27 Nov 2013

PuBliC gOOds?

I was shocked recently to hear a professor of economics say that "ports are a public good because they receive goods that are distributed all over the country, for the benefit of consumers and producers." This nonsensical definition makes sense to port operators seeking subsidies -- a common problem -- but it's false when we remember that those ports are handling private goods, the cost of which consumers are willing to bear.

There's no non-excludable, non-rival public good involved, only private goods that are shipped for profits.

Would producers like more profits? Would consumers like to pay less? Sure, but subsidies to them create private benefits to them -- not public goods.

Bottom Line: Public goods benefit everyone, regardless of capitalization.

3 comments:

Jay said...

I have heard so many goods labeled public goods by those advocating some sort of preference or subsidy that I have a new definition for public good that these individuals must be using.

Public Good: Any good or service that I believe should be made available to me, or any individual or group I favor, at a reduced or zero cost.

Ron Griffin said...

Jay makes an excellent point. It's common to hear statements that water is a public good even though it's not, and perhaps Jay's observation explains these statements well.
Yeah, some uses of water are public good applications, but many are rival or excludable, so we can't use public/private labels for water, overall.

JBD said...

The only rationalization i can think of for ports being a public good is that they would be there for public use when desireable, ie in war or disaster response mobilization. But the professor is clearly wrong in his point.

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