Step into a world where roads, parks and clean air belong to only a privileged few. Picture a society where education, healthcare and national security is limited to certain individuals, while others are left to navigate a fragmented and unequal society. Fortunately, such a scenario is merely hypothetical because of the existence of public goods. These essential services and commodities form the backbone of the communities we live in, fostering collective progress, enhancing the quality of life and ensuring a fair and inclusive society. Join us on a journey to discover the fascinating intricacies of public goods, as we uncover their vital role in shaping the world, the challenges faced in their implementation and the endless possibilities they hold in building a better and more inclusive world.

Economically speaking, a public good is a community or service that is provided without profit to all members of a society, usually by the government. As the name suggests, these goods are made for the benefit of the public. A pure public good ****is a good that non-excludable, non-rivalrous and non-rejectable.

Public goods are open to all and available for everyone to enjoy. No one can be prevented from using them (non-excludability). One person's enjoyment of the good does not reduce the availability or quality for others (non-rivalry). No one can choose not to consume them once provided (non-rejectability).

An example of national defence as a public good paints a clear picture. National defence is non-excludable as everyone in a country will enjoy the defence regardless of whether they have paid for it (through taxes) - it is impossible to selectively defend only certain people in the country. It is also non-rivalrous because when one person consumes national defence, it does not reduce the level of defence available for other people in the country. Furthermore, it is also non-rejectable, because when deterrence is created external threats in the form of national defence, a person residing in that country cannot refuse the safety created even if they want to.

Thinking Activity

Consider the following examples and determine if there are public goods.

a. Public toilet

b. Roads

As you may have discovered by now, certain public goods are not purely public in nature. Due to the characteristics of both public and private goods such as partial excludability, partial rivalry and partial rejectability, they are considered quasi-public goods. Examples include public transportation, roads and libraries where are accessible to everyone however may be rivalrous in consumption and partially excludable. Markets for these goods are considered to be incomplete markets and their lack of provision by the free markets would be considered to be inefficient and a market failure.

Why do markets fail to produce public goods efficiently?

Public goods are open to all, so it is hard for producers to charge people for using them. This means that public goods often end up as “free goods” that people can enjoy without paying. Since people can get the benefits for free, they have no reason to pay for public goods. Without anyone willing to pay, producers can’t make a profit from public goods and won’t supply them.

Left on their own, free markets fail to provide public goods. No private company would want to produce public goods for free. The free market alone is unable to achieve an efficient level of public goods. As a result, society misses out on the total benefits that public goods can provide.