Econ. Ch. 11 Public Goods & Common Resources

Excludable (Excludability)
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Terms in this set (10)
Excludable (Excludability)
-property of grouping goods so market can provide goods people want
-the property of a good whereby a person can be excused from using it
-Can a person be prevented from using the good?
Rival in Consumption
-property of grouping goods so market can provide goods people want
-the property of one good whereby one person's use diminishes the other people's use
-Does one person's use of the good of a good reduce another person's use?
Private Goods
-Excludable & Rival in Consumption- An ice cream cone is excludable because it is possible to prevent someone from eating one and rival b/c if one person eats one, another can't have one.
-Most goods are like this
-ice cream
-clothing
-congested toll road
-cows
Public Goods
-Neither Excludable or Rival- People can't be prevented from using public good and one person's use doesn't diminish another person's use
-A tornado siren
-lighthouse
-national defense (one of most expensive)
-uncongested toll road
-fireworks if displayed in town with many residents, but not a Disney world b/c visitors pay to see display
-general knowledge vs. research- research can be excludable if patented, g.k. is always a public good-a mathmatetician can't patent a theorem
-advocates of antipoverty programs claim that fighting poverty is a public good
-similar to an externality-something of value has no price attached to it
-people have incentive to be free riders (fireworks)
Common Resource
-Rival, but not Excludable
-fish in the ocean
-similar to an externality-something of value has no price attached to it
-the environment
-congested nontoll roads
-Tragedy of the Commons
Club Goods
-Excludable but not Rival-
-fire protection
-cable TV
-Uncongested toll roads
Free Rider Problem
-a person who recieves the benefit of the good but avoids paying for it
-when market fails to provide an efficient outcome
-B/c public goods are nonexcludable, the free-rider problem prevents the private market from supplying them
Cost-Benefit Analysis
-estimates total costs and benefits of a project to a society to society as a whole
-the efficient provision of public goods is intrinsically more difficult than that of private goods
-CB have no price signals to observe when evaluating if govt should provide a public good
-rough approximations
Tragedy of the Commons
-a parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole
-Why tragedy of commons?- social and private incentives differ
-arises because of an externality- someone's use of something diminishes another
-govt impose fees and regulate behavior to mitigate overuse
-EX: open grazing, clean air and water, congested roads, wildlife
-environmental degradation is a modern TOC
Importance of Property Rights
-markets fail to allocate resources efficiently because property rights are not well established-that is some item of value does not have an owner with legal authority to control it
-government can potentially solve problem