Fighting poverty Many government programs are aimed at helping the poor. Unemployment benefits provide a basic income for individuals and families who do not have adequate alternative income. The old- age pension and disability support pension benefit specific low-income groups. Those with low incomes may also receive subsidised medical services. These benefit programs are financed by taxes on people who are financially more successful. Economists disagree among themselves about what role the government should play in fighting poverty. Although we will discuss this debate more fully in chapter 21, here we note one important argument – advocates of antipoverty programs claim that fighting poverty is a public good. Even if everyone prefers living in a society without poverty, fighting poverty is not a ‘ good ’ that private actions will adequately provide. To see why, suppose someone tried to organise a group of wealthy individuals to try to eliminate poverty. They would be providing a public good. This good would not be rival in consumption: One person ’ s enjoyment of living in a society without poverty would not reduce anyone else ’ s enjoyment of it. The good would not be excludable: Once poverty is eliminated, no one can be prevented from taking pleasure in this fact. As a result, there would be a tendency for people to free ride on the generosity of others, enjoying the benefits of poverty elimination without contributing to the cause. Because of the free-rider problem, eliminating poverty through private charity will probably not work. Yet government action can solve this problem. Taxing the wealthy to raise the living standards of the poor can potentially make everyone better off. The poor are better off because they now enjoy a higher standard of living, and those paying the taxes are better off because they enjoy living in a society with less poverty. Are lighthouses public goods? Some goods can switch between being public goods and being private goods depending on the circumstances. For example, a fireworks display is a public good if performed in a town with many residents. Yet if performed at a private amusement park, or an outdoor concert, a fireworks display is more like a private good because visitors to the park pay for admission. Another example is a lighthouse. Economists have long used lighthouses as an example of a public good. Lighthouses are used to mark specific locations along the coast so that passing ships can avoid treacherous waters. The benefit that the lighthouse provides to ships ’ captains is neither excludable nor rival, so each captain has an incentive to free ride by using the lighthouse to navigate without paying for the service. Because of this free-rider problem, private markets usually fail to provide the lighthouses that ships ’ captains need. As a result, most lighthouses today are operated by the government.