public goods and common resources economics for business ii day 10 spring 2013
TRANSCRIPT
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Public Goods and Common Resources
Economics for Business II
Day 10
Spring 2013
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Public (Government) Action?
Question: When should the government act on behalf of society, even if it means interfering with private enterprise?
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Non-excludability
• the goods cannot be confined to those who have paid for it
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Non-rivalry in consumption
the consumption of one individual does not reduce the availability of goods to others
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Is the SUN a rival good?
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Spot the free rider
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April 23 2013 7
Public Goods - Benefits
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World's Largest Solar Street Lighting Project by PTLSOLAR™.
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Lighting
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Flood barriers on the Thames River.
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Flood barriers on the Thames River.
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The flood control system built on the Thames to control higher than normal
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Eastern Scheldt Storm Surge Barrier in the Netherlands
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Property Rights
• The importance of Property Rights – the market fails to allocate resources
efficiently because of the not well-established property rights
– when markets fail due to the absence of property rights, the government can step in and solve the problem by using regulation or taxing.
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Summary
• Public goods refer to the goods that are not excludable or rival in consumption
• Common resources are not excludable but rival in consumption
• A common resources create new problem: how much is it going to be used? (Tragedy of the Commons)
• When markets fail due to the absence of property rights, the government can step in and solve the problem by using regulation or taxing