Public Goods - Public Goods v/s Private Goods (UPSC Notes)

In economics, goods are categorized into many different ways based on excludability and rivalrousness. Excludability is determined depending on the fact that whether an individual can be prevented from consuming them. Whereas, rivalrousness of a particular good is determined depending on whether individuals can consume these goods without affecting their availability for the other individuals.

There are mainly four different types of goods: 

  • private goods
  • public goods
  • common resources
  • club goods.

Public goods is an important topic for the IAS Exam and form an important part of the UPSC Syllabus. Candidates can also download the notes PDF at the end of this article.  

What are Public Goods?

Public good is a term in economics which refers to the good (commodity) that is available for use for everybody and one person’s usage of it does not diminish or exhaust its availability to others. It is considered non-excludable and non-rivalrous. Public goods are provided as a whole to the society by the government and the consumption of these goods by an individual doesn’t reduce its availability or doesn’t exclude others from consuming it. Therefore, public goods are non-rivalry and non-excludability.

Examples of public goods are education, infrastructure, lighthouses, flood control systems, knowledge, fresh air, national security, official statistics, etc. The public good is different from the common good in that common good, though non-excludable, tends to be semi-rivalrous in nature. Examples of common goods would be timber, coal, etc. Public goods are useful for the population as a whole. 

Free Rider Problem

The non-excludable property of the public goods gives rise to the free-rider problem as these goods can be bought by the people without paying for them. The free-rider problem is regarded as the burden on a shared resource. This situation arises when a person is using or overusing these goods without paying his/her fair share for it. The free-rider problem can occur in any community, large or small.

What is a Private Good?

Any product which must be purchased for consumption, and which prevents another individual from consuming it if consumed by one individual is known as a private good. Therefore, a good is considered to be a private good if there is a competition between individuals to obtain the good and if consuming the good prevents someone else from consuming it. 

Private goods have a lesser chance to experience the free-rider problem than the public goods as private goods are not readily available for free and a company produces private goods with a goal of making profits. 

Common Resources 

Common resources are those products that are open to consumption by anyone with the means to do so. This means, however, that the chances of someone else using the resources is drastically reduced along with its availability also being less in number. Due to both of these factors common resources are subject to overuse as compared to any other resources. Examples of such resources are wood, farmlands, water, minerals, oil etc.

Club Goods

Club goods are resources which are available but can be easily prevented from being consumed or their consumption can be restricted. This prevents their depletion and overuse. Such goods are made deliberately scarce in order to increase their value and discourage overconsumption. Internet, roads, cinemas are examples of club goods.

Difference between Public Goods and Private Goods

The public goods and private goods vary from each other on the basis of excludability and rivalrousness. The major differences between Public Goods and Private Goods are mentioned in the table below:

Public Goods Private Goods
It is non-rivalry as the consumption of one unit of these goods by one person does not decrease the available units for consumption by another person. It is rivalrous as the consumption of one unit of private goods by one person does decrease the available units for consumption by another person. 
It is non-excludable. A good is said to be non-excludable if it is impossible, or extremely costly, to prevent someone from benefiting from that particular good who has not paid for it.  It is an excludable good as it prevents a person from enjoying the benefits of the good if they have not paid their share on that good. 

The Public Goods forms an important topic under the Economics section for the Civil Service Exam. Candidates preparing for UPSC 2021 are also advised to keep a track on the latest current affairs topics related to several economic developments in the country.

Relevant Question for Public Goods

What is the importance of Public Goods?

Public goods contribute to a mutual awareness of persons and to a type of exchange among persons that is less demanding than mutual recognition, yet which is nevertheless a form of connecting with each other which is important for the population at large.

What are three characteristics of public goods?

Public goods are those that are both non-excludable and non-rivalrous. IN other words, the supplier cannot prevent people from using the good, nor will its consumption prevent others from accessing it. Such examples include defence, policing, and streetlights.

Public Goods (UPSC Notes):- Download PDF Here

To know more about the general pattern of the UPSC Exams, be sure to visit the UPSC Syllabus page. FOr more UPSC related preparation materials, visit the linked article.

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