Public Goods Explained: Definition, Examples & How They Work

What Is a Public Good?

A public good is a commodity or service that every member of a society can use without reducing its availability to all others. Typically, a public good is provided by a government and funded through taxes.

Examples of public goods include town roads, parks, and schools. National defense is also a public good. Public goods can also include basic needs like clean air and drinking water.

Understanding the Mechanisms of Public Goods

The main criteria that distinguish a public good are that it must be non-rivalrous and non-excludable. Non-rivalrous means that the goods do not dwindle in supply as more people consume them. Non-excludability means that the good is available to all citizens.

The point of contention is called the free rider problem. Public goods are available to everyone, whether or not they have paid for them. Some members of society use the good but are unable or unwilling to help pay for it. Those who don’t pay taxes are essentially taking a "free ride" from those who do.

Comparing Private and Public Goods

The opposite of a public good is a private good, which is both excludable and rivalrous.

Private goods can only be used by one person at a time—a piece of jewelry, for example. In some cases, they are destroyed in the act of using them, such as when a slice of pizza is eaten.

Private goods generally cost money. Most of the goods and services that we consume or use in our everyday lives are private goods. Although they are not subject to the free rider problem, they are also not available to everyone, since not everyone can afford to purchase them.

Sometimes, public goods aren't fully non-rivalrous or non-excludable. For example, a town swimming pool is a public good open to all residents, but it might charge a small fee.

Some goods are "quasi-public" because, even though they are available to all, their value decreases as more people use them. For instance, roads are accessible to all citizens, but they lose value when congested during rush hour.

Global Perspectives on Public Goods

Every nation makes its own decisions on which goods and services should be considered public goods, and this is reflected in their national budgets. For example, many argue that national defense is an important public good because the security of the nation benefits all of its citizens.

Many countries heavily invest in their militaries, funding army maintenance, weapons, and R&D through taxes. In the United States, for example, the Department of Defense (DoD) has a budget of $1.52 trillion, equal to 12.8% of the total federal budget for the 2023 fiscal year.

Many countries consider essential services like healthcare and education as types of public goods. Taxpayer-funded healthcare is provided by nations including Canada, the United Kingdom, France, Germany, Italy, and Israel.

Government investments in public education have grown tremendously since the 1950s. According to Our World in Data, the percentage of the world’s population that has received at least some basic education has grown from about 49% in 1950 to more than 86% in 2020 (the most recently available data).

Advocates argue that government spending has economic and social benefits like better workforce participation, skilled industries, and lower poverty rates. Critics say it burdens taxpayers and that the private sector can provide these goods more efficiently.

The Bottom Line

A public good is a commodity or service that every member of a society can use without exhausting the supply of it that is available to others. National defense, effective policing, clean air, and public education are all examples of public goods.

Private goods, unlike public goods, are inherently scarce and become more scarce as people consume them.