ECON 1201 Lecture Notes - Lecture 15: Pigovian Tax, Used Car, Adverse Selection
ECON 1201 – Lecture 15 – Public Goods and Economics of Healthcare
Reminders
• First study session next Monday night
• Additional office hours on Friday
Characteristics of Goods
• Rivalry
o If I consume it, you can’t
• Exlusivity/Excludability
o Whether or not we can exclude others from using the good
Types of Goods
• Most goods are private goods
o Private goods have rivalry and exclusivity in consumption
• Public, nonrivalrous, nonexclusive
o My consumption of it doesn’t impact your consumption of it
• Common Property
o Can not exclude people from consuming it, but there is rivalry in consumption
o Many environmental problems because of common property
• Quasi-public/Club
o Can exclude people from consuming but nonrivalrous
o Cable TV – my watching doesn’t impact your watching
The “Problem” With Public Goods
• Private markets tend to underproduce public goods because of their characteristics of
rivalry and exclusivity
• Free rider
o Consume but not pay for it
o i.e. PBS, NPR
• Incentives to Disclose True Preferences
Government Remedy for the Free Rider Problem
• Regulate the problem by paying for it with tax revenue
Common Property/Open Access
• Tragedy of the commons and negative externalities are cousins because they both have
the lack of private property rights
• They don’t take into account the cost being imposed on others
• The overexploitation of common resources leads to the race to develop
o The only way to actually get ownership is if you capture it before someone else
does
o Otherwise there is no incentive to protect or maintain the good
Nature of the Problem
• Why are there no “save the cows” campaigns like for buffalo or elephants?
• Someone owns it, no one owns fish or elephants
• Poachers have an incentive to do it before others do it
• There is economic interest to maintain forest because they need inventory of wood for
their future
Important to Note
• If the geographical area/number of people involved is small, access restrictions are used
through community norms and laws
• If the geographical are/number of people involved is large, access restrictions are used
through legal restrictions like taxes, quotas, and fees
Economics of Health Care - General Issues in the US
• Rapid expansion of healthcare costs
• Underprovision of healthcare services
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Document Summary
Econ 1201 lecture 15 public goods and economics of healthcare. Reminders: first study session next monday night, additional office hours on friday. If i consume it, you can"t: exlusivity/excludability, whether or not we can exclude others from using the good. The problem with public goods: private markets tend to underproduce public goods because of their characteristics of rivalry and exclusivity, free rider, consume but not pay for it i. e. pbs, npr. Government remedy for the free rider problem: regulate the problem by paying for it with tax revenue. If the geographical area/number of people involved is small, access restrictions are used through community norms and laws. If the geographical are/number of people involved is large, access restrictions are used through legal restrictions like taxes, quotas, and fees. Economics of health care - general issues in the us: rapid expansion of healthcare costs, underprovision of healthcare services, quality of health care services.
