The game of Free Riders-Public Goods

Public goods are the goods with 2 characteristics:

1. Non-Rivalry

2. Non-Excludability

Non-Rivalry means that consumption of the good by one person will not affect the consumption of other person. Like, if we had just one apple and I ate it so you cant consume it, my consumption had an effect on yours  but if we have just one television and I am watching it that wont stop you from watching it. So, television is a non-rivalrous good.

Non-Exclusion means that nobody can be excluded from the use of the good once it is provided. Like, electricity in our homes is excusable if we dont pay the bill but the street light that is being provided will benefit everyone regardless of the payments.

A good that possess both these features is known as a public good. Some of the major examples of public goods are national defense, street lights, judiciary system.

The main reason why they are so much importance in economics is the problem that occurs with their provisioning. As no one can be excluded from its use their are people who wont pay for it. Because even if they dont pay once the good is provided they will be able to use it. These people are called free riders. They want to free-ride on other people’s payments. The is the main reason why public goods are not provided by markets. Private players in market will never want to provide these goods as sometimes costs cant be covered. Hence, government has to intervene as most of the public goods are important. Its necessary to provide these goods. As some are ready to pay for it and others are not, these are generally freely provided by the government. The main solution to the provisioning of public goods is considered as a compulsory tax by government.

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