Subscribe to our RSS feed
EconLife.com connects economics to everyday life, current events and history.

Tag Archives: public goods

env eco

By Amy Tourgee, guest blogger, Kent Place School alumna and Environmental Studies undergraduate at Princeton University

Hello to all from Kenya! For those of you who didn’t catch the postscript of my last blog, I am studying abroad here on a joint Princeton-Columbia program on tropical agriculture and sustainability.  13 students, 4 classes, 1 research center.  It’s kind of like a super academic version of MTV’s Real World.

I’ve only been here for a few days, but it’s already shaping up to be an amazing adventure.  It’s a beautiful 80-90 degrees every day with no humidity.  On the drive to the reserve, we were within a few arms lengths of giraffes.  And I’m totally rocking the zip off pants, binoculars and safari hat a la Nigel Thornberry (we do a lot of fieldwork).

Backing up a bit though, one of the first obstacles we faced in Nairobi was the horrendous traffic. Truly, truly horrendous.  I will never complain about Manhattan street congestion ever again.  As we sat in the car, unmoving, I thought about roads as a private or public good.

Economic Lesson

In fact, roads are a mixed good – that is, they have elements of both pure private and public goods.  On one hand, roads are similar to public goods in the sense that they are non-excludable.  You cannot prevent another person from using the good – everyone can use roads, just like everyone can use a public park.

However, roads are like private goods because they are a rival good, meaning that one person’s consumption affects other people’s consumption of the good.  In the case of a road, as more people drive on the road, traffic emerges, and the experience of other cars is changed from quick, leisurely drive down the highway to a frustrating, slow crawl.

Posted by: adminEcon
Tags: , , , ,
Comments (0) Add a Comment

The Congress and the Deficit

All the talk about Big Bird and federal funding is really about 2 much bigger issues.

1. Discretionary Spending

With proposed spending in the Obama 2013 budget at 3.7 trillion dollars, a tiny proportion–between 1 and 2 percent, goes to the Corporation for Public Broadcasting (CPB). In fact, add to CPB money, the EPA, the entire judicial brach of government, homeland security, education, transportation, agriculture, foreign policy, NASA, and other discretionary categories (except defense) and you approach 15 percent of all federal spending.

The other 85%?

  • Social Security
  • Health and Human Services (primarily Medicare and Medicaid)
  • the Interest on the Debt
  • Defense

 

You can see that for real deficit reduction, we need to focus on 3 mandatory (required by law) budget components and defense–not Big Bird and not discretionary spending.

2. Lighthouses

Would Big Bird pass the lighthouse test? Economists like to point out that when we try to decide what government should pay for, we can start with a lighthouse. Used by anyone, depleted by no one, and a necessity, a lighthouse would be tough to fund privately. So government should step in.

The lighthouse test is a handy start for deciding what should be covered by federal funds.

Sources and Resources: This NY Times interactive graphic is a superb shortcut for illustrating and understanding the federal budget. Also very well done, the NPR Planet Money podcast on public goods was fascinating.

Posted by: adminEcon
Tags: , , , , , , , , , , , , , ,
Comments (0) Add a Comment

mail box...16744_6.26_000008803278XSmall

While the U.S. had postal services since the 1600s, Ben Franklin transformed the system. Appointed Deputy Postmaster for the Colonies by the British, he established our first home mail delivery system, diminished to a single day the letter delivery time between New York and Philadelphia, and to 6 days between Philadelphia and Boston. When the British fired Franklin for his rebellious political activity, the postal system was making a profit.

Is it possible to bring Ben Franklin’s spirit to today’s USPS?

More than 2 years ago, the Washington Post expressed an answer. Comparing creative innovation from a privatized Swiss system to tired thinking from the USPS, they said we are dealing with a hybrid entity “hamstrung by a large and heavily unionized workforce, congressional management, and an antiquated business model.” We could add that George Mason economist Tyler Cowen tells us that we have been sacrificing new ideas and cost efficiencies because our Postal Service is a “privileged quasi-monopoly.”

A Postal Fact: 12345  is GE’s zip code in Schenectady, NY

The Economic Lesson

A controversial idea: Defined on Planet Money, a public good is “something that we all need that will make our lives better, but the market will not and cannot provide.”  One podcast example of a public good was the benefit provided by a lighthouse. Maybe the US Post Office is very different from a lighthouse.

An Economic Question: Should mail delivery be a public good?

Posted by: adminEcon
Tags: , , , ,
Comments (0) Add a Comment