Public Good: Economic Definition and Examples

In economic theory, public goods are non-excludable and non-rivalrous resources available to a common pool of people. In other words, everyone can use these goods without exclusion or fear of the aggregate of resources being depleted. Paul Samuelson crystallized this definition of public goods in his 1954 economics paper The Pure Theory of Public Expenditure, although many other economists have expanded upon the theory of public goods since that time.

An allocation of public finance reserves is often responsible for providing public goods, but the private sector can also make such goods available. The former is an example of macroeconomics, while the latter is an instance of microeconomics.

In the case of macroeconomics, you can consider when taxpayers and voters enable policymakers in their federal government to provide for the national defense, guarantee health care, ensure clean air, or fight the negative effects of climate change with government spending. These are all examples of the provision of public goods with many positive externalities for the public good overall. The collective action of local communities can also lead to the acquisition of public goods.

When it comes to microeconomics, you can consider when a competitive enterprise in the free market suspends its self-interest to contribute a public good for the general well-being of society. When they do so without an expectation of remuneration or reward (as with a higher valuation of their stock, for instance), they are creating a public good. As a more specific example, a private firm or individual who releases open-source software without requiring any payment beyond general attribution is releasing a public good.

Public goods must meet a few criteria to be considered as such. These are the three most important characteristics:

1. 1. Social benefits: Public goods must have some social benefit for a community as a whole. Whether locally, nationally, or globally, public goods must increase the general well-being and efficiency of society.
2. 2. Undepletable: Public goods are non-rivalrous. A non-rival good is a resource no one needs to compete for, as there is never an undersupply of it. So a public good cannot be one that society could possibly use up.
3. 3. Widely available: Public goods must be non-excludable and available to everyone. In other words, it’s not possible to enforce property rights in relation to them. Everyone must have open access to them at all times.

There are many different types of public goods, or resources. Here are seven such goods to consider:

1. 1. Freeways: In contrast to toll roads, freeways allow all drivers to travel long stretches of road without having to pay any extra fees.
2. 2. Information: One of the most global public goods is information. The free flow of information is available to anyone with an Internet connection and a sense of curiosity. Generally speaking, anyone with access to the open Internet can access a webpage, and multiple people can access the same webpage at the same time.
3. 3. Languages: Everyone can use languages free of charge to create a greater sense of social cohesion, and no one can prevent another person from using a language.
4. 4. Lighthouses: A lighthouse is a classic example of a public good. They guide any ship in their purview into port without discrimination or distinction.
5. 5. Public health infrastructure: Many countries consider healthcare a public good. In these regions, it’s a matter of public policy that all healthcare costs will be covered by tax revenue, government spending, and subsidies to the healthcare industry.
6. 6. Public parks: A public park is a public good in the sense that everyone in the community can use the park at any time. In contrast, a private park at a country club is only accessible to its members.
7. 7. Street lighting: Street lights are available to everyone who walks on the path they light, and no matter how many people are on the street, their luminescence remains undepleted.

You can compare public goods—which are free and open resources to society—to other goods in the field of economics. Here are three more common types of goods:

1. 1. Common good: A common good is very similar to a public good, except for the fact that it can be depleted. In other words, it doesn’t meet the standard of non-rivalry (public goods are resources no one must compete for to use). As an example, no one is excluded from accessing the fish stocks in the ocean, but once you catch a fish, you cannot share it, and the stocks are depleted overall.
2. 2. Impure public goods: Impure public goods are close to being pure public goods, but they don’t quite meet one of the major matrics. They might be close to total non-excludability or non-rivalry, but since they allow for some exclusion or rivalrousness, you must consider them impure or incomplete public goods. Many common goods would qualify as impure public goods.
3. 3. Private good: Goods that are neither non-excludable nor non-rivalrous are private goods. You must purchase a private good to enjoy it. These can be anything from food you buy at a grocery store or restaurant to club goods, such as membership at an exclusive golf course or country club.

The Free Rider Problem is a public goods problem based around the idea that some people might attempt to “free ride”—in other words, try to subsist on other people’s benevolence and generosity.

Communities can attempt to prevent free riding of their public goods by compelling all of those who would benefit from the good to contribute to the resource through taxation. This mainly applies to commodified goods that society must finance in one way or another. In other cases—as with languages, information, or other non-commodifiable public goods—the free rider problem doesn’t really exist.

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