Postulados teóricos cognitivistas

This two above analysis is based on two broad sources of market failure that stem from the inability to exclude individuals from consuming a good or service.

1. Public Goods

2. Common Property Resources

The easiest way of defining these two types of goods is to consider two key characteristics of goods:

41

1. Excludable: A good is excludable if the supplier of that good can prevent people who do not pay from consuming it. There are many goods that are non-excludable, including clean air and many fisheries.

2. Rival in Consumption: A good is rival in consumption if the same good cannot be consumed by more than one person at the same time. There are many goods that are non-rival in consumption, including national defense and public television.

3.2.1. Four Types of Goods

The two characteristics above subdivide the space of goods and services into four types of goods:

1. Private Goods: Goods that are excludable and rival in consumption a. Apples

b. Jackets

2. Artificially Scarce Goods: Goods that are excludable, but nonrival in consumption a. Computer Software

b. Pay-per view movies

3. Common Property Resources: Goods that are non-excludable and rival in consumption a. Fish

b. Biodiversity

c. Clean Air and Water

4. Public Goods: Goods that are non-excludable and nonrival in consumption a. National Defense

b. Public Television 3.2.2. Public Goods

A Public Good, again, are goods that are both non-excludable and non-rival.

There are many examples of these types of goods, including: national defense, law enforcement, lighthouses, disease prevention, public sanitation, scientific research, broadcast television

These types of goods are often provided via government, but not necessarily.

In the case of broadcast television, we have both: Commercial television and Public television

3.2.3. The Efficient Level of Production

42

Consider the simple example of public television. It satisfies both the characteristics of a public good:

- It is non-excludable in consumption

- once the signal is broadcast, anyone can pick up the television signal.

- It is non-rival in consumption

- my watching a PBS show does not prevent another from doing so as well.

3.2.4. Common Property Resources

A Common Property Resource is one that is non-excludable, but is rival in consumption.

The classic example is the fishery industry, but others include - water (especially groundwater)

- forests - clean air

The fundamental problem is an individual‘s use of these resources are often faced with a

―use-it-or-lose-it‖ proposition, leading to overuse. Moreover, when individuals use the resource, they often impose costs on the resource not born solely by the current user.

3.2.5. Regulating Common Property Resources

Managing Common Property Resources have taken several forms historically:

1. Local community management of the commons.

2. Regulation of the commons through restrictions on total ―use‖ (e.g.,total annual catch) 3. Privatization of the commons through tradeable quotas on use

However, we can then ask the question is policing – is policing a public good?

The general protection that the police services provide in deterring crime and

investigating criminal acts serves as a public good. But resources used up in providing policing means that fewer resources are available elsewhere. Private protection services such as private security guards, privately bought security systems and detectives are private goods because the service is excludable and rival in consumption and people and businesses are often prepared to pay a high price.

Let us now ask why are public goods an example of market failure?

 Pure public goods are not normally provided by the private sector because they would be unable to supply them for a profit.

43

 It is up to the government to decide what output of public goods is appropriate for society.

 To do this, it must estimate the social benefits from making public goods available.

Another question that can be asked is what is meant by the Free Rider Problem?

 Because public goods are non-excludable it is difficult to charge people for benefitting form a good or service once it is provided

 The free rider problem leads to under-provision of a good and thus causes market failure

Furthermore, we can also asked the question on what are Quasi-Public Goods?

A quasi-public good is a near-public good i.e. it has many but not all the characteristics of a public good. Quasi public goods are:

1. Semi-non-rival: up to a point, extra consumers using a park, beach or road do not reduce the space available for others. Eventually beaches become crowded as do parks and other leisure facilities. Open access Wi-Fi networks become crowded 2. Semi-excludable: it is possible but often difficult or expensive to exclude

non-paying consumers. E.g. fencing a park or beach and charging an entrance fee;

building toll booths to charge for road usage on congested routes

Finally let us ask ourselves whether the air waves is a public good or quasi public good?

 The airwaves used by mobile phone companies, radio stations and television companies are owned by the government.

 Do they count as a pure public good? One person's use of the airwaves rarely limits how other people can benefit from utilising them.

 At peak times, the airwaves become crowded 3.3. Challenges in identifying public goods

The definition of non-excludability states that it is impossible to exclude individuals from consumption. Technology now allows radio or TV broadcasts to be encrypted such that persons without a special decoder are excluded from the broadcast. Many forms of information goods have characteristics of public goods. For example, a poem can be read by many people without reducing the consumption of that good by others; in this sense, it is non-rivalries. Similarly, the information in most patents can be used by any party without reducing consumption of that good by others. Official statistics provide a clear example of information goods that are public goods, since they are created to be non-excludable. Creative works may be excludable in some circumstances, however: the

44

individual who wrote the poem may decline to share it with others by not publishing it.

Copyrights and patents both encourage the creation of such non-rival goods by providing temporary monopolies, or, in the terminology of public goods, providing a legal mechanism to enforce excludability for a limited period of time. For public goods, the

"lost revenue" of the producer of the good is not part of the definition: a public good is a good whose consumption does not reduce any other's consumption of that good.

Debate has been generated among economists whether such a category of public goods exists. Mendy (2003) has suggested the following:

when professional economists talk about public goods they do not mean that there are a general category of goods that share the same economic characteristics, manifest the same dysfunctions, and that may thus benefit from pretty similar corrective solutions...there is merely an infinite series of particular problems (some of overproduction, some of underproduction, and so on), each with a particular solution that cannot be deduced from the theory, but that instead would depend on local empirical factors.

Common confusion is that public goods are goods provided by the public sector.

Although it is often the case that government is involved in producing public goods, this is not necessarily the case. Public goods may be naturally available. They may be produced by private individuals and firms, by non-state collective action, or they may not be produced at all

The theoretical concept of public goods does not distinguish with regard to the geographical region in which a good may be produced or consumed. However, some theorists use the term global public good for public goods which is rival and non-excludable throughout the whole world, as opposed to a public good which exists in just one national area. Knowledge has been held to be an example of a global public good, but also as a commons, the knowledge commons.

3.3.1. Social goods

Social goods are defined as public goods that could be delivered as private goods, but are usually delivered by the government for various reasons, including social policy, and funded via public funds like taxes. Note that some writers have used the term public good to refer only to non-excludable pure public goods and refer to excludable public goods as club goods.