Location Transport

Provide some examples of a beneficial externality besides education and vaccination.?

Also, is the public transport system in Sydney and Melbourne a good example of a public good?

Public Comments

1. An externality is an unintended effect. For example, people commute everyday because they need to go to work. An externality of commuters around the world is air pollution, noise pollution and increased wear and tear of the roads. Not all externalities are bad - but we try to minimize the harsh effects of those that are bad. This is called "internalizing the externality." To go off the example above, London introduced a congestion tax (driving tax). If you drive in London between certain hours you have to pay a hefty fee. This fee is SUPPOSED to go towards maintaining the roads and improve public transportation infrastructure - while simultaneously encouraging people to take mass transit. This will help reduce road clogging and pollution. They're trying to initiate this in busy U.S metropolitan areas. I don't see how education and vaccinations are externalities... Public transportation is NOT a public good in the economic sense. A "public good" does NOT mean that the government pays for it in some uses of the term! A public good is a good which can't be used up by an individual, thereby excluding another person from being able to use it. If I breathe air it doesn't mean that you'll have no air to breathe. So, air is a public good because it is available to all users regardless of usage. A lighthouse is the token example of a public good - if one boat uses the guidance from a lighthouse it doesn't exclude other boats from using it, too. On the other hand, there IS a limited number of seats available to persons who want to go on the train or bus - most of the time you'll see a "Max. # --" on the vehicle denoting how many people can legally and safely ride. Since there is limited space available, public transportation is a "rivalrous," "non-public" or "excludable" good. There is an exhaustible supply of seats on the train - so not everyone can go on it. * * The guy below me took "public good" to literally (me thinks!). "Public good" is an actual economic term, as I've described above. A government-subsidized transportation system is "public" but it isn't a "public good" in the true economic sense.
2. An external benefit could be in algae production. An algae farmer will farm algae to sell on the algae market (whatever that is), but as an external benefit, algae production creates oxygen and cleans the air. If the algae farmer only creates algae to optimize his producer surplus in the algae market, he (more than likely) won't capture all of the external benefit to society. It would be wise, in this case, for the government to subsidize the farmer on a per-unit basis so that he produces the SOCIALLY optimal amount of algae (which will be more, so that he cleans more air). In regards to your second question, yes, public transportation is a public good, paid by the government using taxpayer dollars. With public transportation, if you live in a city/county that is serviced by the public transportation, you'll usually pay a tax on that, whereas cities that do not have that particular public transportation do not pay that tax. Hope that helps. *** EDIT: G_Elisabeth - Actually, the economic definition of "public good" is a bit more in-depth than the literal definition, and your example of air as a public good is the literal definition. A public good is a good that no one person can claim individual property rights to, yet everyone can use. That is the literal definition, which you used. In economics, however, we learn that public goods would not exist unless some form of government pays for it through the use of taxpayer dollars, because although everyone receives some benefit, no individual would want to front the whole cost. Public transportation is an example of a public good in economics. A classic example of a public good is a levee that could be installed in a town that is prone to floods. The floods cause $100 a year in water damages to each house in the town (let's say there are 10). The levee costs $500 to build (and lets say $500 each following year to maintain, for argument's sake). If each house were to be taxed for the levee, and pay equally, it would seem to be a good deal; pay a $50 tax to avoid $100 in damages. However, no individual house would want to pay $500 to save $100, it doesn't make economic sense. Unless the houses unite together (like a government) and agree to share costs (like a tax), the levee won't get built and the town remain worse off. When the levee is built, they all receive utility, and it is the government that owns the levee, thus the levee is a public good.