Public good
[2] This is in contrast to a common good, such as wild fish stocks in the ocean, which is non-excludable but rivalrous to a certain degree.
"[3] Public goods include knowledge,[4] official statistics, national security, common languages,[5] law enforcement, broadcast radio,[6] flood control systems, aids to navigation, and street lighting.
Information about men's, women's and youth health awareness, environmental issues, and maintaining biodiversity is common knowledge that every individual in the society can get without necessarily preventing others access.
Paul A. Samuelson is usually credited as the economist who articulated the modern theory of public goods in a mathematical formalism, building on earlier work of Wicksell and Lindahl.
From the fact that public goods are paid through taxation according to the Lindahl idea, the basic duty of the organization that should provide the people with this services and products is the government.
Donors can feel assured that their money will only be spent if there is sufficient support for the public good.
Assurance contracts work particularly well with smaller groups of easily identifiable participants, especially when the game can be repeated.
If there’s a chance that the contract will fail, a refund bonus incentivizes people to participate in the mechanism, making the all-pay equilibrium more likely.
It can be shown that altruistic donors can generate more funding for the good by donating towards the lottery prize rather than buying tickets directly.
For instance, some aspects of cybersecurity, such as threat intelligence and vulnerability information sharing, collective response to cyber-attacks, the integrity of elections, and critical infrastructure protection, have the characteristics of impure public goods.
The benefits enjoyed from such a good for any one individual may depend on the consumption of others, as in the cases of a crowded road or a congested national park.
Creative works may be excludable in some circumstances, however: the individual who wrote the poem may decline to share it with others by not publishing it.
Steven Shavell has suggested the following: when professional economists talk about public goods they do not mean that there are a general category of goods that share the same economic characteristics, manifest the same dysfunctions, and that may thus benefit from pretty similar corrective solutions...there is merely an infinite series of particular problems (some of overproduction, some of underproduction, and so on), each with a particular solution that cannot be deduced from the theory, but that instead would depend on local empirical factors.
[30] Digital public goods include software, data sets, AI models, standards and content that are open source.
Use of the term “digital public good” appears as early as April, 2017 when Nicholas Gruen wrote Building the Public Goods of the Twenty-First Century, and has gained popularity with the growing recognition of the potential for new technologies to be implemented at scale to effectively serve people.
Digital technologies have also been identified by countries, NGOs and private sector entities as a means to achieve the Sustainable Development Goals (SDGs).
The free rider problem is also a form of market failure, in which market-like behavior of individual gain-seeking does not produce economically efficient results.
The free rider would not voluntarily exert any extra effort, unless there is some inherent pleasure or material reward for doing so (for example, money paid by the government, as with an all-volunteer army or mercenaries).
Any time non-excludability results in failure to pay the true marginal value (often called the "demand revelation problem"), it will also result in failure to generate proper income levels, since households will not give up valuable leisure if they cannot individually increment a good.
In the case of an information good, however, because of its characteristics of non-excludability and also because of almost zero reproduction costs, commoditization is difficult and not always efficient even from a neoclassical economic point of view.
The classical theory of public goods defines efficiency under idealized conditions of complete information, a situation already acknowledged in Wicksell (1896).
Thus, deeper analysis of problems of public goods motivated much work that is at the heart of modern economic theory.
When it comes to socially efficient provision, networks that are more dense or close-knit in terms of how much people can benefit each other have more scope for improving on an inefficient status quo.
[43][45] Economic theorists such as Oliver Hart (1995) have emphasized that ownership matters for investment incentives when contracts are incomplete.
[47] They consider the government and a non-governmental organization (NGO) who can both make investments to provide a public good.
Besley and Ghatak argue that the party who has a larger valuation of the public good should be the owner, regardless of whether the government or the NGO has a better investment technology.
This result contrasts with the case of private goods studied by Hart (1995), where the party with the better investment technology should be the owner.
However, it has been shown that the investment technology may matter also in the public-good case when a party is indispensable or when there are bargaining frictions between the government and the NGO.
[48][49] Halonen-Akatwijuka and Pafilis (2020) have demonstrated that Besley and Ghatak's results are not robust when there is a long-term relationship, such that the parties interact repeatedly.
[50] Moreover, Schmitz (2021) has shown that when the parties have private information about their valuations of the public good, then the investment technology can be an important determinant of the optimal ownership structure.
