Tuesday, September 18, 2007

Public Goods

I have spent a couple of days showing that people generally have reason to promote a general desire to contribute to public goods and/or promote an aversion to not contributing to public goods.

Today, I want to look at practical implications.

Public Goods

Public goods, recall, are goods where the benefits to not accrue to assigned individuals. That is to say, an individual can obtain a benefit without paying anybody to supply the benefit. Because of this, suppliers face less of an incentive to provide that benefit.

I used three examples of public goods two days ago:

Military. It is difficult to defend one house without defending the neighbor’s house. Besides, much of the benefits of a military is its deterrence value, which protects everybody.

Police/Courts. When a criminal is put away, the beneficiaries are whomever his or her victims would have otherwise been. We do not know who they are. Nor do we know who benefits from crimes not committed by those who do not want to go to jail.

Education. I received some objections to listing this as being (in part) a private good that I will address later.

Other examples of public goods where investments can be expected to be lacking.

Contemporary Issues

A tsunami warning system in the Indian Ocean. It is difficult to create a system that warns one person of an impending tsunami without warning others who did not contribute to the system. We can expect that such a system would be expensive. Assume that a particular hotel chain, for example, purchased such a system so that they could protect their guests. All of the other hotel chains get the benefit without paying a dime. While the conscientious hotel chain raises its rates to cover its costs, the other chains take customers. This is the a part of the punishment for contributing to a public good.

Levees around the city of New Orleans. Here, again, any system that protects one house from flooding also protects its neighbors. There is no way to charge people for flood protection, and then simply allow houses to be flooded where the owners did not pay. So, even though each dollar donated to the levee project might bring two dollars in return, since the return is divided up among hundreds of thousands of beneficiaries. The investor, then, gets very little back on his investment, but would get a substantial return if everybody else contributed.

Preventing Sea Level Rise. To the best of my knowledge, we lack the technology to allow the sea level to rise only around America, while it does not rise around those countries that actually took active steps to combat global warming. Consequently, if the United States refuses to contribute to this effort, we still stand to benefit from the contributions that everybody else makes. The Bush Administration claims that any American contribution to fighting global warming would be bad for the economy. This is the same benefit that anybody gains by refusing to contribute to a public good – a benefit that makes everybody in the world (including the United States) worse off than they could have otherwise been.

Asteroid/Comet Detection and Deflection System. The worst of all possible natural disasters is also the most preventable. However, it is particularly difficult to deal with a threat to Earth from an asteroid or commet that benefits only those that created such a system. Therefore, a lot of people are sitting around vulnerable because people do not seem to be particularly interested in funding this public good.

Environmental Goods

Many environmental goods are examples of public goods. Imagine a group of people who desire that a particular wilderness area exists. If the wilderness area exists at all, then this person benefits, regardless of whether or not this person made any contributions to its existence. In other words, wilderness benefits are not deniable or assignable.

In addition, if a society provides its citizens with clean air, everybody benefits whether they pay for that clean air or not. There is no way to clean the air and then assign it only to those who have the capacity to pay for it. We could, perhaps, bottle air in the same way we bottle water, but I suspect that the inconvenience of walking around with maks all the time, even while sleeping, would be counted as a cost.

Related to this is the fact that the rain forests, for example, provide the benefits of oxygen, carbon sequestering, and genetic diversity that are all public goods. If Brazil and Indonesia would somehow deny the benefits of their rain forests and give them only to those who would pay for them, we would not have nearly the problem with deforestation as we do today. However, since the benefits of rain forests are neither assignable or deniable, rain forests end up being destroyed.

The fight against communicable diseases is a public good. The best way to protect people from a serious pandemic is to identify it early (which requires people going out and conducting research whenever there is a hint of such an outbreak) and taking aggressive steps to contain an outbreak when it occurs. We all benefit from these programs, and there is no way to separate those who benefit and pay from those who benefit and do not pay. Consequently, we will have ‘free rider’ problems associated with disease control.


Curiosis, in a comment made to the first post in this series, disputed the claim that ‘education’ is a public good.

If Bob graduates from high school, clearly Bob benefits, but the benefit to the rest of the populace seems negligible, if it could be measured at all. Once could likewise argue that we would all be better off if every graduating senior were given $10,000. This would stimulate the economy and give them all a better chance in life.However, this is wealth redistribution, plain and simple.

A public good does require benefits for others that cannot be assigned to given individuals or withheld. Education does tend to provide private goods in that a person educated to perform brain surgery or program computers (for example) has the ability to withhold the benefit from anybody who does not pay for it. However, he has an incentive to pursue an education only to the degree that, and only in the fields that, alow him to withhold benefits from those who do not pay.

As Eneasz pointed out in response to Curiousis, educated people cast more informed votes, which provides benefits that cannot be withhold from those who do not wish to pay. However, the informed voter provides not only a more informed vote. He or she provides a more informed contribution to the election process, putting not only is vote but his time and his effort into those causes. In fact, all of his charity and volunteer work promises to be better directed towards things that actually produce positive effects, rather than wasting resources where they do not do any good.

In another example: assume that you were in an automobile accident on a lonely next to nowhere. Family members are hurt, and you can’t get anywhere. Another car comes along. You clearly have reason to wish that the person in that car is more educated rather than less educated. In fact, you probably have a specific desire that the person in the car be educated in emergency first-aid. People who learn emergency first-aid do not do so for the sake of earning money, but for the sake of providing a benefit. He is not somebody who will negotiate a fee before applying aid. We all benefit from having these types of people driving around, yet we cannot assign that benefit to any given individual, nor can we deny that benefit to those who do not pay.

This brings up an important point about education as a public good. Some education is more of a public good than others. Reading, writing, math, and critical thinking skills are particularly important (making our society particularly foolish in our tendency to denigrate, rather than promote, critical thinking skills).

Moral education is another public good. On the model used in this blog, good people are those with desires that tend to fulfill the desires of others. We all obtain benefits from being surrounded by people with desires that tend to fulfill the desires of others, so we all have reason to promote morality as a public good.

In fact, these last three days have been substantially about the public benefits of promoting a desire to contribute to public goods, and an aversion to not contributing to public goods. This, in itself, is a public good.

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