The Economics of Free
Public Goods and Free Provision
Governments provide some things free, like roads and vaccination, because markets under-supply goods that benefit everyone.
When free is a policy choice.
Public goods
Goods that no one can be excluded from and that one person’s use doesn’t reduce, like street lighting.
Free rider
Individuals can benefit without paying, so markets under-provide.
Tax funding
Governments pay through taxes, making it ‘free’ at the point of use.
Examples
Roads, defence, public health campaigns and basic education.
A street lamp
Everyone walking by benefits, but no one can be charged easily.
Thinking 'free' government services cost nothing
Taxes pay for them.
Key takeaways
- Public goods are non-excludable.
- Free riders undermine markets.
- Taxes fund them.
- Examples include roads and defence.
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