chapter47520>>Y THE MIDDLE OF THE NINETEENTHcentury, London had become theworld’s largest city, with close to2.5 million inhabitants. Unfortunately, allthose people produced a lot of waste—andthere was no place for the stuff to goexcept the Thames, the river flowingthrough the city. Nobody with a workingnose could ignore the results. And the riverdidn’t just smell bad—it carried waterbornediseases like cholera and typhoid. Londonneighborhoods close to the Thames haddeath rates from cholera more than sixtimes greater than the neighborhoods far-thest away. And the great majority ofLondoners drew their drinking water fromthe Thames.What the city needed, said reformers,was a sewage system that would carry wastePublic Goods and Common ResourcesTHE GREAT STINKBWhat you will learn inthis chapter:➤A way to classify goods that pre-dicts whether a good can be effi-ciently provided by markets➤What public goodsare, and whymarkets fail to supply them➤What common resourcesare,and why they are overused➤What artificially scarce goodsare, and why they are under-consumed➤How government intervention inthe production and consumptionof these types of goods canmake society better off➤Why finding the right level ofgovernment intervention is difficultLondon’s River Thames then . . .. . . and the same river now, thanks to governmentintervention.UPPA/Topham/The Image WorksCorbisaway from the river. Yet no private individ-ual was willing to build such a system, andinfluential people were opposed to the ideathat the government should take responsi-bility for the problem. For example, themagazine The Economistweighed in againstproposals for a government-built sewagesystem, declaring that “suffering and evilare nature’s admonitions—they cannot begot rid of.”But the hot summer of 1858 broughtwhat came to be known as the Great Stink,which was so bad that one health journalreported “men struck down with thestench.” Even the privileged and powerfulsuffered: Parliament met in a building nextto the river. After unsuccessful efforts tostop the smell by covering the windowswith chemical-soaked curtains, Parliament
Private Goods—and OthersWhat’s the difference between installing a new bathroom in a house and building amunicipal sewage system? What’s the difference between growing wheat and fishingin the open ocean?These aren’t trick questions. In each case there is a basic difference in the charac-teristics of the goods involved. Bathroom appliances and wheat have the characteris-tics needed to allow markets to work efficiently. Sewage systems and fish in the seado not.Let’s look at these crucial characteristics and why they matter.
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