Public Goods and Common Resource

Сентябрь 11, 2022

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Экономика
Public Goods and Common Resource

Содержание

2. THE DIFFERENT KINDS OF GOODS Characteristics of Goods Useful to group various types of goods according
3. THE DIFFERENT KINDS OF GOODS Characteristics of Goods 2. Rivalry Is the good rival? Does one
4. THE DIFFERENT KINDS OF GOODS Characteristics of Goods Goods differ by the amount of these two
5. THE DIFFERENT KINDS OF GOODS Four Types of Goods Rival? Excludable? High Low High Low Private
6. THE DIFFERENT KINDS OF GOODS Pure and Impure Goods Distinguish goods by degree of excludability and
7. PRIVATE GOODS Private goods are goods that are both excludable and rival An ice-cream cone is
8. PUBLIC GOODS Public goods are goods that are neither excludable nor rival People cannot be prevented
9. PUBLIC GOODS Pure public goods Local public goods In some circumstances, a public good has a
10. PUBLIC GOODS Club goods Sometimes possible to divide population into two or more consumption groups or
11. PUBLIC GOODS Examples of Public Goods Ecosystem Provide public services given their ability to underpin and
12. PUBLIC GOODS Examples of Public Goods Oceans Act as local public good by providing public services
13. COMMON GOODS Common goods are goods that are rival but not excludable Fish in the ocean
14. COLLECTIVE GOODS Collective goods are goods that are nonrival but excludable Sometimes provided by government, sometimes
15. PUBLIC AND COMMON GOODS AND EXTERNALITIES Public goods and common goods are both not excludable, and
16. PUBLIC AND COMMON GOODS AND EXTERNALITIES If one person uses a common good, such as fish
17. PUBLIC AND COMMON GOODS AND EXTERNALITIES More advanced discussion Private provision of public goods creates Pareto
18. PUBLIC AND COMMON GOODS AND EXTERNALITIES More advanced discussion But private firm cannot profit by providing
19. PUBLIC AND COMMON GOODS AND EXTERNALITIES More advanced discussion Externality Cause of this inefficiency due to
20. PUBLIC GOODS AND THE FREE-RIDER PROBLEM A free-rider is a person who receives the benefit of
21. PUBLIC BADS An undesirable public good Reduces consumer utility or firm profits Examples: pollution, noise Loss
22. MIXED GOODS Enviornmental Assets as Mixed Goods Environmental assets which provide both private and public good
23. MIXED GOODS Characteristics of Mixed Goods Main characteristic of a mixed good is that consumption of
24. MIXED GOODS AND MARKET FAILURE Characteristics of Mixed Goods Often overexploitation of the mixed good and
25. MIXED GOODS Enviornmental Assets as Mixed Goods Many ecological services are neither purely rival nor purely
26. MIXED GOODS Enviornmental Assets as Mixed Goods As with many public goods, underinvestment in environmental services
27. MIXED GOODS AND MARKET FAILURE Biodiversity market failure and external effects due to: 1. Non-correspondence between
28. MIXED GOODS AND MARKET FAILURE Biodiversity market failure and external effects due to: 2. Distortions of
29. MIXED GOODS AND MARKET FAILURE Biodiversity market failure and external effects due to: 3. Distribution of
30. MIXED GOOD AND MARKET FAILURE Negative Externalities or External Costs Price Demand Supply (private marginal cost)
31. MIXED GOOD AND MARKET FAILURE WITHOUT WELFARE CONSEQUENCES Externality is Pareto irrelevant in this case Demand
32. OPTIMAL EXPLOITATION OF MIXED GOODS Marginal benefit of private good Marginal benefit of public good Increasing
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Слайд 2

THE DIFFERENT KINDS OF GOODS
Characteristics of Goods
Useful to group various types

of goods according to two characteristics
1. Excludability
Is the good excludable?
Can people be prevented from using the good?
The property of a good whereby a person can be prevented from using it

