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You don't understand the definition of a public good. The key to a public good is that it is non-exclusionary, or at least partially non-exclusionary, and would

You don't understand the definition of a public good. The key to a public good is that it is non-exclusionary, or at least partially non-exclusionary, and would suffer from the free rider problem if provided by the market, and so would be inefficiently under-produced. You say that health care and education generate more wealth than they cost. That doesn't make them public goods. Education primarily produces the extra wealth for the person who gets the education. This doesn't make it a public good, it just makes it something worth investing for each individual. Also, look to rural India if you think the market has trouble providing education. There are bits of health care that fall into public good, like vaccinations, but public health and health care are mostly entirely separate things.

RyanMcGreal 17y ago
I understand the definition of a public good. Take education: a significant part of the benefit that flows from education is externalized, that is society as a whole benefits as well as the individual. As a result, in a pure market people tend to under-invest in education.
- eru 17y ago
  Perhaps. I guess you can have the government help with internalizing the cost and benefits without providing the service itself. Think school vouchers for example.
  - RyanMcGreal 17y ago
    That might work, as long as the charter schools aren't allowed to risk-select.
    - eru 17y ago
      Or perhaps if they are allowed to do so, but have to disclose it?
- solutionyogi 17y ago
  Ryan, I completely disagree. I am surprised that you would think that the society benefits more from the education than the individual. According to me, if I have higher education, I get a better job, better salary, more respect in social circle. Compared to this, what does society get if I am educated? And looking at how tuition fees are at all time high and people are still paying them, I would not say that people are under investing in education. EDIT 1: For some reason, I am not able to reply to some of the replies to my comment, so let me clarify. What is society made of? Individuals. Obviously, if individuals are better off then society will automatically be better off. Isn't it? So if you think by providing education to an individual, society becomes better, why don't we provide good healthy food for all the individuals and we will solve the obesity problem and end up with a really healthy society? How about providing free access to a high quality gym and personal instructor? I see that you are disagreeing and you would say, one has to draw line somewhere. And in my opinion, if you think that Government should be not be responsible for good healthy food (the most important thing for an individual, even more than education), I don't understand how you can say that Government should provide public education. EDIT 2: And here's why I am not in favor of government programs. A bureaucrat has no incentive what so ever to please their customers (i.e. taxpayers). [Quick, tell me, how many government agencies do a good job in your opinion?] By nature, government will try to find a one-size-fits-all solution to education, which does not work. As someone else said, I am all in favor of voucher system which gives control back to people who care about education and let market place offer variety of solutions for people's education needs.
  - alanthonyc 17y ago
    Are you kidding? An educated citizenry is one of the most important things a society can have. The "better job, better salay, more respect" to which you refer are all functions of the value that you provide to the community.
    - solutionyogi 17y ago
      Excuse me, but why do you have the notion that Educated people are somehow better than uneducated people?
- timwiseman 17y ago
  I have to strongly agree. The individual recieving the education will likely benefit more than society, but on the whole there is great benefit to society to having an educated populus. This is true of all societies, but it is much more true in a democracy(or republic) where the populus is meant to take some role (even if indirect) in the governance.
- Perceval 17y ago
  Adam Smith wrote an interesting section of The Wealth of Nations on the issue of education. It appears in Book V of the volume, which is the book where he begins to qualify his otherwise laissez faire position. The section "Education of Youth" is Chapter 1, Part III, Article II. Most of the section is devoted to explaining why endowing public money for educational institutions has a negative effect on the quality of teaching. Most of the arguments should be familiar to anyone who follows debates about public education, teachers unions, etc. It's pretty clear that Smith thinks full public funding for education will produce a negative outcome. However, he does then start to make a critique of a society lacking any education or virtues—one that's actually quite similar to the critiques Tocqueville and Nietzsche would make decades later. Talking about the effect of the functional division of labor on the populace he writes: But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects too are, perhaps, always the same, or very nearly the same, has no occasion to exert his understanding, or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him, not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. ... His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society this is the state into which the laboring poor, that is, the great body of people, must necessarily fall, unless the government takes some pains to prevent it. He goes on to write a justification for the public funding of the education of the poor. The state should teach the Three R's by establishing parish schools, giving prizes for academic achievement, and requiring students to pass exams before entering a trade. In this way, he writes: The more they are instructed, the less liable they are to the delusions of [religious] enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually more respectable, and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. You should keep in mind that Smith is justifying only public funding for the education of poor youth, not general funding for the education of all at all levels. Nevertheless, even Smith saw areas in which laissez faire needn't be strictly followed, and which could benefit society if the government were to intervene.
Retric 17y ago
Even without vaccinations having a heathy population reduces the spread of a wide range of dissease.
eru 17y ago
And you can internalize the effects of vaccination by government sticks and carrots, without having government provide the vaccine. Of course there's a risk of regulatory capture in that system, that might make it better to let government provide the vaccines in the first place.
Gormo 17y ago
Those who advocate government intervention where markets have not performed optimally also miss one important consideration: what the profit motive is to commercial business, the power/influence motive is to government institutions. Even where a true public good exists, automatically defaulting to a government solution still leaves us vulnerable to corruption and greed where the incentives for political influence do not exactly align with the true public interest, with the added problem that government solutions tend toward centralization and monopoly even more often than commercial markets. I think that the "market vs. government" model is a false dichotomy - there is an entire spectrum of viable organizational models within civil society, which can deliver public and private goods without compromising pluralism, voluntary cooperation, or individual liberty.
deleted 17y ago
[deleted]
albertsun 17y ago
You're right about the definition of public good, but public goods are not the only area in which it's rational for the government to intervene in the market. Both health care and education have strong positive externalities, and would be under provisioned if left purely to the private market. Particularly in the case of education where many of those who benefit from education are budget and credit constrained, the under provision will be particularly severe. That's why it makes sense for the government to intervene.
Perceval 17y ago
For anyone who's interested, one of the canonical statements of the free rider problem and exclusive/inclusive goods is Mancur Olson's The Logic of Collective Action. A short book and well worth the read.

