Public good

Some goods, once provided, are available to everyone and used up by no one, which is exactly why markets struggle to supply them. Those are public goods.

A public good is one that is non-rival, meaning one person's use does not diminish another's, and non-excludable, meaning no one can easily be prevented from using it. These two properties make public goods difficult for markets to provide, which is why their supply is one of the classic justifications for government.

The two defining properties

Non-rivalry means the good can be enjoyed by many at once without being used up: one person watching a fireworks display, breathing clean air, or benefiting from national defence does not reduce what is available to others. Non-excludability means it is impractical to stop anyone from benefiting once the good exists: you cannot easily exclude a passer-by from the lit street or the defended nation. Goods that have both properties, such as national defence, clean air, lighthouses, and basic research, are pure public goods; many real goods have the properties partially.

Why markets undersupply them

The trouble for markets is the combination of these properties with self-interest. Because no one can be excluded, people can enjoy a public good without paying for it, the free-rider problem, so few will voluntarily contribute, and a private firm cannot easily charge for something it cannot withhold. As a result, markets tend to undersupply public goods, or fail to supply them at all, even when their total value to society far exceeds their cost. The benefit is real and collective, but the private incentive to provide it is weak.

Providing them

Because markets struggle with public goods, their provision often falls to government, which can fund them through taxation, compelling the contribution that voluntary payment would not secure, and supply them collectively. This is one of the central economic rationales for the state: to provide defence, basic research, public health, and other goods that markets would under-provide. Other mechanisms exist too, voluntary collective action, philanthropy, and clever schemes to make goods excludable, but the public good remains a standing reason why some things cannot be left wholly to the market.

The public good is a foundational concept in understanding the limits of markets and the role of government. Its defining properties, non-rivalry and non-excludability, explain why some of the most valuable things a society needs will not be adequately supplied by private incentive alone, and why collective provision, usually through the state, is the classic answer to the free-rider problem that public goods create.