Слайд 3

THE DIFFERENT KINDS OF GOODS
Characteristics of Goods
2. Rivalry
Is the good rival?
Does

one person’s use of the good diminish another person’s ability to use it?
The property of a good whereby a person can be prevented from using it.
Also called non-depletable
Consumption by one individual does not affect supply available for other individuals
Non-rivalry implies that marginal social cost of supply the good to an additional individual is zero

Слайд 4

THE DIFFERENT KINDS OF GOODS
Characteristics of Goods
Goods differ by the amount

of these two characteristics and can be grouped accordingly into four categories
1. Private goods
2. Public goods
3. Common goods
4. Collective goods

Слайд 5

THE DIFFERENT KINDS OF GOODS
Four Types of Goods
Rival?
Excludable?
High
Low
High
Low
Private Goods
Public Goods
Common Goods
Collective

Good

Слайд 6

THE DIFFERENT KINDS OF GOODS
Pure and Impure Goods
Distinguish goods by degree

of excludability and rivalry
Goods display varying degrees
Leads to distinction of pure and impure

Слайд 7

PRIVATE GOODS
Private goods are goods that are both excludable and rival
An

ice-cream cone is excludable because it is possible to prevent someone from eating it and it is rival because if one person eats it another person cannot eat the same cone
Most goods in economy are private
Analysis of supply and demand and efficiency of markets implicitly assumed that goods were both excludable and rival – private goods

Слайд 8

PUBLIC GOODS
Public goods are goods that are neither excludable nor rival
People

cannot be prevented (nonexcludable) from using a public good and one person’s use of a public good does not reduce another person’s ability to use it (nonrivalrous)
Allows for simultaneous consumption

Слайд 9

PUBLIC GOODS
Pure public goods
Local public goods
In some circumstances, a public good

has a spatial dimension
Provides benefits only to those living in a particular geographic region
Examples: trafic lights, parks, ports, marine reserves

Слайд 10

PUBLIC GOODS
Club goods
Sometimes possible to divide population into two or more

consumption groups or clubs
Each club consumes its own public good
Examples:
Swimming pools, golf courses,movie houses

Слайд 11

PUBLIC GOODS
Examples of Public Goods
Ecosystem
Provide public services given their ability to

underpin and buffer the market economy against external shocks of production and consumption
Wetlands
Act as local public good by buffering economy from natural and man-made shocks by providing water purification and habitat services

Слайд 12

PUBLIC GOODS
Examples of Public Goods
Oceans
Act as local public good by providing

public services to local economy, given its capacity to provide recreational services, habitat services, accepting terrestrial water flows, accepting wastes, etc.
Also provide public goods to global economy, given non-rival benefits of biodiversity, ecosystem linkages, carbon sequestration, provision of oxygen

Слайд 13

COMMON GOODS
Common goods are goods that are rival but not excludable
Fish

in the ocean are rivalrous, because when person catches the fish, there are fewer fish for the next person to catch.
Fish in the ocean are not excludable, because it is difficult to stop fishers from taking fish out of the ocean

Слайд 14

COLLECTIVE GOODS
Collective goods are goods that are nonrival but excludable
Sometimes provided

by government, sometimes by private goods
Pay-per-view cable television
Often are natural monopolies

Слайд 15

PUBLIC AND COMMON GOODS AND EXTERNALITIES
Public goods and common goods are

both not excludable, and therefore available to everyone free of charge
Both are closely related to externalities
For both, externalities arise because something of value has no price attached to it
If one person provides public good, other people better off, and yet they could not be charged for this benefit

Слайд 16

PUBLIC AND COMMON GOODS AND EXTERNALITIES
If one person uses a common

good, such as fish in the ocean, other people are worse off, and yet they are not compensated for this loss
Because of these external effects, private decisions about consumption and production can lead to inefficient allocation of resources and public intervention can potentially raise economic welfare

Слайд 17

PUBLIC AND COMMON GOODS AND EXTERNALITIES
More advanced discussion
Private provision of public

goods creates Pareto inefficiency
Leads to insufficient level of a desirable public good
Market failure and externality
Due to non-rivalry, marginal social cost of supplying good to an additional individual is zero
Pareto efficiency occurs when marginal social benefit equals marginal social cost, implying price for usage should be zero

