public goods macro 2014
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Group Assignment Due midnight on Friday 1/24 by email
Create a youtube vide on the following question:
1. Why do you think the government is the only builder of roads, armies or street lights? And do you think it
does a good job at providing these items?
Everyone gets the same grade
Problems with assignment?
• Strategy?
• Incentives?
Brainstorm at your tables• 3 + goods that if you consume it, your friends
can’t consume it at the same time
• 1.5 + goods that if you consume it, your friends are unaffected by your consumption
Private Goods• Rivaled consumption
• A person’s consumption affects others’ consumption
• Excludable
• Firms can exclude people who don’t pay
Public Goods• Goods that are both non-excludable and
non-rivaled in consumption
Free Rider Problem• Free Rider – a person who does not pay for,
but benefits from a public good
How does society pay for public goods?
TaxesUser fees
Private GoodsFor example: food
Common GoodsEX: Open ocean fishing
Club goodsEX: Golf Course, movie theatre
Public goodsEX: National DefenseStreet lights
Excludable? Rivaled Consp.?
Excludable? Rivaled Consp.?
Excludable? Rivaled Consp.?
Excludable? Rivaled Consp.?
Excludable? Rivaled Consp.?
AP question
1. A pure public good is a good that is
a) Provided efficiently by markets
b) Rivalrous and excludable in consumption
c) Nonrivalrous and excludable in consumption
d) Nonrivalrous and nonexcludeable in consumption
e) Rivalrous and nonexcludable in consumption
AP question
1. Which of the following would fit the definition of a public good?
a) Broadcast FM Radio
b) Movie Theater tickets
c) Submarine sandwiches
d) Medical insurance
e) Cable television