Course: Microeconomics > Unit 9Lesson 4: The four types of goods: private goods, public goods, common resources, and natural monopolies
Public goods: real-world examples
Let's look at some real examples of public goods.
- Goods that are nonexcludable and rivalrous are called common resources.
- Advances in public health have all been closely linked to positive externalities and public goods.
- Economists are seeing more and more evidence of a widening gap between those who have access to rapidly improving technology and those who do not.
Common resources and the “Tragedy of the Commons”
There are some goods that do not fall neatly into the categories of private good or public good. While it is easy to classify a pizza as a private good and a city park as a public good, what about an item that is nonexcludable and rivalrous, such as the queen conch?
The queen conch is a large marine mollusk found in shallow waters of sea grass in the Caribbean. These waters are so shallow, and so clear, that a single diver may harvest many conch in a single day. Not only is conch meat a local delicacy and an important part of the local diet, but the large ornate shells are used in art and can be crafted into musical instruments. Because almost anyone with a small boat, snorkel, and mask can participate in the conch harvest, it is essentially nonexcludable. At the same time, fishing for conch is rivalrous; once a diver catches one conch it cannot be caught by another diver.
Goods that are nonexcludable and rivalrous are called common resources. Because the waters of the Caribbean are open to all conch fishermen, and because any conch that you catch is conch that I cannot catch, common resources like the conch tend to be overharvested.
The problem of overharvesting common resources is not a new one, but ecologist Garret Hardin put the tag “Tragedy of the Commons” to the problem in a 1968 article in the magazine Science. Economists view this situation as a problem of property rights. Since nobody owns the ocean or the conch that crawl on the sand beneath it, no one individual has an incentive to protect that resource and responsibly harvest it.
To address the issue of overharvesting conch and other marine fisheries, economists typically advocate simple devices like fishing licenses, harvest limits, and shorter fishing seasons. When the population of a species drops to critically low numbers, governments have even banned the harvest until biologists determine that the population has returned to sustainable levels. In fact, such is the case with the conch, the harvesting of which has been effectively banned in the United States since 1986.
Positive externalities in public health programs
One of the most remarkable changes in the standard of living in the last several centuries is that people are living longer.
Thousands of years ago, human life expectancy is believed to have been in the range of 20 to 30 years. By 1900, average life expectancy in the United States was 47 years. By 2015, life expectancy was 79 years. Most of the gains in life expectancy in the history of the human race happened in the 20th century.
The rise in life expectancy seems to stem from three primary factors. First, systems for providing clean water and disposing of human waste helped to prevent the transmission of many diseases. Second, changes in public behavior have advanced health.
Early in the 20th century, for example, people learned the importance of boiling bottles before using them for food storage and baby’s milk, washing their hands, and protecting food from flies. More recent behavioral changes include reducing the number of people who smoke tobacco and precautions to limit sexually transmitted diseases.
Third, medicine has played a large role. Immunizations for diphtheria, cholera, pertussis, tuberculosis, tetanus, and yellow fever were developed between 1890 and 1930. Penicillin, discovered in 1928, led to a series of other antibiotic drugs for bringing infectious diseases under control. In recent decades, drugs that reduce the risks of high blood pressure have had a dramatic effect in extending lives.
These advances in public health have all been closely linked to positive externalities and public goods. Public health officials taught hygienic practices to mothers in the early 1900s and encouraged less smoking in the late 1900s. Many public sanitation systems and storm sewers were funded by government because they have the key traits of public goods. In the 20th century, many medical discoveries came out of government- or university-funded research. Patents and intellectual property rights provided an additional incentive for private inventors. The reason for requiring immunizations, phrased in economic terms, is that it prevents spillovers of illness to others—as well as helping the person immunized.
Inequitable technology spillover
NASA’s space projects have had many positive spillovers, but those benefits are not shared equally.
Economists like Tyler Cowen, a professor at George Mason University, are seeing more and more evidence of a widening gap between those who have access to rapidly improving technology and those who do not. According to Cowen—author of the recent book, Average Is Over: Powering America Beyond the Age of the Great Stagnation—this inequality in access to technology and information is going to deepen the inequality in skills, and ultimately, in wages and global standards of living.
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- Are there any “real world situations” on public goods, services.(1 vote)