Слайд 18

PUBLIC AND COMMON GOODS AND EXTERNALITIES
More advanced discussion
But private firm cannot

profit by providing pure public good for free
Due to non-rival and non-excludable consumption
Each firm ignores impact of its private contribution to public on other firms and vice versa
No firm accounts for the extra benefit passed on to other firms as each firm increases its contribution to the supply of the public good

Слайд 19

PUBLIC AND COMMON GOODS AND EXTERNALITIES
More advanced discussion
Externality
Cause of this inefficiency

due to externality
Each consumer’s purchase of the public good provides direct benefit not only to the purchasing consumer, but also to every other consumer
Hence, private provision of public good creates situation with externality
Free-rider situation created

Слайд 20

PUBLIC GOODS AND THE FREE-RIDER PROBLEM
A free-rider is a person who

receives the benefit of a good but avoids paying for it
Most often associated with public goods
Arises due to non-excludability
Implies that market will provide less of public good than is socially optimal
Misallocates resources away from environmental assets to private goods where conditions of rivalry and exclusive use hold

Слайд 21

PUBLIC BADS
An undesirable public good
Reduces consumer utility or firm profits
Examples: pollution,

noise
Loss suffered by one person from pollution of air, for example, does not reduce loss suffered by another
Public bads are oversupplied

Слайд 22

MIXED GOODS
Enviornmental Assets as Mixed Goods
Environmental assets which provide both private

and public good services are mixed goods
Biodiversity is an example
Species provide public good services in the generation of ecological services that are themselves of value to human society
Species provide private good services of direct economic value in both human consumption and production

Слайд 23

MIXED GOODS
Characteristics of Mixed Goods
Main characteristic of a mixed good is

that consumption of mixed good as private good is is unaffected by consumption of same good as public good
Because of non-rivalrous characteristic when public good
Whereas consumption of mixed good as public good is affected by consumption of same mixed good as a private good
Because of rivalrous nature of private goods

Слайд 24

MIXED GOODS AND MARKET FAILURE
Characteristics of Mixed Goods
Often overexploitation of the

mixed good and underinvestment and under-supply in public good aspect of mixed good
Market only values private good uses

Слайд 25

MIXED GOODS
Enviornmental Assets as Mixed Goods
Many ecological services are neither purely

rival nor purely exclusive in consumption, and hence are mixed goods
Consumption of such services by one user or group does not diminish their availability to others
Consumption does not preclude consumption by others
In nature of local public good

Слайд 26

MIXED GOODS
Enviornmental Assets as Mixed Goods
As with many public goods, underinvestment

in environmental services or biodiversity in favor of specific populations whose benefits can be captured by individuals or groups

Слайд 27

MIXED GOODS AND MARKET FAILURE
Biodiversity market failure and external effects due

to:
1. Non-correspondence between property rights and flows of benefits within economy-environmental system
Incomplete specification and allocation of rights, so that some effects of economic activities are not included in market activities

Слайд 28

MIXED GOODS AND MARKET FAILURE
Biodiversity market failure and external effects due

to:
2. Distortions of market prices due to government policy or strategic market behavior
When market prices do not reflect social opportunity cost, socially sub-optimal decisions

Слайд 29

MIXED GOODS AND MARKET FAILURE
Biodiversity market failure and external effects due

to:
3. Distribution of income and assets that deepens wedge between individual private and social valuation of many people
Information used in private decisions and discount rates by private individuals is sensitive to market income
Poor able to command less income than rich and thereby express their willingness to pay
Also, strong relationship between income and discount rate for future
Because current consumption is crucial, poor tend to discount future costs of resource at very high rate

Слайд 30

MIXED GOOD AND MARKET FAILURE
Negative Externalities or External Costs
Price
Demand
Supply
(private
marginal

cost)

