While in most circumstances the market is an efficient way to allocate goods and services, it may sometimes fail. When we use the term “market failure,” we are not referring the market failing to reach its equilibrium but rather the equilibrium that it reaches fails to be the optimal outcome from society’s perspective. The book refers to four sources of market failure. For this discussion, you will focus on public goods as a source of market failure.
- Explain what determines the “optimal” amount of a public good and how this concept of optimality can change over time (as we elect new and different leaders). If you use any other sources, be sure to cite them within the text as well as provide a bibliographical citation at the end.
- Watch the video on a common illustration of public goods: A Deeper Look at Public Goods
- Provide one “unique” (i.e. don’t use one that a classmate has already used!) example of the free rider problem that you have seen in your lives. From this example, identify what is causing the market failure and a possible way to solve this problem.
Add responsed to :
The “optimal” amount of public good is determine by looking at the total benefit the particular public good will provide. A common example is national defense, the benefit to have one is high and everyone is protected regardless if they pay taxes or their legal status. Another example, it is public education which it is of great value so all children can have the opportunity to proper education therefore reducing illiteracy.
This concept changes over time and one reason is the change of politics. At the moment, we can see how global warming is no longer important for the current government therefore no interest in coming up with new government incentives for people to make changes.
A free rider problem in the county I live is a program for at risk youth. This program is paid part by county tax payers and Virginia state tax payers. A few years ago, we encountered the migration issue of unaccompanied minors, This children where sent to the U.S. by their families who want them to escape poverty, gang violence and abuse and other issues that they would have to face as they get older. The government decided to keep them here and put them in different facilities around the U.S. These children’s parents do not live here nor pay taxes but yet these children are receiving daily education, psychological services, daily meals, clean and safe place to live, etc. I believe given them the opportunity to a better life is priceless even tough the expenses are paid by tax payers.