ADM 614 Week 3 Assignment

Public Good

Institution Affiliation

Date

Public good refers to a product which can use without anyone reducing its availability to other individual and no one is excluded from using this product. Examples of public goods are such as public parks, national defense, law enforcement and many others products which are used by the society at large. All the public goods are normally financed by revenues from tax and hence cannot be denied from individuals who do not pay directly for them. Public good are vital to the smooth functioning of the society since a free rider problem can arise when these goods are not offered.

The free rider problem normally states that an individual does not have to contribute to the delivery of public goods since he or she does not have to contribute in order to benefit. A good example of this statement is that even if a person does not pay taxes, he or she still benefits from public goods such national defense by riding on taxes that are paid  by other citizens (Fisher,2005).

Public goods have common characteristics which include the following: Nonrivalrous-This feature denotes that the public goods do not reduce in availability as people consume them. The other characteristic of public goods is nonexcludability and it refers to any product or amenity that is not possible to offer without it being available for many individuals to enjoy. From this characteristic we can therefore say that public goods must be made available to each and every person and must not be limited in quantity. Quasi-public goods and amenities have the characteristics of non-rivalry and non-excludability but they do not qualify to be pure public goods. Examples of quasi-public products are such as roads.

Public goods are different from private goods in different ways. Some of the major differences are as follows: Public goods and services are free to use and hence individuals do not incur direct costs when using such products whereas for private products individuals have to pay so that one can use them. Examples of public goods are such air, street lights, roads and many others while examples of private goods are such as furniture, cars, clothes, and mobile phones among others. The other major difference is that the use of public goods does not decrease the availability of the products for other people. For example when one person breathes fresh air, it does not mean that the rest of the individuals will not breathe fresh air. This is different in private goods since the usage of private goods leads to reduction in quality or quantity for others. For example if a person buys a certain car ,the chances of other people getting the same model,  color and at the same price are low.

Public goods are similar for everyone such that regardless on one’s social status, age or color we all breathe the same air whereas for private goods the quality and quantity one gets depend on one’s financial status. For example the rich people buy expensive devices such as 3D televisions while the average people will go for normal televisions which are relatively cheaper. Another difference between public and private goods is that public goods are normally offered by nature or by the government while private goods are normally factory-made and they are made for the purpose of profit.

The government is the only suppliers of public goods. This is because one of its major functions is to supply public functions that the market fails to offer or cannot offer efficiently. The provision of public goods by the government needs fundamental moral decisions besides the economic concerns about comparative efficacy of markets as well as government supplying them. The government happens to be the only suppliers of public goods since there are various challenges that may arise when private firms provide public goods. First we find that it is very costly to disregard individuals from using a good or receiving a service that has the characteristics of a public good. For example if police protection was being offered by a private organization the organization would have to identify all the people using the service and then bill them for protection so that they can receive payment for the services rendered. In addition to that, the private organization would also ensure that those individuals who do not pay for the service are not protected. It may be theoretically possible for private firms to supply public goods but it would be quite costly.

The other reason why the government is the only supplier of public goods is because the market provision of a public good would lead to inefficiency. In order to maximize on the efficiency of public goods, marginal benefits as well as marginal costs should be equal and the cost of offering a public good to an additional user should be zero. This means that extra units of public products should be offered free of charge (Anomaly, 2013).

There are various challenges related to public goods and they include insufficient resources. Most of the governments normally lack adequate resources which can provide public goods effectively. The situation is normally aggravated by economic policies which are not effective in most of the countries especially developing countries. These policies may include high rates of borrowing, the misuse of natural resources among others. The other challenge is the increasing population. Most of the countries are normally faced with an increase in population growth. This creates a challenge on the inadequate financial incomes as well as the constraints to the provision of public goods. Ethnic diversities as well as the different cultural practices also pose a problem in the delivery of public goods. The ethnic diversities can lead to conflict which normally affects effective dissemination of resources.

The free rider problem arises due to the non-excludable nature of public goods which makes it difficult to charge people for benefitting from a good or service once it has been offered. This problem leads to under provision of a public good and hence market failure. The free rider problem can address by encouraging direct provision of public goods by the government. This is because if the government offers public goods they will do so more efficiently as compared to private organizations due to economies of scale.

 The government can also help to prevent the under consumption as well as the under provision of public goods and by doing this, the social welfare is improved. The non-rival nature of public goods also offers a strong case for the government as opposed to the market offering and paying for public goods. By doing all these, the free rider problem will be overcome (Hogg & Huberman 2008)

References

Anomaly, J. (2013). Public goods and government action. Politics, Philosophy & Economics, 1470594X13505414.

       Fisher, T. (2005). Is Public Space a Public Good? [Dispatches]. Places, 17(1).

 Hogg, T., & Huberman, B. A. (2008). Solving the Organizational Free Riding Problem with         Social Networks. In AAAI Spring Symposium: Social Information Processing (pp. 24-29).