Social cost =
Private +
external cost

QMARKET

QOPTIMUM

Quantity

Market Equilibrium

Social
Optimum

POPTIMUM

PMARKET

External
Cost

Social cost of good
exceeds private cost
Socially optimum
quantity exceeds
privately optimum
quantity
Socially optimum price
exceeds privately
optimum price

Слайд 31

MIXED GOOD AND MARKET FAILURE WITHOUT WELFARE CONSEQUENCES
Externality is Pareto irrelevant

in this case

Demand

Quantity

Price

S’

Social value of external
cost

Marginal social and privae
costs diverge over same
range of exploitation.
Social marginal cost curve is
S’FS
Market equil. Is socially
optimal even though private
exploitation imposes external
costs.

Слайд 32

OPTIMAL EXPLOITATION OF MIXED GOODS
Marginal benefit
of private good
Marginal benefit of

public good

Increasing private exploitation

Q0: Socially optimal exploitation level
Q1: Optimal private exploitation level

Increasing public exploitation

Public Goods and Common Resource

Содержание

THE DIFFERENT KINDS OF GOODSCharacteristics of GoodsUseful to group various types

THE DIFFERENT KINDS OF GOODSCharacteristics of Goods2. RivalryIs the good rival?Does

THE DIFFERENT KINDS OF GOODSCharacteristics of GoodsGoods differ by the amount

THE DIFFERENT KINDS OF GOODSFour Types of GoodsRival?Excludable?HighLowHighLowPrivate GoodsPublic GoodsCommon GoodsCollective

THE DIFFERENT KINDS OF GOODSPure and Impure GoodsDistinguish goods by degree

PRIVATE GOODSPrivate goods are goods that are both excludable and rivalAn

PUBLIC GOODSPublic goods are goods that are neither excludable nor rivalPeople

PUBLIC GOODSPure public goodsLocal public goodsIn some circumstances, a public good

PUBLIC GOODSClub goodsSometimes possible to divide population into two or more

PUBLIC GOODSExamples of Public GoodsEcosystemProvide public services given their ability to

PUBLIC GOODSExamples of Public GoodsOceansAct as local public good by providing

COMMON GOODSCommon goods are goods that are rival but not excludableFish

COLLECTIVE GOODSCollective goods are goods that are nonrival but excludableSometimes provided

PUBLIC AND COMMON GOODS AND EXTERNALITIESPublic goods and common goods are

PUBLIC AND COMMON GOODS AND EXTERNALITIESIf one person uses a common

PUBLIC AND COMMON GOODS AND EXTERNALITIESMore advanced discussionPrivate provision of public

PUBLIC AND COMMON GOODS AND EXTERNALITIESMore advanced discussionBut private firm cannot

PUBLIC AND COMMON GOODS AND EXTERNALITIESMore advanced discussionExternalityCause of this inefficiency

PUBLIC GOODS AND THE FREE-RIDER PROBLEMA free-rider is a person who

PUBLIC BADSAn undesirable public goodReduces consumer utility or firm profitsExamples: pollution,

MIXED GOODSEnviornmental Assets as Mixed GoodsEnvironmental assets which provide both private

MIXED GOODSCharacteristics of Mixed GoodsMain characteristic of a mixed good is

MIXED GOODS AND MARKET FAILURECharacteristics of Mixed GoodsOften overexploitation of the

MIXED GOODSEnviornmental Assets as Mixed GoodsMany ecological services are neither purely

MIXED GOODSEnviornmental Assets as Mixed GoodsAs with many public goods, underinvestment

MIXED GOODS AND MARKET FAILUREBiodiversity market failure and external effects due

MIXED GOODS AND MARKET FAILUREBiodiversity market failure and external effects due

MIXED GOODS AND MARKET FAILUREBiodiversity market failure and external effects due

MIXED GOOD AND MARKET FAILURENegative Externalities or External Costs PriceDemandSupply(private marginal

MIXED GOOD AND MARKET FAILURE WITHOUT WELFARE CONSEQUENCESExternality is Pareto irrelevant

OPTIMAL EXPLOITATION OF MIXED GOODSMarginal benefit of private goodMarginal benefit of

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