Hayek Assignment

1. What are public goods? What two characteristics do they have? Why do you think economists are interested in public goods?

A public good is a good that, once produced, can be consumed by an additional consumer at no additional cost. The two characteristics that public good have are non-excludability and jointness in consumption.

2. What does the author hope to accomplish with this paper?

The author hopes to develop a theory within the paper that will help explain the development and use of public goods theory as justification for government production.

3. What is a public good?

A public good is a good having one or both of the characteristics of non-excludability and jointess in consumption.

4. How does the use of the word “public good” mislead the public? (Be sure to define “Samuelsonian” public good in your answer.)

Most people who hear the phrase “public good” think of a good that is available for all citizens to consume. The phrase suggests that a public good is a good that is produced by the government and generally available for the benefit of its citizens. Samuelson’s definition of a public good is a good that, once produced for consumers, can be consumed by additional consumers at no additional cost. Samuelson’s definition falls inline more with public-sector production being necessary for efficiency.

5. Does Holcombe believe that the market necessarily underprovide Samuelsonian public goods? Give an example.

Holcombe believes that there is real-world evidence that shows that non-excludable Samuelsonian public goods, like radio broadcasts and microcomputer software, are efficiently produced in the market.

6. Is government production a public good?

No. Government production is a private good. The article mentions that redistribution is the largest category of government expenditures. It can be argued that redistribution is a non-excludable benefit, but it is does not contain the characteristic of jointness. A dollar’s worth of resources redistributed to one person reduces the amount of resources available to others by a dollar. This does not follow in line with the theory that it can be consumed