Abstract
Free goods are ‘goods’, whether consumer goods or productive inputs, which are useful but not scarce; they are in sufficiently abundant supply that all agents can have as much of them as they wish at zero social opportunity costs (cf. ch. 11, §3, of Carl Menger’s Principles of Economics, 1871). Goods which have a positive social opportunity cost but a zero price – for example, because there are no property rights in them, or because they are fully subsidized – are not free goods. Any ‘gift of nature’, whether it be a good such as air, or a primary input such as labour or land (in the narrow sense), might be a free good under certain circumstances. But a produced commodity can be a free good, other than in the market period, only if it is a joint product. As is at once obvious from the example of air, the free nature of a good is not an intrinsic property; thus air above the earth’s surface is, in most circumstances, a free good but air under water or in deep mines is not. More abstractly, then, a free good is a good for which supply is not less than demand at a zero price (in the sense of social opportunity cost). But since both supply of and demand for any good depend on the prices of all goods, it is clear that whether a particular good is or is not a free good is a general equilibrium, not a partial equilibrium, issue.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsBibliography
Debreu, G. 1959. Theory of value: An axiomatic analysis of economic equilibrium. New York: Wiley.
Morishima, M. 1976. The economic theory of modern society. Cambridge: Cambridge University Press.
Author information
Authors and Affiliations
Editor information
Copyright information
© 2018 Macmillan Publishers Ltd.
About this entry
Cite this entry
Steedman, I. (2018). Free Goods. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_1026
Download citation
DOI: https://doi.org/10.1057/978-1-349-95189-5_1026
Published:
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-95188-8
Online ISBN: 978-1-349-95189-5
eBook Packages: Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences