A Level Economics 50: Public Goods

Private Goods:

Private goods are goods that are rivalrous and excludable. Rivalrous means that when one person consumes the good, it reduces the quantity available for others. Excludable means that it is possible to prevent people from using the good if they don't pay for it. Examples of private goods include food, clothing, and electronics. In a free market, private goods are efficiently allocated through the price mechanism, where consumers choose what to buy based on their preferences, and producers supply goods to meet the demand.

Public Goods:

Public goods are goods that are non-rivalrous and non-excludable. Non-rivalrous means that one person's consumption of the good does not diminish its availability for others. Non-excludable means that it is difficult or costly to prevent people from benefiting from the good, even if they don't pay for it. Examples of public goods include street lighting, national defense, and public parks.

Market Failure of Public Goods:

The main problem with public goods is the free-rider problem. Since public goods are non-excludable, individuals have an incentive to "free-ride," meaning they can benefit from the good without paying for it. If one person decides not to pay for street lighting, they can still enjoy the benefits of well-lit streets if others do pay. This behavior can lead to under-provision of public goods in a free market.

Consequences of Market Failure on Economic Actors:

1. Non/Under-provision: In a free market, private firms may not have an incentive to produce public goods because they cannot charge individual consumers for their usage. As a result, public goods might be non/under-provided, leading to a suboptimal allocation of resources.

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3. Suboptimal Social Welfare: The under-provision of public goods can result in a situation where society as a whole is worse off than it could be if the public goods were efficiently provided. The overall welfare of society is not maximized.

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5. Short-term Focus: Private firms are profit-driven, and they may prioritize short-term gains over long-term investments in public goods, which can lead to a lack of investment in critical infrastructure and services.

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7. Externalities and Spillover Effects: Some public goods, like education and healthcare, have positive externalities, meaning they benefit society as a whole. If these goods are under-provided, it can lead to negative consequences for economic development and social well-being.

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9. Inefficiency in Resource Allocation: Market failure in the provision of public goods means that resources are not allocated efficiently. Valuable resources might be misallocated, leading to lost opportunities for economic growth and development.

Government Intervention for Public Goods: To address the market failure of public goods, governments play a crucial role in their provision. Governments can provide public goods directly through tax revenue or subsidies, ensuring that these goods are available to everyone in society. By doing so, governments can correct the free-rider problem and ensure that essential public goods are adequately provided for the benefit of all citizens.

Has the US given up on Pakistan?

 

Barack Obama says Saudi Arabia needs to learn to share region with Iran

Mark Landler in The Times of India

President Barack Obama believes that Saudi Arabia, one of America's most important allies in the Middle East, needs to learn how to "share" the region with its arch enemy, Iran, and that both countries are guilty of fuelling proxy wars in Syria, Iraq and Yemen.

In a series of interviews with the magazine Atlantic published on Thursday, Obama said a number of US allies in the Persian Gulf — as well as in Europe — were "free riders," eager to drag the United States into grinding sectarian conflicts that sometimes had little to do with US interests. He showed little sympathy for the Saudis, who have been threatened by the nuclear deal Obama reached with Iran.

The Saudis, Obama told Jeffrey Goldberg, the magazine's national correspondent, "need to find an effective way to share the neighbourhood and institute some sort of cold peace". Reflexively backing them against Iran, the president said, "would mean that we have to start coming in and using our military power to settle scores. And that would be in the interest neither of the United States nor of the Middle East."

Obama's frustration with much of the Arab world is not new, but rarely has he been so blunt about it. He placed his comments in the context of his broader struggle to extract the United States from the bloody morass of the Middle East so that the nation can focus on more promising, faster-growing parts of the world, like Asia and Latin America.
"If we're not talking to them," he said, referring to young people in those places, "because the only thing we're doing is figuring out how to destroy or cordon off or control the malicious, nihilistic, violent parts of humanity, then we're missing the boat."

Obama also said his support of the Nato military intervention in Libya had been a "mistake," driven in part by his erroneous belief that Britain and France would bear more of the burden of the operation. He defended his refusal not to enforce his own red line against Syria's president, Bashar Assad, even though Vice-President Joe Biden argued internally, the magazine reported, that "big nations don't bluff."

The president disputed criticism that he should have done more to resist the aggression of President Vladimir Putin of Russia in Ukraine. As a neighbour of Russia, Obama said, Ukraine was always going to matter more to Putin than to the United States. This meant that in any military confrontation between Moscow and the West, Russia was going to maintain "escalatory dominance" over its former satellite state.

"The fact is that Ukraine, which is a non-Nato country, is going to be vulnerable to military domination by Russia no matter what we do," he said. "This is an example of where we have to be very clear about what our core interests are and what we are willing to go to war for."

Obama, who has spoken regularly to Goldberg about Israel and Iran, granted him extraordinary access. The portrait that emerges from the interviews is of a president openly contemptuous of Washington's foreign-policy establishment, which he said was obsessed with preserving presidential credibility, even at the cost of blundering into ill-advised military adventures.

"There's a playbook in Washington that presidents are supposed to follow," Obama said. "And the playbook prescribes responses to different events, and these responses tend to be militarized responses." This consensus, the president continued, can lead to bad decisions. "In the midst of an international challenge like Syria," he said, "you are judged harshly if you don't follow the playbook, even if there are good reasons."

Although Obama's tone was introspective, he engaged in little second-guessing. He dismissed the argument that his failure to enforce the red line in Syria, or his broader reticence about using military force, had emboldened Russia. Putin, he noted, invaded Georgia in 2008 during the presidency of George W Bush, even though the United States had more than 100,000 troops deployed in Iraq.

Similarly, the president pushed back on the suggestion that he had not been firm enough in challenging China's aggression in the South China Sea, where it is building military installations on reefs and islands, some of which are claimed by the Philippines and other neighbours.

"I've been very explicit in saying that we have more to fear from a weakened, threatened China than a successful, rising China," Obama said.

The president refused to box himself in as a foreign-policy thinker.

"I suppose you could call me a realist in believing we can't, at any given moment, relieve all the world's misery," he said.

But he went on to describe himself as an internationalist and an idealist. Above all, Obama appeared weary of the constant demands and expectations placed on the United States.

"Free riders aggravate me," he said.

He put France and Britain in that category, at least as far as the Libya operation was concerned. Prime Minister David Cameron of Britain, he said, became distracted by other issues, while President Nicolas Sarkozy of France "wanted to trumpet the flights he was taking in the air campaign, despite the fact that we had wiped out all the air defences."

Only on the threat posed by the Islamic State did Obama express some misgivings. He likened the extremist group to the Joker in "The Dark Knight," the 2008 Batman movie. The Middle East, Obama said, was like Gotham, a corrupt metropolis controlled by a cartel of thugs.

"Then the Joker comes in and lights the whole city on fire," Obama said. "ISIL is the Joker," he added, using an acronym for the Islamic State.

Still, Obama acknowledged that immediately after the terrorist attacks in Paris and San Bernardino, California, he did not adequately reassure Americans that he understood the threat, and was confronting it.

"Every president has his strengths and weaknesses," he said. "And there is no doubt that there are times where I have not been attentive enough to feelings and emotions and politics in communicating what we're doing and how we're doing it."