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The Theory of Public Goods

A public good is a commodity whose cost of production does not change with a change in the number of consumers (Samuelson, 1954). An example of such a good is street lighting, the cost of street lighting does not change with an increase or decrease in the number of users. Another aspect of a public good is that it is non-excludable; meaning that consumers cannot be excluded from using the good once it has been produced. A good aspect of non-exclusion is that of air, no one can regulate who can and who cannot breathe or use air.

The attributes of non-excludability and joint consumption of a public good connotative indicate the need for public production for efficiency. Scholars such as Samuelson argue that the markets coupled with other factors will fail to allocate resources to efficiently produce these public goods in the private sector. This associates public goods with public expenditure or rather government expenditure theory.

The national and the highways are public goods that are meant for the common good of the entire community and the cost of producing them does not change with change in consumer numbers. Secondly, these goods are nonexcludable and one cannot be segregated and not enjoy the same.

The pure market economy is driven by market forces such as demand and supply. For a public good to be produced in the private sector without government expenditure there would be the need for an additional price with an increase in demand. However the economist’s definition of a public good con-notate a constant supply against increasing demand and at a constant price.

Capital goods are needed in the production of these public goods; sometimes they produce other capital goods and the efficacy of production of these goods such as the highways cannot be left in the hands of the private sector due to a failure to reach the theoretical thresholds for Pareto efficiency (McInerney et al, 2020). The marginal rate of transformation of the public goods would not be equal to the marginal rate of substitution by the consumers for the production of the public good in the private sector.

Public goods contribute to social inclusion and support society and promote patriotism and shared citizenship. The provision by the private sector becomes impractical as this would have a cost that would prevent some users from assessing them hence losing the whole definition of public goods. Public goods are non-rivalry in nature that they do not offer competition however they suffer from free-rider problems that the private sector is usually keen to avoid.

The non-excludability results in free-rider problems. When there are free consumers there will be underproduction as a result. This will result in the good not deriving the same value for all consumers or being inaccessible to some consumers hence becoming a capital good. There is a reason for government expenditure on the production of these goods

The cost of public goods is paid collectively through taxation as it would require some huge capital investments and would be more expensive if provided for privately and without regulation the quality of these goods would also be impossible or quite a task. An example of such service is law enforcement forces and the education sector. Law enforcement will require centralized regulation so that the quality of training and standardization of the services provided be checked.

The non-excludability and non-rivalry characteristics of public goods make it impossible for the private sector to sell public goods; the value derived from the use by a single customer does not reduce or affect the value derived by another customer from the same product. This translates to no reward and therefore no motivation for the provision of public good by the private sector.

Public education is a public good that though it is presented for the good of society; is so regulated that it is used to extend the interest of the government of the day. The curriculum is designed to produce persons that are set to advance the interests of the government of the day.

Public education is excludable and this means that this service can be provided for by the private sector. The fact that the private sector can offer the education and charge some fees that will make sure that some people cannot access the education from their institution while the content of the same is provided in public schools and therefore non-rivalrous defies the definition of a public good (Zhang et al, 2021).

The education system is a sure way for the government to control the flow of ideas through its citizenry and hence preserve the interests of those in government in a way that it is a private product. This opens students to a set of ideas, punishments, and rewards that will have a great influence on the ideas they retain and are furthered by the research funding in the universities.

The government is more of a beneficiary of public education. From the devising of the curriculum, education can use it to portray the legitimacy of its intentions and generate a citizenry that adheres to its ideologies and policies. It makes them more obedient to their roles.

Private-sector production education has a net effect on efficiency in production as public education transfers a large tax burden to taxpayers. While in the private sector the marginal cost of adding an extra learner is quite low compare to that of collective budgeting and financing through taxation. The private sector uses social pressures and preferences to fundraise hence less burden than the collective taxation using the legislature to enforce and finance education through government expenditure.

In conclusion, a public good has two characteristics; that is non-rivalrous and non-excludable (alley, 2021). The fact use of the good by one does not reduce the value of the good is not in any way to other users. The characteristics of these public goods create free-rider problems that can be controlled and reduced by measurements such as social pressures, legislation, and social preferences.


Paul A. Samuelson, “The Pure Theory of Public Expenditure,” Review ofhnomics and Stotirtics 36 (November 1954): 387-89; and idem, “A Diagrammatic Exposition of a Theory of Public Expenditure,” Review ofhnomics and Statistics 37 (November 1955): 350-56.

McInerney, J. O., Whelan, F. J., Domingo-Sananes, M. R., McNally, A., & O’Connell, M. J. (2020). Pangenomes and selection: the public goods hypothesis. The pangenome: diversity, dynamics and evolution of genomes. Cham: Springer, 151-167.

Alley, J. (2021). Reassessing the public goods theory of alliances. Research & Politics8(1), 20531680211005225.

Zhang, Y., & He, L. (2021). Theory and experiments on network games of public goods: inequality aversion and welfare preference. Journal of Economic Behavior & Organization190, 326-347.


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