PUBLIC GOODS AND COMMON RESOURCES公共物品与公共资源.pptVIP

“The best things in life are free. . .” Most goods in our economy are allocated in markets. ? For these goods, prices are the signals that guide the decisions of buyers and sellers. “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 raise economic well-being The Other Economic Functions of Government Providing Public Goods Goods to which the principle of rival consumption does not apply In contrast, private goods can be consumed by one individual at a time. The Other Economic Functions of Government Characteristics of public goods Shared Consumption - additional users of public goods do not deprive other users Non-excludable - difficult to charge for a public good based on consumption—the exclusion principle The Political Functions of Government Merit Goods Goods deemed socially desirable through the political process Museums Ballet Concerts Theater Provided through subsidization Example: Parking on a Public Street Some Chicago residents use the “dibs system” to claim a parking space once they have shoveled it out. Does a free parking spot fit the definition of a public good? The Other Economic Functions of Government Free-Rider Problem Arises when some individuals take advantage of the fact that others will take on the burden of paying for public goods Free-Rider: a person who receives the benefit of a good but avoids paying for it. Question How much national defense did you consume last month? 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 tha