RyanMcGreal 17y ago

I understand the definition of a public good. Take education: a significant part of the benefit that flows from education is externalized, that is society as a whole benefits as well as the individual. As a result, in a pure market people tend to under-invest in education.

eru 17y ago
Perhaps. I guess you can have the government help with internalizing the cost and benefits without providing the service itself. Think school vouchers for example.
- RyanMcGreal 17y ago
  That might work, as long as the charter schools aren't allowed to risk-select.
  - eru 17y ago
    Or perhaps if they are allowed to do so, but have to disclose it?
solutionyogi 17y ago
Ryan, I completely disagree. I am surprised that you would think that the society benefits more from the education than the individual. According to me, if I have higher education, I get a better job, better salary, more respect in social circle. Compared to this, what does society get if I am educated? And looking at how tuition fees are at all time high and people are still paying them, I would not say that people are under investing in education. EDIT 1: For some reason, I am not able to reply to some of the replies to my comment, so let me clarify. What is society made of? Individuals. Obviously, if individuals are better off then society will automatically be better off. Isn't it? So if you think by providing education to an individual, society becomes better, why don't we provide good healthy food for all the individuals and we will solve the obesity problem and end up with a really healthy society? How about providing free access to a high quality gym and personal instructor? I see that you are disagreeing and you would say, one has to draw line somewhere. And in my opinion, if you think that Government should be not be responsible for good healthy food (the most important thing for an individual, even more than education), I don't understand how you can say that Government should provide public education. EDIT 2: And here's why I am not in favor of government programs. A bureaucrat has no incentive what so ever to please their customers (i.e. taxpayers). [Quick, tell me, how many government agencies do a good job in your opinion?] By nature, government will try to find a one-size-fits-all solution to education, which does not work. As someone else said, I am all in favor of voucher system which gives control back to people who care about education and let market place offer variety of solutions for people's education needs.
- alanthonyc 17y ago
  Are you kidding? An educated citizenry is one of the most important things a society can have. The "better job, better salay, more respect" to which you refer are all functions of the value that you provide to the community.
  - solutionyogi 17y ago
    Excuse me, but why do you have the notion that Educated people are somehow better than uneducated people?
timwiseman 17y ago
I have to strongly agree. The individual recieving the education will likely benefit more than society, but on the whole there is great benefit to society to having an educated populus. This is true of all societies, but it is much more true in a democracy(or republic) where the populus is meant to take some role (even if indirect) in the governance.
Perceval 17y ago
Adam Smith wrote an interesting section of The Wealth of Nations on the issue of education. It appears in Book V of the volume, which is the book where he begins to qualify his otherwise laissez faire position. The section "Education of Youth" is Chapter 1, Part III, Article II. Most of the section is devoted to explaining why endowing public money for educational institutions has a negative effect on the quality of teaching. Most of the arguments should be familiar to anyone who follows debates about public education, teachers unions, etc. It's pretty clear that Smith thinks full public funding for education will produce a negative outcome. However, he does then start to make a critique of a society lacking any education or virtues—one that's actually quite similar to the critiques Tocqueville and Nietzsche would make decades later. Talking about the effect of the functional division of labor on the populace he writes: But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects too are, perhaps, always the same, or very nearly the same, has no occasion to exert his understanding, or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him, not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. ... His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society this is the state into which the laboring poor, that is, the great body of people, must necessarily fall, unless the government takes some pains to prevent it. He goes on to write a justification for the public funding of the education of the poor. The state should teach the Three R's by establishing parish schools, giving prizes for academic achievement, and requiring students to pass exams before entering a trade. In this way, he writes: The more they are instructed, the less liable they are to the delusions of [religious] enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually more respectable, and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. You should keep in mind that Smith is justifying only public funding for the education of poor youth, not general funding for the education of all at all levels. Nevertheless, even Smith saw areas in which laissez faire needn't be strictly followed, and which could benefit society if the government were to intervene.

Retric 17y ago

Even without vaccinations having a heathy population reduces the spread of a wide range of dissease.

eru 17y ago

And you can internalize the effects of vaccination by government sticks and carrots, without having government provide the vaccine. Of course there's a risk of regulatory capture in that system, that might make it better to let government provide the vaccines in the first place.

Gormo 17y ago

Those who advocate government intervention where markets have not performed optimally also miss one important consideration: what the profit motive is to commercial business, the power/influence motive is to government institutions. Even where a true public good exists, automatically defaulting to a government solution still leaves us vulnerable to corruption and greed where the incentives for political influence do not exactly align with the true public interest, with the added problem that government solutions tend toward centralization and monopoly even more often than commercial markets. I think that the "market vs. government" model is a false dichotomy - there is an entire spectrum of viable organizational models within civil society, which can deliver public and private goods without compromising pluralism, voluntary cooperation, or individual liberty.

deleted 17y ago

[deleted]

albertsun 17y ago

You're right about the definition of public good, but public goods are not the only area in which it's rational for the government to intervene in the market. Both health care and education have strong positive externalities, and would be under provisioned if left purely to the private market. Particularly in the case of education where many of those who benefit from education are budget and credit constrained, the under provision will be particularly severe. That's why it makes sense for the government to intervene.

Perceval 17y ago

For anyone who's interested, one of the canonical statements of the free rider problem and exclusive/inclusive goods is Mancur Olson's The Logic of Collective Action. A short book and well worth the read.