Law and Economics-Charles W. Upton Private Goods vs. Public Goods

Private Goods versus Public Goods Private vs. Public Which goods should be publicly owned and which should be privately owned?

Private Goods versus Public Goods Private vs. Public Which goods should be publicly owned and which should be privately owned? –A private good is one where consumption by A reduces the amount available for B to consume. –A public good is one where consumption by A does not reduce the amount for B to consume.

Private Goods versus Public Goods Economic Efficiency Efficiency requires that private goods be privately owned and that public goods be publicly owned, for bargaining will not result in the efficient use of public goods.

Private Goods versus Public Goods Economic Efficiency This distinction misses some of the point. –John Smith, by dint of arduous research comes up with a cure for AIDS. It costs $1 to manufacture. The formula is clearly a public good. Should Smith be allowed to hold it to himself?

Private Goods versus Public Goods Economic Efficiency This distinction misses some of the point. –John Smith, by dint of arduous research comes up with a cure for AIDS. It costs $1 to manufacture. The formula is clearly a public good. Should Smith be allowed to hold it to himself? –John Smith runs a slaughterhouse. Should individual property owners be exempt from the smell? This may be a public good or eternality and there may be a case for public regulation because of high transaction costs.

Private Goods versus Public Goods End ©2004 Charles W. Upton