DefinitionTo be called a public good, that good must exhibit two traits:
E.g A lighthouse, or national defence.
 Please check out the social goods page to see goods that could be provided privately but are treated as public goods.
examples national defence and atmosphere The argument that some infrastructure goods must be provided by the statePUBLIC GOODS argument - private sector would not provide Non excludable and non rivalrous but most is actually excluable like toll boths, but light houses are not non rivalrous means Overall a weak argument MONOPOLYIf the state did not provide the goods the private sector would have a monopoly Firms would overcharge, a single seller can raise prices at will. However if you charge too much there will be competition, from either substitutes or competitors who can now compete. Regulation creates barriers to and creates monopoly Is state monopoly any better than a private one? EQUALITY Privatising would exclude certain groups, the danger is - customers might not buy enough to make transaction viable for the seller. This argument doesn't hold
Government already protects big business and restricts choices for poorer people so are not really interested in equality. ENVIRONMENT
Cures can be worse than the disease - as policy's can mis-price, and bow to certain industries, pushing the pollution overseas. SHORT TERMINISM
However risks don't disappear with government projects, just they are loaded onto taxpayers and consumers. COMPULSORY PURCHASEState authority needed to deal with holdouts - "why govt are needed" Complexity of schemes means state more efficient Transaction costs inflated by regulation - markets work to reduce transaction costs Property rights threatened PUBLIC vs PRIVATE provisionEconomic calculation argument - top down Central planning v's entrepreneurial discovery Elite preferences verses individual preferences -Voting with your money, more effective than once every election cycle Special interests v's consumers GOVT FAILURE ON ROADSCongestion Poor maintenence and high accident rates demand and supply mismatched projects for political reasons policy benefits special interests Lack of innovation costs pushed up Underinvestment Policy becomes designed to stop people travelling!!! (bus lanes in, footpaths widened) Benefits of private ownershipInvestment reflects demand Price mechanism can eliminate congestion innovation and efficiency gains Strong incentive to reduce accidents Services reflect consumer preferences market for poorer customers Localise solutions Real reasons for state controlTheft of land or people Facilitating taxation Rigging markets to meet political goals create artificial scarcity on enrich elite interests Fostering a culture of dependency - people can't create their own infrastructure. Social engineering/social cohesion Privatisation Makes taxation and regulation more difficult Disperses control away from corrupt elites Restores freedom of association Strengthens private property and individual freedom. Private sector are not just businesses, they can be non profit organisations. Government sometimes do things the free market would do anyway but just claim the credit. Don't need third party insurance, you can insure yourself that someone without third party will crash into you. PPP removes debt from the govts books, and gets the public to pay for it later. Reference |
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Public goods |