1. Public goods externalities
Ing. David Slavata, Ph.D.,
Public Finance A

2. The Market Failures Public Goods Externalities Imperfect Competition
Asymmetric Information

3. The Classification of goods
Institutional view
Economical view

4. Institutional view
Market goods
Non market goods

5. The Market Goods
The market goods are distributed and alocated by the market. The market price, which is the equilibrum of supply and demand is the main factor to whom it will be distributed.

6. The non market Goods
The distribution of goods do not depend on the market price. Mostly it depends on the decision of the government.

7. The state Price regulation
Administrative prices
Cost based prices
Time directed prices
Moratorim

8. The Economical view Excludability Rivality
the possibility to exclude anybody from the consuming of the good.
Rivality
- means the possibility of reducing the quantity of available good by the consumption to any other.

9. Non excludable Common property Public good
Rivalrous Non rivalrous
Exludable Private good Club good
Non excludable Common property Public good
resources

10. The samples Private goods - pencil, bread...etc. Public goods
- roads, city lights, defense, police..etc.
Common property resource
- lake for fishing
Club goods
- Cabel TV, NATO

11. Semiprivately consumed
The public goods
Colectively consumed
Privately consumed
Semiprivately consumed

12. Non market private good Non market public good Market public good
The samples
Market private good
Non market private good
Non market public good
Market public good

13. Externalities
A cost or benefit that occurs when the activity of one entity directly affects the welfare of another in a way that is outside the market mechanism.

14. Positive externalities Negative externalities Reciprocial
The classification
Positive externalities
Negative externalities
Reciprocial

15. The negative externalities
There is a negative effect from the production of the entity.
Pollution
Chamicals

16. The positive externalities
There is a positive effect from the activity of the entity.
Agriculture
- bio agriculture
Fisherman societies

17. Reciprocial
There is a mutual benefit from the entity activity. Sample: Beekeeper and gardener.

18. The instruments Taxes Fees Emmission permits Subsidies
Legal protection

19. Pigouvian taxation
a tax devised by Arthur Cecil Pigou (1877–1959) to remove the negative external impact. According to Pigou, environmental polluters must pay a tax equal to the difference between actual and social costs when producing a commodity or using a polluting technology.

20. The Coase Theorem
In a competitive economy with complete information and zero transaction costs, the allocation of resources will be efficient and invariant with respect to legal rules of entitlement.
The problem of negative externality can be solved without the need for governmental intervention.
The condition of clear property rights.

21. The SAMPLE Factory owner and farmer
pollution causes the harm to the farmer for 100 USD as negative externality
the externality can be eliminate by the investing of 50 USD to the factory
In case of the valid claim of the farmer the factory owner gladly will invest 50 USD to avoid the paying the 100 USD to the farmer.
In case of valid claim of the factory owner the farmer would gladly pay 50 USD to the factory owner to invest to his factory to prevent the pollution which avoid the harm of the farmer in sum of 100USD.

22. Thank you for your Attention