BU224_Krugman_Chapter 20 - c h a p t e r 475 20...

BU224_Krugman_Chapter 20
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Unformatted text preview: c h a p t e r 475 20 >> Y THE MIDDLE OF THE NINETEENTH century, London had become the world’s largest city, with close to 2.5 million inhabitants. Unfortunately, all those people produced a lot of waste—and there was no place for the stuff to go except the Thames, the river flowing through the city. Nobody with a working nose could ignore the results. And the river didn’t just smell bad—it carried waterborne diseases like cholera and typhoid. London neighborhoods close to the Thames had death rates from cholera more than six times greater than the neighborhoods far- thest away. And the great majority of Londoners drew their drinking water from the Thames. What the city needed, said reformers, was a sewage system that would carry waste Public Goods and Common Resources T H E G R E AT S T I N K B What you will learn in this chapter: ➤ A way to classify goods that pre- dicts whether a good can be effi- ciently provided by markets ➤ What public goods are, and why markets fail to supply them ➤ What common resources are, and why they are overused ➤ What artificially scarce goods are, and why they are under- consumed ➤ How government intervention in the production and consumption of these types of goods can make society better off ➤ Why finding the right level of government intervention is difficult London’s River Thames then . . . . . . and the same river now, thanks to government intervention. U P P A / T o p h a m / T h e I m a g e W o r k s C o r b i s away from the river. Yet no private individ- ual was willing to build such a system, and influential people were opposed to the idea that the government should take responsi- bility for the problem. For example, the magazine The Economist weighed in against proposals for a government-built sewage system, declaring that “suffering and evil are nature’s admonitions—they cannot be got rid of.” But the hot summer of 1858 brought what came to be known as the Great Stink, which was so bad that one health journal reported “men struck down with the stench.” Even the privileged and powerful suffered: Parliament met in a building next to the river. After unsuccessful efforts to stop the smell by covering the windows with chemical-soaked curtains, Parliament Private Goods—and Others What’s the difference between installing a new bathroom in a house and building a municipal sewage system? What’s the difference between growing wheat and fishing in 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 sea do not....
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