Public and Merit Goods

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    Public and Merit Goods

    In a mixed economy the government exists alongside the free market to provide certain goods and services. These tend to be public goods and merit goods because a free market would either fail to provide them or not provide them in sufficient quantities.

    Public Goods

    These are things like street lighting, coast guard, police, fire brigade, and the army.  It is clear that people want streets to be lit and to be kept safe from attack so why doesn’t the market react and satisfy these wants? Why do you believe that private firms would be reluctant to provide these? They have two distinctive features: They are non-rivalry­, meaning that anyone can use it, and they are non-excludable, meaning that they can’t stop people from using it and it is difficult to prevent “free riders”.

     

    Merit Goods

    Merit goods are not provided enough by the private sectors because it is not profitable. They are things like healthcare, education, libraries, sports centers, country parks, public housing, and public hospitals. Public housing and hospitals are public because the people who use these facilities have no or low income to afford it.  Again, people want to be kept well and want to be educated. The market can provide these goods; ESF is a private education provider whilst in the USA healthcare is almost exclusively carried out by the private sector. Why then in many countries do governments step in and provide healthcare?

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