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| | But there are many “positive externalities” too. These create benefits for the public without requiring some to pay for it. If you happen to live next to an outdoor classical concert facility, then you may enjoy listening to music without buying an admission ticket. The people paying for the concert receive the benefit they want, but you would receive a benefit free to you as a “positive externality.” Or perhaps you have a view of fireworks from your front porch on July 4th. You do not have to pay to see the fireworks, and benefit from the positive externality of the display. | | But there are many “positive externalities” too. These create benefits for the public without requiring some to pay for it. If you happen to live next to an outdoor classical concert facility, then you may enjoy listening to music without buying an admission ticket. The people paying for the concert receive the benefit they want, but you would receive a benefit free to you as a “positive externality.” Or perhaps you have a view of fireworks from your front porch on July 4th. You do not have to pay to see the fireworks, and benefit from the positive externality of the display. |
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| − | == Public good == | + | === More Examples of Externalities === |
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| − | A “public good” is something, like music, that provides a benefit to one person without reducing the benefit to others. One listener does not lose benefit by the presence of other listeners. Food, in contrast, is not a public good, because typically only one person can benefit from one meal.
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| − | Can you think of other public goods? Public transportation is another example, where the price of a ticket is less than the true cost. An additional person can benefit from a subway train that going to a destination regardless. The New York Subway system, where you can go anywhere in all of New York City for a <continue? How about free internet music through peer-to-peer networks like the old Napster?
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| − | The internet is filled with activities that create both positive and negative externalities. The positive externality is all the free and useful information posted on websites at someone else’s expense, but available to the public. The negative externality is all the pornography that destroys those who fall victim to it, creating costs for society to bear in dealing with them. FBI agents say that the one common attribute of every criminal residence that they raid is the presence of pornography. | + | The internet is filled with activities that create both positive and negative externalities. The positive externality is the enormous amount of free and useful information posted on websites at someone else’s expense, but available to the public. The negative externality is all the pornography that destroys those who fall victim to it, creating costs for society to bear in dealing with them. FBI agents say that the one common attribute of every criminal residence that they raid is the presence of pornography. |
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| | Professor Lawrence Lessig is a champion of the “commons” on the internet. The “commons” is a term from medieval England, when anyone could bring their sheep to graze on public land. Ultimately, all the grass was eaten and then the commons was not of much use, so the story goes. Professor Lessig supports free books, music, etc., over the internet. He took a case to the U.S. Supreme Court fighting long copyright extensions (Eldred v. Ashcroft). In the end, some Justices seemed worried about the impact on private property of his theories, and he lost. | | Professor Lawrence Lessig is a champion of the “commons” on the internet. The “commons” is a term from medieval England, when anyone could bring their sheep to graze on public land. Ultimately, all the grass was eaten and then the commons was not of much use, so the story goes. Professor Lessig supports free books, music, etc., over the internet. He took a case to the U.S. Supreme Court fighting long copyright extensions (Eldred v. Ashcroft). In the end, some Justices seemed worried about the impact on private property of his theories, and he lost. |
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| | Remember Ronald Coase? He would say that the reason for externalities is transaction costs. If it were practical to give everyone a right to be free from pollution, and then allow them to sell it without incurring transaction costs, then the negative externality of pollution would disappear. People would accept small payments from Exxon and other oil companies in exchange for allowing the gas to add a little pollution to their lives, if transaction costs weren’t larger than the payments. We would not need additional taxes on gasoline by an inefficient government. | | Remember Ronald Coase? He would say that the reason for externalities is transaction costs. If it were practical to give everyone a right to be free from pollution, and then allow them to sell it without incurring transaction costs, then the negative externality of pollution would disappear. People would accept small payments from Exxon and other oil companies in exchange for allowing the gas to add a little pollution to their lives, if transaction costs weren’t larger than the payments. We would not need additional taxes on gasoline by an inefficient government. |
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| | + | == Public good == |
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| | + | A “public good” is something, like music in public, that provides a benefit to one person without reducing the benefit to others. (Let's assume it's ''good'' music!) One listener does not lose benefit by the presence of other listeners. It is impossible to exclude others nearby from freely hearing it. Food, in contrast, is not a public good, because one person eats one meail and can eat the entire meal without people passing by eating it also! |
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| | + | Let's try to define a "public good" in a rigorous manner. A "public good" is a good which has indivisible benefits such that others cannot be excluded from the benefit for not paying. Here are some examples: |
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| | + | *fire protection |
| | + | *national defense |
| | + | *radio transmission |
| | + | *network (pre-cable) television |
| | + | *public parks |
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| | + | Most public goods are provided by government because people are unwilling or unable to pay for them. People who say, why pay for this when I can let others pay for it and still enjoy the benefits? Many public goods have low marginal cost, such as public parks that do not require much upkeep. |
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| | + | Can you think of other public goods? |
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| | + | Public transportation is not a public good because it is easy to keep people off who do not pay. But the cost of riding is usually much lower than the true cost, and taxpayers subsidize most of the cost of public transportation. |
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| | + | Garbage collection in most cities is a public good because voters want all of the garbage collected, whether someone wants to pay for it or not. But in rural areas, including much of New Jersey, people do pay private for garbage college. The small town governments do not pay for it. |
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| | ==Antitrust Laws== | | ==Antitrust Laws== |