What Is a Public Good in Economics?
Understand public goods in Cambridge International AS Level Economics: non-excludability, non-rivalry, free riders and why markets may fail to provide them.
A public good is a good that is both non-excludable and non-rival. Non-excludable means it is difficult or impossible to stop people using it, even if they have not paid. Non-rival means one person’s use does not reduce the amount available to others. In Cambridge International AS & A Level Economics, this is part of the AS Level topic Classification of goods and services (1.6.2); the related issue of non-provision is covered in 3.1.1.
An example
National defence is a common example. Once a country is defended, it is difficult to exclude a resident who has not contributed to its cost. Protecting that resident does not normally reduce the protection available to another resident. It therefore has both features of a public good.
Compare a loaf of bread: a seller can exclude non-payers, and when one person eats it, others cannot eat the same loaf. Bread is therefore excludable and rival, unlike national defence. This comparison tests the definition rather than who pays for a good.
Why might a market not provide one?
Non-excludability creates a free-rider problem: people can benefit without paying. If a firm cannot charge enough users to cover its costs, it may have little incentive to provide the good, even though people value it. This is why governments may arrange and fund the provision of public goods through taxation.
The issue is not that nobody values the good. Each person may prefer that others pay while they still benefit. If enough people do this, voluntary contributions can be too low to cover provision.
Common exam mistake: Do not define a public good as simply “a good provided by the government” or “a good that is free to use”. Who provides a good, and whether users pay at the point of use, do not determine whether it is a public good. Check both non-excludability and non-rivalry.
