PublicGoods:Examples

Theclassicaldefinitionofapublicgoodisonethatisnonexcludableandnonrivalrous.The
classicexampleofapublicgoodisalighthouse.Alighthouseis:
Nonexcludablebecauseitsnotpossibletoexcludesomeshipsfromenjoyingthebenefitsof
thelighthouse(forexample,excludingshipsthathaventpaidanythingtowardthecostofthe
lighthouse)whileatthesametimeprovidingthebenefitstootherships;and
Nonrivalrousbecauseifthelighthousesbenefitsarealreadybeingprovidedtosomeships,it
costsnothingforadditionalshipstoenjoythebenefitsaswell.Thisisnotlikearivalrous
good,whereprovidingagreateramountofthegoodtosomeonerequireseitherthatmoreof
thegoodbeproducedorelsethatlessofitbeprovidedtoothersi.e.,wherethereisavery
realopportunitycostofprovidingmoreofthegoodtosomepeople.
Someotherexamplesofpublicgoods:
Radioandtelevision:TodaynoonewhobroadcastsaradioorTVprogramovertheair
excludesanyonefromreceivingthebroadcast,andthecostofthebroadcastisunaffectedby
thenumberofpeoplewhoactuallytuneintoreceiveit(itsnonrivalrous).Intheearlydecades
ofbroadcasting,exclusionwasnottechnologicallypossible;buttechnologytoscrambleand
descrambleTVsignalswasinventedsothatbroadcasterscouldchargeafeeandexcludenon
payers.Scramblingtechnologyhasbeensupersededbycableandsatellitetransmission,in
whichexclusionispossible.ButwhileitsnowtechnologicallypossibletoproduceaTVorradio
signalfromwhichnonpayersareexcluded(sothatitsnotapublicgood),itsimportanttonote
thatbecauseTVandradiosignalsarenonrivalrous,theyaretechnologicallypublicgoods:its
technologicallypossibletoprovidethemwithoutexclusion.
Cleanair;pollutionabatement:Thequalityoftheairwebreatheinaparticularneighborhood
isbothnonexcludableandnonrivalrous.Pollutionabatementisthereforeapublicgood.
Theexamplesabove,togetherwithourinclassexamplesofthewaterlevelinalakeanda
mosquitoabatementprogram,makeitclearthattheessentialcharacteristicofapublicgoodis
thatitsnotpossibletovarythelevelofthegood(i.e.,itsquantity,itsquality,etc.)across
people.Changingthelevelforonechangesthelevelforall.Inotherwords,itsnonrivalrous.
Ifanonrivalrousgoodisinherentlynonexcludableifexclusionisnotpossible,aswiththe
lakewaterlevelorwithTVintheolddaysthenwhatwehaveisapublicgood.Butif
exclusionistechnologicallypossibleforanonrivalrousgood,aswithTVtoday,thenthegoodis
potentiallyapublicgood,butitmaynotbemanifestedasapublicgoodinpractice.
Ahighwaysystem;amasstransitsystem;aschoolsystem:Ineachoftheseexamples,
everyonewhohasaccesstothesystembenefits(orsuffers)fromthesamesystem.The
systemscharacteristicsforexample,thequalityoftheteachinginaschool,orthetimeit
takesthesubwaytotravelfromBrooklyntotheBronx,orthenumberofpotholesinthestreets
thesearethesameforallusers.However,ineachofthesecasesitsatleastpossibleto

excludepeoplefromaccess,andthereforetochargeafeeoratollforaccess.Andthesepublic
goodsarealsoallsubjecttocongestionwhentoomanypeopleusethem,sothatthequalityof
thegoodmaybeaffectedbyaddingmoreusers.Additionalexamplesofpublicgoodsthatare
subjecttocongestionareabridge,apublicswimmingpool,andanairport.
Thecharacteristicsofahome:ThesizeoftheTV,thecolorofthelivingroom,thesizeofthe
swimmingpoolandthetemperatureofthepoolswater,thesizeoftherefrigerator,thespeed
oftheinternetconnectiontheseareallpublicgoodstotheresidentsofthehome.Whatever
ischosenforoneischosenforall.
Thethermostatsettinginaroom:Thetemperatureinourseminarroom,401KKorina
sharedoffice,orinahomeisthesametemperatureforallwhooccupytheroom.Wecant
makeitwarmforsomeandcoolforothers.
Policeprotection;nationaldefense:Nationaldefensecantbeprovidedatdifferentlevelsto
differentcitizens.Similarlyforthelevelofpoliceprotectioninacommunity,butpolice
protection(unlikenationaldefense)issubjecttocongestion:alargerpopulationrequiresa
largerpoliceforcetoprovidethesamelevelofprotection.
Books:Considertheinformationinabook.Aftertheinformationhasbeenproduced(i.e.,
oncethebookhasbeenwritten),itneedntbewrittenagaininorderforadditionalpeopleto
readit.Sointhisrespect,abookisnonrivalrous.Butuntilrecentlytherewasstillasignificant
costtomakingthebookavailabletoadditionalreaders:additionalcopiesofthebookhadtobe
printed,bound,anddelivered,andallthesestepsrequiredresources(amarginalcost)foreach
additionalcopyofthebook.Sothepublicgoodcharacterofabook(thenonrivalrous
informationitcontained,i.e.,thewriting)wasoutweighedbyitsprivategoodcharacter,the
marginalcostofproducingeachadditionalcopyofthephysicalbook.Butthishascompletely
changed:todayitspossible,onceabookhasbeenwritten,todistributeunlimitedcopies
electronicallyatessentiallyzeromarginalcost.Sotodayabookisapublicgoodi.e.,likeaTV
broadcast,abookistechnologicallyapublicgood,buttotheextentthatexclusionispossible,in
practicethebookmayormaynotbeapublicgoodinanyparticularcase.
Information;content:Everythingwesaidintheprecedingparagraphaboutbooksisequally
trueforrecordedmusic,movies,newspapers,magazinesforwhatstodayoftencalled
content.Inthenotverydistantpast,itwascostlytomanufactureanddistributeadditional
copiesofanyparticularcontent,suchasaCDorvideotapeormagazine.Buttoday,oncethe
fixedcostofcreatingthecontenthasbeenincurred,themarginalcostofmakingthatcontent
(information)availabletoadditionalpeopleisessentiallyzero.
Somedecisionsbyacorporationorapartnership:Alternativestrategiesorinvestmentsbya
firmtypicallyhavedifferenttimepathsfortheircostsandreturns,andoftenhavedifferent
statecontingentoutcomes.Ifthepartnersorshareholdershavedifferenttimepreferencesor
differentriskpreferences,thefirmsdecisioncantgenerallyyieldoutcomesthatdifferforthe
variousownerstheoutcomesarenecessarilythesameforalltheowners,sothedecisionisa
publicgoodfromtheperspectiveoftheowners.