1. Public Goods and Common Resources Chapter 11 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777.

2. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. “The best things in life are free...” When goods are available free of charge, the market forces that normally allocate resources in our economy are absent.

3. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. “The best things in life are free...” In such cases, government policy can potentially remedy the market failure that results, and raise economic well-being.

4. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Different Kinds of Goods When thinking about the various goods in the economy, it is useful to group them according to two characteristics: u Is the good excludable? u Is the good rival?

5. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Different Kinds of Goods Excludability （可排他性） u People can be prevented from enjoying the good. u Laws recognize and enforce private property rights.

6. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Different Kinds of Goods Rivalness （敵對性；無共享性） u One person’s use of the good diminishes another person’s enjoyment of it.

7. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Types of Goods

8. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Free-Rider Problem A free-rider （搭便車，白吃午餐） is a person who receives the benefit of a good but avoids paying for it.

9. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Free-Rider Problem u Since people cannot be excluded from enjoying the benefits of a public good, individuals may withhold paying for the good hoping that others will pay for it. u The free-rider problem prevents private markets from supplying public goods.

10. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Solving the Free-Rider Problem u The government can decide to provide the public good if the total benefits exceed the costs. u The government can make everyone better off by providing the public good and paying for it with tax revenue.

11. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Some Important Public Goods u National Defense u Basic Research u Programs to Fight Poverty

12. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Are Lighthouses Public Goods?

13. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Cost-Benefit Analysis A cost-benefit analysis （成本效益分析） would be used to estimate the total costs and benefits of the project to society as a whole. u It is difficult to do because of the absence of prices needed to estimate social benefits and resource costs.

14. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Common Resources Common resources u like public goods, are not excludable u unlike public goods, they are rival

15. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Tragedy of the Commons The Tragedy of the Commons is a story with a general lesson. u Common resources tend to be used excessively when individuals are not charged for their usage. u This creates a negative externality.

16. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Examples of Common Resources u Clean air and water u Oil pools u Congested roads u Fish, whales, and other wildlife

17. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Importance of Property Rights The market fails to allocate resources efficiently when property rights （財產 權） are not well-established.

18. Public Goods and Common Resources Chapter 11 Summary