Any good is either a private or public good. A public good can be enjoyed by more than one person concurrently. Public goods are further classified as pure public goods and impure public goods. Impure public goods are goods that can be used by more than one person. The limit goes up to a point where exclusion is made possible. Impure goods are also known as club goods. In common property resources, impure goods are open for consumption to numerous people up to a point where restrictions are put and consumption restricted. The main difference between impure and pure public goods is that exclusion in consumption is possible in the case of impure public good whereas it is not possible in the case of a pure public good. A good is classified as impure when it exhibits both characteristics of public and private goods. Some of the most common impure public goods include fire protection, sewer and water services and even refuse collection from households.
These goods show characteristics of both public and private goods. Wildlife can also be classified as an impure public good. This is because its provision to the public is free, but people have to provide money to keep and maintain the animals and wildlife. The contribution that wildlife has to the public cannot be always provided if conservation measures are not funded. The affiliates of the public are projected to contribute some resources to facilitate consumption. An impure public good is prone to congestion. Biodiversity conversation can also be classified as an impure public good. Forests and marine are open for use to everyone but if they are over-exploited, they may become obsolete in the near future.
Externalities are factors or influences that have a direct impact on the actions of other people. An externality comes to be whenever the utility of any agent or good is directly dependent on the deeds of another agent on the condition that they have a non-pecuniary link. The non-pecuniary risk means that they do not have any monetary relationship. The externalities that are associated with impure public goods should not have any monetary relationship. There are various illustrated externalities that have a direct impact on impure public goods. Some of these externalities are pollution. Environmental pollution is an externality that affects impure public goods. The rationale this is the case is because, though offered for free, water pollution should be limited to a few members and restricted to prevent dilapidation of the resource. Lack of control in the fishing practice may lead to eventual death of all marine life that may be detrimental to future generations.
Another externality that is associated with impure public goods is the tragedy of the commons. Social efficiency will not be achieved if associates of the public are tolerated to use and exploit a resource without measure. Members tend to exploit this opportunity and over-use the resource. Environmental degradation that involves deforestation is another externality that affects the impure public goods. The benefit that the general public accrues from the forests cannot be ignored or got from elsewhere. The products include timber, paper, game and other resources. Therefore, if this resource is not controlled, the public will overexploit it. Many consumers seek their own self satisfaction and, therefore, eventually forests will be no more. These externalities have to be dealt with in the provision of impure public goods.
There are three main techniques involved in public good supply. They comprise of summation, best shot and the weakest link. Summation technology outlines that for efficiency in the production of any public good, the sum of the individuals separate Marginal Rate of Substitution should be equivalent to the marginal cost of production. It is also paramount for the public to note that under the summation rule, under-provision should be expected. Under this technology also, many members of the public are in charge of paying their own costs incurred in public good provision. The total production of the public good under this rule increases with an increase in the population.
Under the weakest-link rule, the amount of social public good available is the minimum amount that the individual is supposed to have. In this case, an individual has a voice in the total amount of public good being provided. Under-provision of public goods is considerably standardized when this technique is applicable. This technique is applicable where all members who use the public good have to put in their effort so that the goal will be achieved collectively by the whole society.
Under the best-shot rule, the amount of public good available socially is the maximum quantity that an individual should have. All individual efforts are helpful in increasing the reward that is available to the public. Under-provision of the public good when this technique is applied is aggravated. With the amplified population increase, the amount of public good is also increased. All these techniques are used to exploit the criteria used when deciding how to provide a community with voluntary public good.
The economic incentives used and that are created for impure goods aim at motivating the members of the public to get value for their money as well as finance the long term survival of the impure public goods. There are two main economic incentives that are used when dealing with public goods. Taxes are one on the economic incentives imposed to cater for the provision of public goods supply. Taxes are imposed on the users to cater for its repairs and maintenance so it will be available for people in the future generation. Other economic incentives available will include market incentives that include contracts, subsidies and rights trading. Rights trading are more effective incentives. Rights can be defined as permits to a harvest quota of fish or wildlife species before a certain date. The right is only exercised once to allow for maturity or breeding. Subsidies are also good economic incentives that can be used to control public goods. With regards to environmental public goods, for example, clean air, subsidies can be awarded to firms that produce fewer emissions and pollute the air less.
The subsidies would work in the reduction of air pollution. Contracts can also be used as economic incentives to manage public goods. Contracts can be awarded in the wildlife conservation because it is a public good. They should be given to the communities that live by to provide and take care of the wildlife as they in return sell products and use the proceeds to set up social amenities. The social amenities may include schools and hospitals that are useful in societal development. These are some of the economic incentives that public goods create.
