19LECTURE 17PUBLIC GOODS AND COMMON RESOURCESSome Important Common ResourcesClean air and waterCongested roadsFish, whales, and other wildlife
20LECTURE 17PUBLIC GOODS AND COMMON RESOURCESCONCLUSIONPublic goods tend to be under-provided, while common resources tend to be over-consumed. These problems arise because property rights are not well-established:•Nobody owns the air, so no one can charge polluters. Result: too much pollution.•Nobody can charge people who benefit from national defense. Result: too little defense. The govt can potentially solve these problems with various policy options.
21LECTURE 17PUBLIC GOODS AND COMMON RESOURCESCHAPTER SUMMARYA good is excludable if someone can be prevented from using it. A good is rival in consumption if one person’s use reduces others’ ability to use the same unit of the good. Markets work best for private goods, which are excludable and rival in consumption. Markets do not work well for other types of goods.
22LECTURE 17PUBLIC GOODS AND COMMON RESOURCESCHAPTER SUMMARYPublic goods, such as national defense and fundamental knowledge, are neither excludable nor rival in consumption. Because people do not have to pay to use them, they have an incentive to free ride, and firms have no incentive to provide them. Therefore, the government provides public goods, using cost-benefit analysis to determine how much to provide.
23LECTURE 17PUBLIC GOODS AND COMMON RESOURCESCHAPTER SUMMARYCommon resources are rival in consumption but not excludable. Examples include common grazing land, clean air, and congested roads. People can use common resources without paying, so they tend to overuse them. Therefore, governments try to limit the use of common resources.