A public good is a product whose consumption by one person does not reduce the availability of that product to another person. Public goods are different from the other goods because they do not attract rivalry among people, and no one is excluded from using them (Tutor2u, 2014). Examples of public goods include national security, knowledge, street lighting, sewer systems, radio broadcasts, basic television, and public parks.
Public goods differ from the other goods because they do not cause rivalry among the users. The non-rivalry characteristic is due to the fact that the consumption of the public good by one person does not reduce another person’s consumption of the same good (Tutor2u, 2014). An example is where all the people benefit from the street lighting offered by the government. All the people utilize the lighting service without affecting each other’s utilization of the service. A public good also differs from the other goods due to its non-excludability characteristic. That means that a person cannot be prevented from the consumption of a public good. An example is where all the people enjoy the national security offered by the government. There are people who do not pay for the public goods, and yet they still enjoy the benefits. Such people are known as free-riders.
The market cannot provide public goods because there is no guarantee that they will make profits (Tutor2u, 2014). The non-rivalry and non-excludability characteristics of public goods make it easy for people to benefit without even paying for the goods. The free-rider problem makes the provision of public goods by the market a potential failure. A rational person will not pay for the public goods because he knows that he will still benefit even without paying. The public goods are usually provided by the government. The government gathers funds through taxation of businesses and individuals (Tutor2u, 2014). The tax revenue is then used in the provision of the public goods. Below is a diagram showing the deadweight loss caused by the public goods in the market.
National security is a public good that the government offers to the public. National security is very expensive, and private investors cannot take the risk of providing it because they are not guaranteed to make economic profits. National security is also a very sensitive product, and is entrusted to the government. Street lighting is another example of a public good that is provided by the government. Street lighting is a product that is consumed by all the people. A private investor cannot stop every motorist, and demand payment for the service enjoyed. The government can provide this service by using tax revenue. Another example of a public good is a public park. People enjoy relaxing at public parks, but they are not charged for going to the parks. A business person cannot run a public park because they are not assured of making profits.
The National Healthcare System in the UK is a public good. The NHS in UK is funded by the public through taxation (NHS, 2014). The Parliament issues grants to the Department of Health by sourcing the funds from the tax revenues. The goal of NHS is to make sure that each person can access good healthcare. NHS as a public good has made it possible for the UK residents to acquire health benefits. NHS covers all health issues such as emergency treatments, transplants, routine treatments, and chronic conditions (NHS, 2014). The rate of infant mortality has fallen and life expectancy has risen. The negative consequences of providing NHS to the UK residents is that there are some opportunistic tourists who go to the UK with the intention of benefiting from the service. The hospital waiting lists are also very long because of the free healthcare. Some UK citizens opt to source healthcare services from other countries so as to avoid the long waiting.
Bibliography
Tutor2u, 2014. Public Goods. [Online] Tutor2u. Available at: http://www.tutor2u.net/economics/content/topics/marketfail/public_goods.htm [Accessed 15 December 2014]
NHS, 2014. The NHS in England. [Online] National Health Service. Available at: http://www.nhs.uk/NHSEngland/thenhs/about/Pages/overview.aspx [Accessed 15 December 2014]
Catalan, J. 2013. Thinking Through Public Goods. [Online] Economic Thought. Available at: http://www.economicthought.net/blog/2013/08/thinking-through-public-goods/ [Accessed 15 December 2014]
