Public Goods
Introduction
Governments provide goods and services for a variety of reasons, but having the characteristic of being a "public good" is the single most important economic consideration.. A pure public good is a good with benefits that, when made available to anyone, are equally available to everyone. Like national defense and clean air programs, these goods provide benefits that cannot be withheld from persons who may choose not to pay for them. A government may assume the major responsibility either for monopolizing or for regulating production when it expects significant large economies of scale in the production of a good or service. Goods such as water supply and transportation systems offer benefits that are shared by large numbers of people. Some public goods such as environmental protection cannot be restricted to subscribers. Others such as airport and seaport facilities would not be produced on an adequate scale if they were produced for private sale. This week, you will explore what constitutes a public good, what distinguishes a public good from a private good, and the free-rider problem. You will learn the conditions for efficient production of pure public goods and why their positive externalities render their private production inefficient.
Discussion 1: Rationing Publicly Provided Goods
There are two ways of making a good or service available to the public. One is government providing the good or service by executive or legislative action. An example is the Affordable Care Act that Congress passed in 2010 to provide access to health insurance. The other is by private firms supplying goods and services through the market. As Hyman (2014) notes, "Goods with benefits that cannot be withheld from those who do not pay and are shared by large groups of consumers are public goods" (p. 132).
A pure public good, as explained by Hyman (2014), is nonrivalrous and non-excludable (pp. 132-143). For example, national defense is nonrivalrous because the amount of defense that one person enjoys does not diminish the amount of defense his neighbor enjoys, whereas clean air is nonexcludable because it is not possible to exclude a person from enjoying its benefits. Impure public goods do not meet these criteria perfectly. On the other side of this, public transit is an impure public good since it is both price-excludable and congestible (rivalrous). A person who cannot pay the fare is excluded, and a crowded bus may pass by a person. Impure public goods are rationed in a variety of ways. In the case of riding the bus, the good is rationed by charging fares. Sometimes express buses charge a higher fare. The government rations many publicly provided private goods and impure public goods. Healthcare, as available through the national health services of Britain and Canada, is an example of a publicly provided private good that is rationed. Healthcare, when privately financed, is rationed by price; the patient receives a specified level of benefits. When publicly financed, the patient gets what will be allowed by the public agency overseeing distribution of the benefit. Consider this example in preparation for this week's Discussion.
Post by Day 3 an analysis of government rationing for one of the following public programs: Public Higher Education in Nigeria, the National Health Service in the United Kingdom, and the National Park Service in the United States. Your analysis should include the following:
. A description of how each public program is rationed by the government
. An analysis of possible impact(s) of alternative rationing systems for each public program
. At least one example of governmental rationing from your personal/professional experience
Discussion 2: Assessing Public Spending Choices
We can build it. We can link the north to the south. We can reshape the land use in the Central Valley, where land prices are cheaper. We can do it in an elegant way. We can do it with renewable energy ... and it will be a model for the country. And if 17 other countries can do it, California can.
-California Governor Jerry Brown, on a proposed high speed rail line
One major responsibility of any political system, national or subnational, is determining what services to provide and how to pay for them. National governments make decisions about whether to fund the production of new weapon systems or to expand food assistance and farm subsidy programs. Subnational governments may decide whether to fund transportation infrastructure or programs to support older persons who wish to remain in their homes despite needing daily care. Consider the example of California Governor Jerry Brown speaking on the proposed high-speed rail line linking north to south. How would a statement like this create a variety of views on public spending?
Post by Day 5 an assessment of different views on spending for public goods. Your assessment should answer the following questions:
. To what extent do you think differences in views between advocates of less spending on public goods and advocates of more spending can be attributed to different assessments of the marginal cost of public goods?
. Are the increased distortions associated with the additional taxes required to finance public goods a factor in the differences?
. What are other sources of disagreement?
Be sure to support your post with specific references to the Learning Resources and other peer-reviewed sources and provide full APA-formatted citations for your references.
Annual Budget: Services Provided by Local Government
Name of jurisdiction: The name of jurisdiction is El Paso County, Texas. The seat of El Paso County is the city of El Paso.
