Economics - A public good is one which is non rival in consumption and non excludable

Mohamed Subhi

Economics

A public good is one which is non rival in consumption and non excludable. This means that one persons consumption does not reduce the amount available for someone else and once the good or service is provided the producer is unable to prevent anyone from consuming it e.g. street lighting, a park etc. Public goods are provided free at the point of use but have typically already been paid for through taxation.

The opposite of a public food is a private good because a consumer can be excluded from using it and a price has to be paid at the point of use e.g. entry to a rock concert, private healthcare.

Merit goods are good which are socially desirable e.g. education, health etc.

Demerit goods are goods that are socially undesirable and are negative for society e.g. alcohol, drugs, cigarettes etc.

A merit good is a socially desirable good; in this case healthcare is a positive externality to society i.e. it benefits society; as social benefits exceed private benefits.

Higher government spending on these merit goods should lead to an improvement in total economic welfare. Therefore the government offers healthcare as a public good. The government offers healthcare as a public good however must offer it collectively, because a public good is typically non-excludable i.e. public goods cannot be restricted to those who have paid for it. Also a public good is non-rivalry in consumption i.e. the consumption of a public good by one person does not decrease the availability of the good to others. The advantage of this would be that healthcare is free at the point of use ad is offered to all people equally, and in theory people are paying their taxes therefore keeping the National Health Service working effectively and efficiently. However as healthcare is non-rivalry in consumption non-payers can take a free ride and enjoy the benefits of consumption (“free riders”). This creates market failure. More “free riders” within the market means more people paying no taxes for the public goods supplied by the government; this means less money is being re-invested to enhance and improve the healthcare service which results in a poor healthcare service. This is clearly unfair for the people whom pay taxes. A minority of people whom pay taxes then will decide to go private in healthcare, as they will rather pay extra money on top of there taxes and obtain better healthcare and avoid long waiting lists; this generates an increase in the establishment of private hospitals. The main reason that private sector will not provide public goods to people are because they cannot be confident of making a profit.

So the advantage of healthcare being a public good is that in theory it is available to everyone and the consumption of a public good by one person does not decrease the availability of the good to others. It is free at the point of use, so one does not directly pay for it; e.g. if one cuts oneself and requires stitches one will go to the local hospital and the doctor or practical nurse will stitch up the cut and the person will not have to pay at the point of use. Therefore this is a benefit to the ...

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Also as there is a great demand for public healthcare within the UK, therefore the government needs to accommodate this demand and therefore more doctors, nurses, practical nurses and all the staff required for a hospital are needed this generates and creates more jobs and decreases unemployment rates in the UK, this again is an advantage.

Also public healthcare clearly benefits the poor; not taking the “free riders” aspect into perspective it benefits the poor whom may be ill and require medical attention. This is not a great economical advantage, however it shows democracy, equality within the UK between all peoples of all natures and positions, which generates a external benefit to society, decreasing discrimination and prejudice within society. Furthermore a public health service offered to everyone closes the discriminative gap between the rich and the poor, as all people are offered equal medical services.

Taking into account these advantages the disadvantages of a public healthcare service would be that as healthcare is non-rivalry in consumption non-payers can take a free ride and enjoy the benefits of consumption (“free riders”), this creates market failure (as stated earlier), and a smaller amount of money is being regenerated into the health service so there is less money for the government to invest into the health service which results in hospitals having out of date equipment, decrease in hospital beds due to cut down in hospital jobs, this is a great drawback.

As healthcare is offered to everybody there is high demand for healthcare, this increases waiting lists for operations and people who require major operations will have to wait longer.

Furthermore as healthcare is provided to everybody and is free at the point of use, people not only can be free riders but can also further exploit the service by going to see a doctor even if one just has a soar throat or has a cold; this increases in waiting times to see a doctor and is a disadvantage for people whom really need to see a doctor regarding there medical condition. This is also a disadvantage for the doctor or nurse as it increases in the workload and stress and decreases hospital staff motivation creating an unfriendly and stressful environment within the hospital. This aspect is the main reason why many doctors within the public healthcare service are moving into private hospitals or establishing their own local hospitals. Therefore all the best doctors are moving into the private sector, which is a cost to the public heath service.

Within the UK there is a choice for one to have private healthcare. Were one has to pay money on top of there general taxes to see a doctor or to gain medical attention. The advantage however for private healthcare is that typically you expect better doctors and staff as all the staff are more motivated to work as your are directly paying for the healthcare provided. The waiting lists are a lot shorter. Furthermore private hospitals are more up to date and consist of all the latest medical equipment and technology.

However only a minority of people can afford private healthcare and it is seen as too expensive at times. Therefore for those whom cannot afford private healthcare have the chance to gain public healthcare were it is free at the point of use. Therefore public and private healthcare have advantages and disadvantages. Public healthcare is free at the point of use and is offered to everyone. However free riders can exploit this advantage creating longer waiting lists.

Private healthcare is expensive however offers high quality medical treatment in terms of doctors, nurses, medical equipment etc. These advantages however come at a high price, as people have to pay at the point of use on top of their general taxes; therefore only a minority of people can afford private healthcare.

Healthcare within the UK is very good compared with other countries within Europe and across the globe.

It is good to have both private and public healthcare within a country. Public healthcare offers an effective health service to everyone and is paid by general taxation, however if one dislikes the current public healthcare service; then one has the chance and freedom to go private.