EBE 2053 LU 6 - Public Goods.ppt - LU 6 Public Goods There exists an intrinsic connection between the common good on the one hand and the structure and

EBE 2053 LU 6 - Public Goods.ppt - LU 6 Public Goods There...

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Public Goods LU 6
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2 of 26 There exists an intrinsic connection between the common good on the one hand and the structure and function of public authority on the other. The moral order, which needs public authority in order to promote the common good in human society requires also that the authority be effective in attaining that end. Pope John XXXIII born Angelo Giuseppe Roncalli (1881-1963)
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3 of 26 Public goods refer to goods or services which, if they are provided at all, are open to use by all members of society. Most generally, the term public goods might be used simply to describe the goods that are produced in the public sector. If the term is used this generally, it does not offer much insight into why some goods tend to be produced by government while others tend to be produced in private markets. Public Goods are goods for which exclusion is impossible. One example is National Defense: A military that defends one citizen from invasion does so for the entire public. Definition
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4 of 26 Examples of Public and Private Goods Public Goods National defense Fireworks display Music file sharing Uncongested highway Private Goods Pizza Health care Congested highway Public housing
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5 of 26 Characteristics of Public Goods 1. Nonexclusion : The inability of a seller to prevent people from consuming a good despite they do not pay for it. A good is nonexcludable if, once produced, it is difficult to keep people from consuming the good. Example is national defense . Once some people in a certain area are being defended from foreign aggressors, it is virtually impossible to prevent others in the same area from being protected as well. As a result, once the good is being provided for some people, they have no incentive to pay for the good, since it will be available to them for free regardless. They may become “free riders,” benefiting from the goods that others produce without paying for their share of the consumption.
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6 of 26 2. Nonrivalry : The characteristic that if one person “consumes” a good, another person’s pleasure is not diminished, nor is another person prevented from consuming it. This definition does not apply to most goods. For example, for each additional hamburger you eat, one less hamburger is available for everyone else; for each additional compact disc you purchase, one less is available for everyone else.
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