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Feasibility and Efficiency of Public Goods

In: Business and Management

Submitted By mnjkr123
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Compare the feasibility and efficiency of producing public goods by tax dollars versus producing them jointly with private funds. Support your argument with specific examples.
Public good may not be 100% funded by tax funds but could well be underwritten and funded by private organizations as well. It is not feasible to produce public goods using private funding. The reason for this is that there is no way to prevent free riders. Public goods, or collective consumption goods, exhibit two properties; non-rivalry and non-excludability. Something is non-rivaled if one person's consumption of it does not deprive another person. A firework display is non-rivaled - since one person watching a firework display does not prevent another person from doing so. A public good is non-excludable. Its use cannot be limited to a certain group of people. The private groups may find it non-profitable to manufacture or create public good if they don’t get tax dollars from government in addition to their own private funds as they would want to maximize their profit as much as possible. An example of this would be the train industry. Amtrak is a private group that provides some funds and runs the system while receiving federal tax dollars in order to operate efficiently and at a profit. Without tax funding in addition to revenue generated from the train usage, Amtrak would not be successful and most likely be bankrupt. On the other hand, the disadvantage of producing public goods with 100 percent tax dollars is that the project or good being produced is being produced for a political purpose regardless of its economic purpose. An example of a public good produced for political purposes is the Metro Train system in Washington DC. The system loses money every year yet it is being expanded for political purposes. When public goods are produced with public and private funds then the project...

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