public good



  • noun a good which can be supplied to everyone, and of which the supply does not diminish as they are being consumed. If a good can be bought or sold, then it is a private good.

Health Economics

  • (written as Public Good)
    A good or service that it is not possible to exclude people from consuming once any is produced. Clean air is a classic example and clean water another, though one could be avoided by migration to an urban environment and the other (in the UK and in 1999) by swimming off one of the 57 British beaches named by the European Commission as having water too polluted for safe swimming (there were fortunately only two such beaches seven years later.). Public goods are non-rival in the sense that providing more for one person does not entail the other having any less (the marginal opportunity cost of provision to another consumer is zero). Most public goods are not wholly public in this sense and whether health care itself has significant public good characteristics is a point of debate. Some programmes (especially those called 'public health') have considerable public good characteristics and even the care consumed by an individual may have a public aspect by virtue of any 'sympathy' that others may feel, so the consumption of one may in this way affect the utility of many others. Thus, if the alleviation of someone's ill-health is valued by any other than that individual, and there is more than one such externally affected person, then the externality will have the attribute of publicness. The first-order rule for optimizing the output of a public good entails adding the marginal value each consumer attaches to the good at a variety of outputs and selecting that output at which the sum of the marginal values (marginal social value) is equal to marginal social cost. In the diagram, the two demand curves D 1 and D 2 are to be interpreted as marginal value curves for two individuals, 1 and 2. The boldly drawn curve D is the vertical summation of these two curves. At output rate Q, which is the optimal rate, the individuals value additions to the output rate at amounts Qa and Qb, whose sum, Qc, the marginal social value, is equal to the marginal social cost. Note that, in economics, a public good is not defined by whether it is produced in the public sector - which also produces private goods (i.e. ones that do not have the characteristics described above) - or the private (where the charitable sector often produces public goods).