Web address of the jurisdiction: The web address of the jurisdiction
Description of the jurisdiction: The jurisdiction is a county in the US state of Texas. It is dominated mainly by the city of El Paso which is the seat of the local government. The county has a population of 800,000 (El Paso County Budget, 2017). This makes it the sixth most populated county in the state of Texas. The local government provides a number of services to citizens. These include the Sun Metro, Mass Transit System; museums and parks; police services; public health services; public library; maintenance of streets; water utility; and aviation services. The city council also provides a number of other community and environmental services.
Population: As aforementioned, according to the 2010 census, the population of El Paso County is approximately, 800,000. Most of the population resides in El Paso city.
Total Expenditure: Total expenditure in the most recent complete year, 2016, for which data is available was $ 1.126 billion. For the year 2017, the budgeted expenditure is $ 900.324 million, while in 2018 the budgeted expenditure is $ 896.357 million. This shows that the county is trying to control its expenditures. This has been done mainly to control the fiscal deficit of the local government (El Paso County Budget, 2017). For 2017 and 2018 the budgeted expenditures have been matched with budgeted revenues for the years. Property taxes are the biggest and most important source of revenue for the county of El Paso. Charges for the various services that the county government provides to its citizens, such as water utility services, account for second biggest source of revenue. They are followed by sales tax, which are the third biggest source of revenue for the local government. Other sources of revenue of El Paso county are penalties and interests; franchise fees; fines and forfeitures; license and permits; intergovernmental revenues; revenues from county participation; rents; enterprise revenues, etc. Personal services make up the biggest expenditure of the county government in a year. Personal services mean the costs of wages, salaries and other fringe benefits that are given to employees. Contractual services make up the second biggest chunk of expenditures.
These are the expenditures for the various services that the county outsources to outside vendors or contractors. Capital outlay is another significant expenditure category for the county (El Paso County Budget, 2017). Capital outlay means expenditure on acquisition of equipment, construction and land acquisition. Other expenditure categories of the county are materials and supplies; operating expenditures; non-operating expenditures; intergovernmental expenditures, etc. The services provided by El Paso County are very similar to the services provided by the jurisdiction chosen by the colleague.
References:
Bade, R., & Parkin, M. (2010). Foundations of Microeconomics. Addison Wesley Paperback 1st.
Bankman, J., Cogan, J., Hubbard, G., & Kessler, D. (2012). Reforming the tax preference for employer health insurance. Tax policy and the economy , 26:43-58.
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Calabria, M. (2016). Behavioral Economics and Fed Policymaking. . Cato Journal, 36(3), pp. 573-587.
Deaton, A., & Muellbauer, J. (2016). Economics and Consumer Behavior. Cambridge ; New York : Cambridge University Press.
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Eaton, B. C., Eaton, D. F., & Douglas, W. A. ( 2012). Microeconomics. Prentice Hall, 5th Edition.
Gärtner, M. (2013). Macroeconomics. Pearson Education Limited.
Samuelson, P., & Nordhaus, W. (2015). Economics. New York: Prentice Hall.
Shaviro, D. (2004). Rethinking tax expenditures and fiscal language. Tax law review , 57: No 2: 187-231.
Public goods that are nonrivalrous in consumption, means that the amount that one consumer uses does not diminish the amount available to another consumer. Making publicly provided Internet service available to all residents of a community is an example of a nonrivalrous public good because one resident using the service does not diminish the amount available to another resident. For example, Chattanooga, Tennessee's municipally owned electric utility provides residents and businesses with Internet service of up to one gigabit per second-200 times faster than the U.S. average (Newcombe, 2013). Using Hyman's (2014) definition of public goods and his description of their characteristics, determine which public services are provided by the local government jurisdiction under your analysis.
From the Annual Budget of your local jurisdiction, respond to the following questions in a 2- to 3-page paper:
Which services would you define as pure public goods, or as close to a pure public good as you can find, that are being provided by the local jurisdiction you are reviewing?
Are there services being rationed in any particular way within this jurisdiction? If yes, describe how it is being done.
Are there services you think should be rationed? If yes, how would you propose to do it?