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Public Goods and Services

posted Aug 24, 2014, 3:29 PM by Quoc-Anh Vuong
Huan Vuong
Public Goods and Services
8/12/14
PUBLIC GOODS AND SERVICES
Street lights. Do you buy street lights?  Do you pay for the electricity that powers street lights?  Do you physically replace the bulbs in street lights?  The answer to those questions is most likely “nope!” Street lights are a great example of a “public good.” A public good or service is one that tax payers finance and our government provides.  Why would we pay the government to provide the service? The first reason is that street lights are non-excludable; you cannot stop anyone from benefitting from a streetlight. Further, the street light is non-rivalrous. If I am enjoying the use of the streetlight, my use does not lessen the resource or availability of the streetlight for someone else.  Because you cannot stop someone from benefitting from the streetlight; and ones use does not diminish the resource for others, private companies cannot charge money for the product.  If a company cannot charge money, they are not going to manufacture and install the product.  The street light then falls into the domain of a “public good,” or product that is funded by tax payers and provided by the government to serve the good of the entire community. Additional examples of a public good include fresh air, national defense, flood control, light houses and knowledge.
What are we talking about today? PUBLIC GOOD
What is a public good or service? SOMETHING ALL CAN BENEFIT FROM
What do we mean when we say non-excludable? CANNOT STOP SOMEONE FROM ENJOYING IT
Why do we use the word non-rivalrous when noting that a resource is not diminished or lessened for one person by the use of another? NO DECREASE IN SOMEONE ELSE’S ENJOYMENT OF IT
Why wouldn’t a private company want to manufacture and install streetlights specifically for an individual person living on a busy street?CAN’T MAKE MONEY FROM IT
Why pays for a public good or service? TAXES
Who delivers a public good or service? GOVERNMENT
Name a few additional examples of a public good or service. HIGHWAYS
Financing and provisioning of public goods was present in 500 BC Athens, when taxes were used to finance city festivals and temples. Paul Samuelson, the first American to win the Nobel Prize in Economic Science, developed a theory of public goods in his 1965 paper The Pure Theory of Public Expenditure. Samuelson defined a public good as a “collective consumption good” when he stated “goods which all enjoy in the common sense that each individuals
consumption of such a good leads to no subtractions from any other individuals consumption of that good.” The opposite of public good is private good, which does not meet either non-rivalrous or non-excludable characteristics. A good example of a private good is a loaf of bread. You can exclude others from eating the loaf of bread, and once the loaf of bread is gone it cannot be used again.
What does the word provision mean? ALLOWS FOR
What city used taxes to fund festivals and war in 500 BC? ATHENS
What award did Paul Samuelson receive? NOBEL PRIZE IN ECONOMICS
What is the opposite of a public good? PRIVATE GOOD
What is a good example of a private good, that is NOT a loaf of bread?  Think of an item that CAN exclude others and CANNOT be used/enjoyed again. CLOTHING
Adam Smith, considered to be the founder of modern economics, was an unlikely fan of inviting the government as a provider of goods and services. He was a fan of the “free market;” a system where prices for goods and services are set by buyers and sellers, free from intervention from government or pre-setting monopolies. However Smith conceded that it was to responsibility of government to intervene and provide public goods and services that would not be profitable for private companies to produce.
Who is considered the founder of modern economics? ADAM SMITH
What is the free market? NO GOVERNMENT INTERFERENCE
Ultimately why did Adam smith decide the government was the best provider of public goods and services? BECAUSE IT WAS NOT PROFITABLE FOR BUSINESSES
Creative Writing:

Higher education is often associated with a cost or price tag directly to the consumer. Why is K-12 education free?  If a cost is associated with higher education, why is the cost subsidized for some lower income students?



PUBLIC EDUCATION IS A PUBLIC GOOD BECAUSE IT PROVIDES A SERVICE TO THE COMMUNITY. A PERSON NEEDS A GOOD EDUCATION IN ORDER TO CONTRIBUTE TO SOCIETY. HIGHER EDUCATION IS A LUXURY NOT A NECESSITY. SO IT IS NOT A PUBLIC GOOD. THE END.

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