Public good

A public good is a special kind of service or product. It helps many different people at the same time.

To be a true public good, it must follow two rules. First, it is non-excludable. This means you cannot stop people from using it. Second, it is non-rivalrous. This means one person using it does not leave less for someone else.

A lighthouse is a perfect example of this. One ship seeing the light does not make the light dimmer for another ship. Because of these rules, these goods are often provided by the government. They use tax money to pay for things that help everyone.

Public goods can be found in many parts of our lives. They include things like street lighting and broadcast radio. They also include national security and flood control systems.

Even knowledge is a public good. Information about health or the environment can be shared with the whole world. This does not stop anyone else from learning the same facts. Sometimes, these goods are spread across the entire Earth. We call these global public goods. They can include things like videos, pictures, and books that everyone can access.

There are many ways to pay for these important things. Since they are costly, someone must pay the bill. In 1919, an economist named Erik Lindahl had an idea. He suggested a Lindahl tax. This idea says people should pay based on how much they benefit. The more a person gains from a good, the more they pay. This helps the government cover the costs of public utilities. Other ideas, like the VCG mechanism, also help find ways to fund these goods. However, some methods are hard to use in real life because they need too much information.

New ways to fund public goods are always being created. One new idea is called quadratic funding. This was developed by people named Buterin, Hitzig, and Weyl. It uses a special math rule to help decide how much to fund a project. Another idea is called an assurance contract. These were first proposed by Bagnoli and Lipman in 1989. In this system, money is only spent if enough people agree to join. If not enough people sign up, no money is used at all. This makes donors feel safe about their contributions.

Sometimes, public goods face a hard problem called the "free-rider" issue.

This happens when people use a good without paying for it. If too many people do this, the good might not be made at all. To fix this, some goods become "club goods." These have rules to limit access, like toll roads or paid television. Other groups, like non-profits, also help. As Bruce R. Kingma noted, non-profits can provide goods that the government might miss. This ensures that the needs of all citizens are met.