Public goods are goods that extend to many people and are often provided for free through
general taxation. Their consumption by one person does not moderate the good for others, nor
do they prevent someone from having access to their consumption. In contrast, private goods
are goods that benefit specific people, they are scarce, and they can prevent someone from
having access to their consumption (Fishburn and Kemp).
The main problem with public goods is the free-rider problem (Neugebauer and Servátka,).
If consumers decide to free-ride the costs exceeds the benefits, the incentive to provide the
goods or services to the market disappears, which negatively affects the market since it fails
to deliver the goods or services needed. Since you cannot stop someone from consuming
public goods and benefiting from the goods does not moderate the quantity presented or
available to others, a consumer can take advantage of the goods by consuming the goods
without paying for them or contributing to their creation (Kaul,). For example, when the
government decides to implement more security in a country, it uses the national defense,an
excellent example of public goods, which benefits very low since the benefits are distributed
among the millions of other people in the country. There is a high possibility that he or she
may be injured or get killed during military service. On the other hand, the free-rider knows
that he cannot be excluded from national defense benefits, regardless of whether they
contribute to it.
The main distinguishing characteristics between public and private goods are non-rivalry and
non-excludability exhibited by public goods. Non-excludability poses the main challenge in
producing public goods privately. When a good is available to all and is costly to produce,
some people will be tempted to free-ride others.
Fishburn, Geoffrey, and Murray C. Kemp. "The Gain from International Trade in Pool
Goods and Private Goods." Review of International Economics, vol. 22,
no. 1, 2014, pp. 167-169.
Kaul, Inge. "Rethinking Public Goods and Global Public Goods." Reflexive Governance
for Global Public Goods, 2012, pp. 37-53.
Neugebauer, Tibor, and Maroš Servátka. "Does Competition Resolve the Free-Rider
Problem in the Voluntary Provision of Impure Public Goods? Experimental
Evidence." SSRN Electronic Journal, 2010.