What are two possible reasons for a particular good or service to be provided by the government?

In economics, a public good refers to a commodity or service that is made available to all members of a society. Typically, these services are administered by governments and paid for collectively through taxation.

Examples of public goods include law enforcement, national defense, and the rule of law. Public goods also refer to more basic goods, such as access to clean air and drinking water.

• Public goods are commodities or services that benefit all members of society, and which are often provided for free through public taxation.
• Public goods are the opposite of private goods, which are inherently scarce and are paid for separately by individuals.
• Societies will disagree about which goods should be considered public goods; these differences are often reflected in nations’ government spending priorities.

The two main criteria that distinguish a public good are that it must be non-rivalrous and non-excludable. Non-rivalrous means that the goods do not dwindle in supply as more people consume them; non-excludability means that the good is available to all citizens. 

An important issue that is related to public goods is referred to as the free-rider problem. Since public goods are made available to all people–regardless of whether each person individually pays for them–it is possible for some members of society to use the good despite refusing to pay for it. People who do not pay taxes, for example, are essentially taking a "free ride" on revenues provided by those who do pay them, as do turnstile jumpers on a subway system.

The opposite of a public good is a private good, which is both excludable and rivalrous. These goods can only be used by one person at a time — for example, a wedding ring. In some cases, they may even be destroyed in the act of using them, such as when a slice of pizza is eaten. Private goods generally cost money, and this amount pays for its private use. Most of the goods and services that we consume or make use of in our everyday lives are private goods. Although they are not subject to the free-rider problem, they are also not available to every one, since not everyone can afford to purchase them.

In some cases, public goods are not fully non-rivalrous and non-excludable. For example, the post office can be seen as a public good, since it is used by a large portion of the population and is financed by taxpayers. However, unlike the air we breathe, using the post office does require some nominal costs, such as paying for postage. Similarly, some goods are described as “quasi-public” goods because, although they are made available to all, their value can diminish as more people use them. For example, a country’s road system may be available to all its citizens, but the value of those roads declines when they become congested during rush hour.

Individual countries will reach different decisions as to which goods and services should be considered public goods, and this is often reflected in their national budgets. For example, many argue that national defense is an important public good because the security of the nation benefits all of its citizens. To that end, many countries invest heavily in their militaries, financing army upkeep, weapons purchases, and research and development (R&D) through public taxation. In the United States, for example, the Department of Defense (DOD) has spent $455.89 billion (45.8%) of its total budget for FY 2022.

Some countries also treat social services–such as healthcare and public education–as a type of public good. For example, some countries, including Canada, Mexico, the United Kingdom, France, Germany, Italy, Israel, and China, provide taxpayer-funded healthcare to their citizens. Similarly, government investments in public education have grown tremendously in recent decades. According to estimates by Our World in Data, world literacy has grown from roughly 56% to over 86% between 1950 and 2016 (the most recently available data).

Advocates for this kind of government spending on public goods argue that its economic and social benefits significantly outweigh its costs, pointing to outcomes such as improved workforce participation, higher-skilled domestic industries, and reduced rates of poverty over the medium to long-term. Critics of this kind of spending argue that it can pose a burden on taxpayers and that the goods in question can be more efficiently provided through the private sector.

A public good may vary based on the country, but generally includes services such as national defense or the police, and basic essentials, such as clean air and drinking water. 

A private good is only used by one person at a time and often has a cost associated with it that could make it prohibitive for some people.

Quasi-Public Goods have elements of both public and private goods, such as a public bridge that is available to all, but loses value when it becomes congested during rush hour. 

There are three kinds of goods and services produced and consumed in a market economy: private, public, and quasi-public. A private good is a product that must be purchased to be consumed, and consumption by one individual makes consumption by another individual impossible. A quasi-public good has qualities of both public and private goods; either availability or supply is somehow compromised.

Public goods are a commodity or service that is provided without profit to all members of a society. In order for a good to qualify as being a public good, it must have two defining characteristics: non-excludability and non-rivalry. Non-excludability means that even people who don't pay for the goods are able to use them. Non-rivalry means that one person's use of a good doesn't reduce its availability to others.

• Public goods are a commodity or service that is provided without profit to all members of society.
• The two main arguments for the privatization of public goods are based on the desire to eliminate the free-rider problem and the introduction of competition to reduce price and increase efficiency.
• The free-rider problem is the burden on a shared resource that is created by its use or overuse by people who aren't paying for their share for it.
• When the providers of goods and services are required to compete against each other, they are forced to keep their costs down, respond quickly to the changing demands of the industry and consumers, and strive more to satisfy customers.

There are some people who believe that some, or all, public goods should be privatized. Typically, they make the case for the privatization of public goods based on two main arguments, namely the desire to eliminate the free-rider problem and the introduction of competition to reduce price and increase efficiency.

Most public goods are provided by governments at the municipal, state, or federal level, and are financed by tax dollars. Common examples of public goods include national defense, police and fire services, and street lights. However, sometimes public goods are provided by private individuals or organizations.

The free-rider problem is the burden on a shared resource that is created by its use or overuse by people who aren't paying for their share for it. Because public goods are a shared resource—even people who don't pay for them can use them—they give rise to the free-rider problem.

For example, U.S. citizens and residents who don't pay taxes still benefit from military protection and national defense. In this scenario, people who don't pay taxes, but still benefit from our national defense, are referred to as "free riders." The presence of free riders in a market economy results in an increased portion of the burden of paying for public goods being shouldered by the remainder of people who are taxpayers.

Another conundrum of a system of public goods is the problem of the forced rider. Through taxation, some people are forced to help pay for public goods that they will never use. For example, childless adults pay taxes to help fund the public school system. When there are a large number of free riders in a society that has a public education system, those who pay—including forced riders who don't benefit from this good—have to cover a higher share of the cost of funding the school system.

One of the main arguments in favor of the privatization of public goods is that it would eliminate the free-rider problem. By extension, the privatization of public goods would also eliminate the forced rider problem. Under private ownership, the providers of goods can charge customers directly and exclude those who do not pay.

For example, a fire department that is privately owned could charge homeowners in its service area for fire protection. Using this model, the owners of the fire department could charge everyone willing to pay for the fire protection service a reasonable price and would not have to demand more money from a group of payers in order to guarantee service for everyone, including all of the non-payers.

The second argument that is typically made in favor of privatizing public goods is that introducing competition to the public sector would reduce the price of public goods and increase efficiency. When the government has difficulty coming up with the money to provide a particular public good or service, they can simply print more money or raise taxes.

Because privately-owned companies do not have this option, their only recourse when profits are down is to improve efficiency and provide better service.

Businesses in the private sector are likely to be beaten out by their competition if they are unable to keep administrative costs as low as possible. Conversely, the public sector is known for having massive overhead costs, complex systems, and high administrative costs.

When the providers of goods and services are required to compete against each other, they are forced to keep their costs down, respond quickly to the changing demands of the industry and consumers, and strive more to satisfy customers. 

Prior to the 1980s, the U.S. government provided funding for services that could have been provided by the private sector, including building highways and dams, conducting research, and giving money to state and local governments to support functions ranging from education to road building.

In the 1980s, then-president Ronald Reagan reversed this shift from public to private ownership. Supporters of the Reagan administration's efforts to privatize government assets and services claimed that it would boost the efficiency and quality of the remaining government services, reduce taxes for American citizens, and shrink the size of the government.

Since then, electrical utilities, prisons, railroads, and education have all been transferred from the government to private owners. The question remains whether or not privatization serves the public interest, and there are as many arguments for privatization as there against it.