Pizza from Scratch presents more Dismal Science Swamp - economics hopefully less painful - 'toon 158

6 October, 2008

Everyone loves tollbooths, right?

© Bill Lemmond (Actually, you're welcome to download and share these web-resolution images, and you probably won't be happy with printing them.)

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Two factors determine whether something is a public or private good or service.

Can you control access? I can say "my sandwich, just for me," (private) but I have to share "my street." (public, not as some country drives are "privately maintained")

Can we share without interfering in each other's enjoyment of it? One seat on a bus really should be limited to one adult-sized person ( a rather private good). My street can be shared, up to a crowded point (imperfect public good). But fireworks over the baseball field can be enjoyed by people for blocks around, without getting in each other's way. They can all look up (public good).

You can put a tollbooth on a lighthouse, or set out a donation box for a GPS satellite, but there will be a big problem, as too many people take a free ride on the service. That's why it's call the "free rider" problem.

The baseball park puts on fire works at some games, even though only ticket-holders pay. So we get some fireworks to watch. But do we get fireworks as often as we would all like? Probably not, as most of us aren't paying, and the paying customers don't want to feel like chumps. For solid financial reasons, the private sector can't and won't supply as much of any public good that the public wants or needs. No one can afford to pay for everyone else, and no one wants to be a chump.

The American colonies tried subscription protection of buildings against fire. This has left us some interesting wrought iron antique doorside plaques. Otherwise, it was soon realized that all buildings in the area had to be protected, or fire would spread from the ones unprotected. So funds had to be collected from the whole community, and if bake sales weren't enough, that meant taxes.