Public goods provide an example of market failure resulting from missing markets
The characteristics of pure public goods are the opposite of private goods:
There are relatively few examples of pure public goods. Examples include flood control systems, some of the broadcasting services provided by the BBC, public water supplies, street lighting for roads and motorways, lighthouse protection for ships and also national defence services.
Policing – is policing a public good?
The general protection that the police services provide in deterring crime and investigating criminal acts serves as a public good. But resources used up in providing policing means that fewer resources are available elsewhere. Private protection services such as private security guards, privately bought security systems and detectives are private goods because the service is excludable and rival in consumption and people and businesses are often prepared to pay a high price.
Public goods and market failure
The Free Rider Problem
A quasi-public good is a near-public good i.e. it has many but not all the characteristics of a public good. Quasi public goods are:
The air waves – a public good or quasi public good?
The case for government intervention with public goods
Overcoming the Free-Rider
Direct provision of a public good by the government can help to overcome the free-rider problem which leads to market failure
Many public goods are provided more or less free at the point of use and then paid for out of general taxation or another general form of charge such as a licence fee.
State provision may help to prevent the under-provision and under-consumption of public goods so that social welfare is improved.
If the government provides public goods they may be able to do so more efficiently because of economies of scale.
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