In the cumulative interpretation, goods are the generalization of the means required to satisfy the needs of the individual and the whole society. The national economy includes a rather extensive classification of goods. Depending on their type and category, their essential properties are also formed.
Concept
Public goods are considered to be those that are consumed by the whole society and produced by the state, but only if an important criterion is met - they must bring significant benefits.
They produce effective external outcomes for all when one citizen can get them. For example, if one person sponsors repairs in his entrance, then all his residents use the results of these works. These goods are divided into different categories and have certain characteristics.
Features
The main properties of public goods are:
- Lack of competition in consumption and its non-selectivity. With the proper amount of goods, their consumption by one individual does notthem inaccessible to others.
- Indivisibility. Consumers have no way to control the amount of goods they consume.
- Non-excludability. No one has the right to restrict access to a particular good.
- Territorial boundaries of consumption. Consumers can be all citizens of the country or region located in a particular territory. But completely different communities can create such benefits.
Practical examples
There are many patterns in life where the properties of public goods are manifested. They are associated with different municipal facilities and zones. State structures that act for the benefit of the country also matter.
For example, such a property of public goods as non-excludability is clearly expressed in the park. It is contained in a certain way. Funds from the treasury are spent on this. And any citizen can walk there: even a beggar, even an influential businessman.
Certain properties of public goods (non-excludability and non-rivalry) have some analogies. They can be treated as collective species. For example, transport road. It is allowed to drive on it and cars, and trucks, and tractors, and motorcycles.
A vivid example of the indivisibility of OB is defense against external aggressors. This benefit is provided by the state, and the whole country uses it. But many citizens do not know its volumes, types and number of armies and weapons involved, and cannot influence these factors.
There are specific distributions along the boundaries of application and provision of benefits. There are only three of them:
- global;
- nationwide;
- local.
Global
They can be used by all inhabitants of the planet or received by certain regions or countries. These benefits include:
- measures to purify the air;
- stopping the ozone hole from growing;
- norms that reduce transactional values, not excluding measures of length and mass;
- the most important scientific discoveries;
- international stability.
When analyzing these benefits, a dilemma arises with those who provide them. In recent years, integration under the auspices of the EU has been actively developing. And most of the public goods lose their nationality, transforming into pan-European ones. As a result, the following happens:
- Modernization and change in the functionality of most EU institutions.
- Education of new decision-making systems.
- Resolving questions about the level of competence of European governments.
National and local views
The following benefits are ranked first:
- country defense;
- law enforcement;
- work of authorities: courts, administrations, governments, etc.
The second are those public goods, the property of which is their availability only to a certain geographical unit: region, city, town, districtetc.
The range of their practical examples is quite wide, from local environmental measures to street lighting.
Main varieties
By their properties and classifications, public goods can be:
- Clean. In practice, they are not implemented and are presented only in theory. Since absolutely all of its consumers must apply its full volume. In reality, this is not feasible. Take, for example, a public park. You can walk there, breathe the air, but sit only on free benches.
- Mixed. This is the main spectrum of public goods that operate in reality. They can be overloaded and overflowed. For example, in any public place, so many people can accumulate that there will be a stampede.
- Worthy. These are the benefits provided by society, but little used by individuals. Therefore, conditions must be created for their intensive consumption. Examples of these benefits: museums, theaters, free education.
- Unworthy. These are the types that need to be restricted. A striking example is alcoholic beverages.
The biggest dilemmas arise from point 1. On paper, the properties of pure public goods look impressive - they are non-excludability and non-selectivity. However, they manifest themselves specifically and can be found in two types of goods. In this case, one property appears less than the other.
One individual cannot receive net benefits if other citizens do not participate in this. The result is mass consumption. And every citizenapplies the benefit of the good, which is not diminished for the rest of the people. For example, the weather forecast. All citizens can benefit from it without diminishing its usefulness to others.
In turn, pure goods in practice are associated with some competition. These are the same examples with park benches, and beach seats, bus seats, etc.
There are also these types of public goods:
- informational (permanent): TV, press, radio, etc.;
- discrete: paintings in galleries, museum exhibits, etc.;
- free: police patrols on the streets, security strongpoints, etc.;
- with negative and positive price tags, an example of the first is the payment for training courses, the second is the fare in public transport.
There is also a category of quasi-public goods.
Defective Species
Essentially, these are public goods, the properties of which are limited. They are also called quasi-social species. Most citizens can get them, but not in full and with specific conditions. The most striking example is education. Students use it for their own purposes. However, they can be expelled if they have a lot of bad marks. In addition, admission to a university is associated with the presence of entrance exams, which not everyone passes.
Due to the constant growth of applicants for education, the costs of premises, computer equipment and teachers' salaries are rising. These are all budgetary expenses. But they also invest in educationhouseholds and companies organizing training.
Consumption dilemma
Because public goods are indivisible, they are not affected by the exclusion criterion. Their producer (state) cannot interfere with their consumption by those citizens who do not pay for them.
The benefit of the good is derived by potential consumers. And it doesn't matter if they paid for it. As a result, their priorities are not determined. This scenario is called the free rider's dilemma.
It designates the government as the sole provider of these benefits. And they are provided through the taxation system. Otherwise, they are absent. As a result, the indicator of market demand for them is significantly underestimated or does not exist at all.
Such a product, as a rule, does not compensate for the cost of its production. But the benefits of this process can match or exceed the marginal cost.
Taking into account such a dilemma, the optimal parameter for the production of a particular good is revealed. Here is a graph with two demand curves. The first concerns a pure public good. The second is its private counterpart. Both of them follow down.
Based on the properties of a public good, all consumers should receive it in full. And therefore, its unit is not priced. As a result, whatever the supply rate of its consumption by each citizen, it should be identical to the supply rate.
Demand Generation
This question featuresindicator P. It denotes the total number of consumers of a particular product.
For the public good, indicator P is also a parameter of personal demand Da, Db, Dc, Df. Because every person uses it to some extent. For this reason, the indicator of aggregate demand for any public good also characterizes the value of personal demand for it. This is expressed in the following formula:
Q (e)=q1=q2=…=q
Due to the nature of the public good, each citizen can consume it in a certain rise and evaluate it differently. Therefore, the general demand curve is formed by adding the personal curves Da, Db, Dc, Df, etc. along the vertical vector.
Identification of efficient production
The best production quantity of a public good can be calculated by comparing the marginal benefit of creating an additional unit of trade (value 1) with the marginal cost of producing such a good (value 2).
But keep in mind that here the value of 1 is the sum of all ratings made by consumers. Then the best production volume is obtained when the sum of the first values is identical to the value of 2. The following rules work here:
- MR=MS. Regarding the release of goods.
- MRP=MRC. Determines the costs required to optimize revenue.
