Public goods are defined as products that are nonrival and nonexcludable, like the global position system (GPS) operated by the US federal government. The nonrival nature means that it isn’t costly for the government to provide the service to an additional user and the nonexcludability component means that anyone can access that service even if they don’t pay taxes to support the service. While GPS was initially developed for military purposes, the government has made the technology available for anyone with a GPS received and companies have created new products and services based on that technology.
Public goods are defined as products that are nonrival and nonexcludable, like weather forecasts in the United States. The nonrival nature means that it isn’t costly for the government to provide the service to an additional user and the non-excludability component means that anyone can access that service even if they haven’t paid for it. Weather forecasts were traditionally provided as a public good, but some companies have been working to change the excludability criterion to turn weather forecasts into an artificially scarce good.
Club goods, also known as artificially scarce goods, are defined as products that are nonrival, but excludable. Previously, weather forecasts were widely available to everyone, even people who didn’t pay for the information, but private companies have limited the National Weather Service’s ability to provide that information. These private companies still use the data from the NWS, so it doesn’t cost the company to provide service to one more user (nonrival), however, they can withhold that information from people who don’t pay for the premium experience (excludable). Club goods create a deadweight loss to society because the price of the product is greater than the cost of production.
Homer has found a new British show on PBS and he’s really loving it, but then they interrupt his show to ask for money. Betty White is a guest during the telethon and mentions that anyone who watches even a second of PBS and doesn’t donate is equivalent to a thief.
The Public Broadcasting Service (PBS) is a nonprofit American public television show. While the channel focuses primarily on educational programming, it relies on donations from viewers to help support its budget. PBS would be considered an example of a public good since it is nonrival and nonexcludable. One of the problems with public goods is that it is subject to underprovision because of free riders, like Homer, who consume the service but don’t contribute to its production.
Thanks to Tom Flesher for the recommendation on Twitter:
The tragedy of the commons are predictable outcomes when looking at grazing lanes, highways, fisheries, and forests. This quick video from the National Science Foundation is a short introduction to the issues that plague common resources. The ending portion of the video paints the tragedy in a much broader light by highlighting the growing need to preserve nature as populations continue to grow.
In this Stossel in the Classroom segment, Stossel analyzes the issues around common resources and public goods. In the opening interview, many people believe public versions of items are better and often cite the lack of a price as the main reason for selecting that over a private item. The same people are quick to point out that a public toilet doesn’t have the same connotation because people overuse it and don’t take care of the resources because no one owns it.
This clips is beneficial to talk about how tragedy of the commons can be overcome by assigning property rights to a business and turning it into a private good.
After Dee has a heart attack, she heads to the hospital only to find out that she doesn’t have insurance because her dad canceled the policy when they were younger. Mac and Charlie are confused that people have to pay to stay in a hospital because they think of it like a public good similar to police and fire protection, which is nonexcludable.
Frank shows up to get a full body health scan because he’s been having a bit too much fun. This line alone is a great clip for teaching moral hazard when it comes to healthcare.
In this episode of “It’s Always Sunny in Philadelphia,” Mac and Charlie try to go swimming during the heat wave in Philadelphia. They grab their beer and floaties and head over to the local swim club. However, they are stopped by a worker who makes them put their beer away and then proceeds to tell them that they cannot be there because they are not members of the swim club. Frustrated with this, Mac and Charlie decide to make their own swim club, one that anyone can attend.
This clip relates to economics because the swim club is an example of an excludable, non-rival good, which is a club good. Because Mac and Charlie don’t pay the fee to be a member, they are unable to swim there. And, the worker tells them that they are at full capacity and are accepting no more members because the pool has the ability to restrict the number of members and charge higher prices. The two get disgruntled because they think the pool really isn’t at full capacity. They decide to go to an abandoned pool, one they used to swim in during their childhoods, and revamp it to make it nonexcludable and nonrival, which would make it a common resource. However, since it would become a public good, it would be easy to get overcrowded, making it rival and a common good.
Thanks to Anna DeCecco for the clip and summary.