This this occasion, within our series of Concepts of Economics we analyze what are public goods, a very special type of goods that are not likely to be bought or sold in any market, since they have the characteristic of being ‘collective’ and whose use and enjoyment can be carried out by any citizen without distinction, regardless of whether they must respect the jurisdiction approved in this regard to protect them.
The management and / or provision of public goods is not exclusive to the State, but can also be provided by the private sector. An example of a public good provided by the State would be street lighting, since if it were not borne by all the citizens of a municipality, no one would have private incentives to be able to do so. And another of a public good managed by a private institution would be a radio signal or fireworks paid for by a company in an annual convention, since we could enjoy them without paying and without having the invitation to said convention.
Public goods managed by the State are an inheritance of the Roman empire, a time in history in which certain public goods and rights began to be provided, such as citizen security, justice, the management of water and municipal land, and so on.
Characteristics of public goods
The essence of a public good, that is, the characteristic that distinguishes it from another that is not, are two properties, that is non-rival and not exclusive. That it is non-rival means that the use and / or enjoyment by an additional user does not imply a limitation for the use and / or enjoyment of a user who already uses it, such as a radio signal, which allows different users listen to the tune at the same time.
An example of a rival good would be a car, since when one of us uses it, another user cannot do it at the same time, or the consumption of a portion of cake when we only have one, since when one of the diners eat it, decreases the amount available for the rest.
That is not exclusive, it means that it is not possible to discriminate which users will enjoy it and who will not through prices, since these are priceless, and any user who wishes can access the use and enjoyment of it, regardless of whether or not they contribute to its maintenance and / or protection. Some examples are the wind, the sand on the beach or the smell of a delicious cake when passing by a bakery.
Public goods in our lives
The most common example of a public good is national defense, a guaranteed protection service and managed by the state of the nation, which protects us against external threats, providing all of us with the service, and for which it is very difficult to exclude a specific user.
An example of why we cannot exclude a specific user is the following, let’s think that in our country an armed conflict begins against another nation, the State would try to protect us through national defense, defense that would be practically impossible to deny the neighbor on the third floor of a building, and at the same time protect the rest of the community’s neighbors.
Regarding this Concept, it must be very clear that not because a certain good or service is administered by the State, it is a public good, only that these are managed by the administration because otherwise no one would have incentives to do so. .
Owing distinguish them from impure public goods, goods that the State provides as well as private institutions that may become limited, reduce their available quantity or see their quality diminished, and that are exemplified perfectly in education. Suppose that a student attends more classes than the rest of the classmates of his degree, a fact that does not cause the amount of education perceived by others to decrease, so in principle there is no rivalry in consumption, as long as this fact be individual and isolated, but if this ‘phenomenon’ spreads, we can reach a point of overcrowding of universities, and therefore decrease the quality of education available to the rest.
One of the more widespread confusion in this regard is for example Public Health, a service of a private economic nature, and whose consumption can exclude certain users, at the same time that it is a rival, because if we have the resources to perform a single surgical intervention we cannot operate on two patients at the same time. Another debate being the fact that this good is provided by the State, either by the positive externalities that it generates, the social impact, or other reasons.
Another issue that is not always clear is the confusion between impure public goods and preferred public goods, which are not public goods since they do not meet either of its two characteristics, being rather private goods, some examples are health, education, housing or food. Goods that generate positive externalities to society, and that if they were not managed by the State could not be provided in an optimal quantity by the private sector, constituting one of the most significant ‘market failures’
Main sustainability issues
Public goods They need public management and a strict control mechanism that guarantees its use and enjoyment, as well as its sustainability. To guarantee the latter, a sufficiently repressive system of law and guarantees must be implemented so that all users of the market are involved in this task.
For example, if we do not respect the forests, the seas or the environment, we can exclude the future inhabitants of the planet from the use and enjoyment of these goods. Therefore, it must legislate in this sense, and ensure respect for the rules in order to achieve this goal.
Another of the most widespread problems in this regard is Stowaway Problem, or ‘free rider’ in the Anglo-Saxon language, and that says that it is difficult to exclude from the service who or who do not contribute to the collective effort for its maintenance. An example of this issue would be the use of public highways by those citizens who do not pay their taxes in a timely manner, causing economic damage and the availability of public resources to those who do contribute to their financing.
This problem is a tremendous ‘damage’ to collective interests, because by avoiding these ‘free’ users the collective effort for its financing or maintenance, supposes that this unsatisfied burden will increase the effort that taxpaying citizens have to satisfy to guarantee its viability.
Prospects, feasibility and conclusions
In recent years, as the fiscal and budgetary problems of the States have worsened, certain initiatives against the collective of tax burdens have been gaining momentum, some forgetting that public burdens are based on two principles, equity and equality. Not considering that although educational or health services are not demanded by some potential users, we all use public transport, the road network and national defense to a greater or lesser extent.
Therefore, governments must promote long-term and sustainable management of public goods in order not to fall for this deception, especially when these they escape to the market, and if they are not taken care of, they can disappear.