Public Goods and common Resources
We can define or classify most of the goods that we have in our
economy. Most of the goods that we have in our economies are private
goods and they are excludable and rival.
Rival: not available for somebody else if it's consumed by you.
The market doesn't work well for allocating public goods and common
resources because we have market failures due to the Free-rider
problem and the Tragedy of the commons.
We can also find the free-rider problem when we are doing teamwork
and this is something that all of us have experienced at least once in our
life, so you are in a group, specially when the team is larger, then it has a
higher chance of happening that one person takes advantage of the
situation and let's all the others do the work.
The government can decide to offer and finance University but not
because it's a public good it's because it has positive externalities. It's a
different reason for why we can have government intervention.
We're going to define private and public according to non-rival, rival and
excludable, non-excludable in this course in economics.
The second problem is the tragedy of commons, we have said that when
we have common resources, so they are not public, like wildlife,
fisheries, oceans, forest... because even if they are not excludable they
are rivals. The problem is that when we have a common resource since
we cannot exclude people, there's going to be a higher demand and the
good is rival. Example if you pollute the ocean it becomes not clean for
somebody else. This causes the tragedy of commons a reduction,