Tuesday, October 5, 2010

Can you say "public good"

Market failure and the need for the government to provide public goods is a core lesson in economics. Simply put, the private market will not provide some things at a socially optimal level because of the free rider problem. Examples of this are military protection, police, and (yes) fire protection. If you ever needed an example of this, the state of Tennessee has provided a great example that clearly shows the reason. In a rural area of the state the fire protection is provided on a fee based system of $75 a year. In one case, the fire department let a family's house burn down because they did not pay the fee - even though they easily could have saved the house - also the family was willing to pay. Here is the link.

No comments:

Post a Comment