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Public goods
 

 

Goods which, because they cannot be withheld from one individual without withholding them from all, must be supplied communally. For example, it would not be possible to exclude any one individual from 'consuming' national defence, street lighting or general police protection. Unless this exclusion could be made, a private entrepreneur would not undertake to supply these services, because he would not have the power to force the community as a whole to pay him and he could not exclude anyone who did not pay him from consuming the goods. Since the state can raise revenues by taxation, it alone can finance the provision of public goods. A further important property of a public good is that consumption of it by one individual does not reduce the amount available for consumption by others. Note that this definition does not apply to all goods publicly supplied. Many of the goods supplied by the state could be supplied privately, and some indeed are; the best examples being housing, education and specific police protection. The non-pure, or 'quasi' public goods, are supplied by the state and financed out of taxation because it is considered that their quality and/or quantity of supply would be inadequate under private provision.

Reference: The Penguin Dictionary of Economics, 3rd edt.