Public Goods

• Public goods in economics are non-rival and non-excludable.
• Private goods are rival and excludable.
• Quasi public goods have some characteristics of public goods.
• Public goods create a market failure due to the free rider problem.
• The government steps in to provide public goods that the market mechanism fails to provide.

This module explains the concept of public goods and the market failure associated with them. Public goods are non-rivalrous and non-excludable, meaning one person’s consumption does not diminish another’s, and it is not possible to exclude individuals from consuming them. Examples include sea defense and street lighting. However, the free rider problem arises because rational consumers have no incentive to pay for these goods, leading to a market failure. As a result, the government must step in to provide public goods. Technology, such as digital and subscriber-based programming, can help resolve this issue by making goods more excludable and allowing the market to provide them.