of view.
 EFFICIENT PRODUCTION LEVELS
OF PUBLIC GOODS
 The Pareto optimal provision of a public good in a society occurs when the sum of the marginal valuations of the public good (taken
across all individuals) is equal to the marginal cost of providing that public good. These marginal valuations are, formally, marginal rates
of substitution relative to some reference private good, and the marginal cost is a marginal rate of transformation that describes how much
of that private good it costs to produce an incremental unit of the public good.) This contrasts to the Pareto optimality condition of private
goods, which equates each consumer's valuation of the private good to its marginal cost of production.
 For an example, consider a community of just two consumers and the government is considering whether or not to build a public park.
One person is prepared to pay up to $200 for its use, while the other is willing to pay up to $100. The total value to the two individuals of
having the park is $300. If it can be produced for $225, there is a $75 surplus to maintaining the park, since it provides services that the
community values at $300 at a cost of only $225.
 The classical theory of public goods defines efficiency under idealized conditions of complete information, a situation already
acknowledged in Wicksell (1896). Samuelson emphasized that this poses problems for the efficient provision of public goods in practice
and the assessment of an efficient Lindahl tax to finance public goods, because individuals have incentives to underreport how much they
value public goods.[7] Subsequent work, especially in mechanism design and the theory of public finance developed how valuations and
costs could actually be elicited in practical conditions of incomplete information, using devices such as the Vickrey–Clarke–Groves
mechanism. Thus, deeper analysis of problems of public goods motivated much work that is at the heart of modern economic theory.
OTHER PROBLEMS ASSOCIATED
WITH PUBLIC GOODS
 Darren Bates writes about urbanization and the relation that it has with the public goods. In his write up, Bates state that currently, the
population of the people living in urban centers is increasing day by day. He also mentions the impact of the urban development;
 We are at a historic moment in urban development. According to the United Nations, more than half of the world’s population now lives
in urban areas. By 2050, that figure will rise to 6.5 billion people — two-thirds of all humanity, 15% with disabilities, making
urbanization one of the 21st century’s most trans-formative and challenging trends. In many places, this trend towards rapid
urbanization goes hand in hand with the creation of more disparities, inequalities, and discrimination, [...] 
 As such, there is a continued and ever increasing concern of the matter of public goods with the urbanization. Therefore, measure that
have to be taken to curb the seriousness of the problems that the public good are experiencing has a lot to do with the idea developed by
Mahatma.
 According to Mahatma Gandhi several developmental aspects to grand the people with the public goods has for many years gone astray.
As recorded by Thakker, Gandhi had a different perspective of the public goods;
 "...need to protect the environment and to guard against the abuse of natural resources. Our mindless destruction of natural wealth is
alarming. Mighty projects, big dams, giant industries and other massive ventures raise questions about the quality of life affected by
them. The quest for the mirage of material development often leads to the destruction of forests, ecological imbalances, scarcity of
water, soil erosion, silting of rivers and desertification pose grave dangers to environment."
 The struggle to get access to the public goods has resulted in the rapid growth of urbanization. As more people come to get the service,
the natural provision of the globe is affected resulting in other side effects. With the aim to achieve provision of public services several
other challenges arise;
 Environmental degradation
 Ecological imbalances (e.g. over fishing causing extinction of some fish species)
 Desertification
 Spread of infectious diseases (SARS and CoViD-19)
 Air Pollution and
 Traffic Congestion
 LOCAL PUBLIC GOODS
 The basic theory of public goods as discussed above begins with situations where the level of a public good (e.g., quality of the air) is
equally experienced by everyone. However, in many important situations of interest, the incidence of benefits and costs is not so simple.
For example, when people keep an office clean or monitor a neighborhood for signs of trouble, the benefits of that effort accrue to some
people (those in their neighborhoods) more than to others. The overlapping structure of these neighborhoods is often modeled as
a network (When neighborhoods are totally separate, i.e., non-overlapping, the standard model is the Tiebout model.)
 Recently, economists have developed the theory of local public goods with overlapping neighborhoods, or public goods in networks: both
their efficient provision, and how much can be provided voluntarily in a non-cooperative equilibrium. When it comes to efficient
provision, networks that are more dense or close-knit in terms of how much people can benefit each other have more scope for improving
on an inefficient status quo. However, voluntary provision is typically below the efficient level, and equilibrium outcomes tend to involve
strong specialization, with a few individuals contributing heavily and their neighbors free-riding on those contributions.
 OWNERSHIP
 It would be rather simple to assume that the public goods are owned by public sector. However, the management of the utilities in the
hands of the public, clearly indicate less benefit to the users due to free-riders. Thus, a question regarding public goods being owned by
the public or the private sector rises.
 Economic theorists such as Oliver Hart (1995) argue that ownership matters for investment incentives when contracts are incomplete. The
incomplete contracting paradigm has been applied to public goods by Besley and Ghatak (2001). They consider the government and a
non-governmental organization (NGO) who can both make investments to provide a public good. Besley and Ghatak show that the party
who has a larger valuation for the public good should be the owner, regardless of whether the government or the NGO has a better
investment technology. This result contrasts with the case of private goods studied by Hart (1995), where the party with the better
investment technology should be the owner. However, more recently it has been shown that the investment technology matters also in the
public-good case when a party is indispensable or when there are bargaining frictions between the government and the NGO.
 BIBLIOGRAPHY
 Wikipedia
 Google chrome