Public Goods

Abstract

In the previous chapters, especially Chapter 2, we were mainly concerned with an economy of private goods. But public goods are an increasingly important part of the overall economy, and in a certain sense are a special kind of externality in consumption. We discussed problems of externality in the previous chapter but our discussion mainly concentrated on one party affecting another. Significant external effects such as pollution (public bads) affect large numbers of individuals and can be regarded as involving an external diseconomy aspect and a public aspect. Hence this chapter is relevant not only to the more traditional subject of the provision of public goods but also to solving the problem of public bads, as well as other social issues that involve a large number of individuals simultaneously (issues such as the environment, health, knowledge and peace are public goods at the global level — see Kaul et al., 1999).