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lectur6-page50 - take any action against you if you don’t...

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50 50 Public Goods NON-EXCLUSION PRINCIPLE : u There is no technology available to prevent people who do not pay for the good or service from consuming it, OR the costs of exclusion are prohibitively high relative to the commodity's benefit. All right, let us trying something here. Picture that we are sitting in a classroom full of students. I announce that the government is going to privatize the production of national defense for the country. Who will bid on this contract to produce national defense? Well, lets assume that I do, and I get the bid. Now, how am I going to pay the production costs? This national defense thing ain’t cheap you know. Just one of those Tomahawk Cruise Missiles runs a couple million, and some of those fighter jets are in the $16 million range. How can I make you all pay for this? You will all collectively consume the benefits of national defense. I can’t make you pay for it. O.K., since I can’t make you pay for it because I don’t have any authority to
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Unformatted text preview: take any action against you if you don’t pay to enjoy the benefits of my hard work at providing national defense, I guess I am going to have to get a hat out and start passing it around the room asking for donations. How much money do you think I would collect after passing the hat around the room? Do you think everyone contributed something to the cause? Or, do you think a few folks thought to themselves, “Why should I pay a dime, I enjoy the benefits regardless of whether I pay or not. So why pay?” You bet there were a few thinking that way, and economists refer to them as “Free Riders” The next time I pass the hat around the room, I will probably collect less because more of you will have learned to be free riders: people getting the benefits from a commodity without contributing one nickel to the commodities cost....
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