MODULE 75

Public Goods

In this Module, you will learn to:

• Characterize public goods and explain why markets fail to supply efficient quantities of public goods

• Define common resources and explain why they are overused

• Define artificially scarce goods and explain why they are under consumed

• Describe how government intervention in the production and consumption of these types of goods can make society better off

• Discuss why finding the right level of government intervention is often difficult

In this module, we take a somewhat different approach to the question of why markets sometimes fail. Here we focus on how the characteristics of goods often determine whether markets can deliver them efficiently. When goods have the “wrong” characteristics, the resulting market failures resemble those associated with externalities or market power. This alternative way of looking at sources of inefficiency deepens our understanding of why markets sometimes don’t work well and how government can take actions that improve the welfare of society.