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Public Goods

Public goods are services or commodities that governments, organizations, or even
individuals provide to the society for free. They are characterized by two attributes. First, they
are non-excludable. This means that a consumer cannot be prevented from accessing a public
good because of non-payment for the good (Dasgupta, 2017). Secondly, they are non-rivalrious.
This means that consumption of a public good by one consumer does not prevent simultaneous
consumption of the same good by other consumers.
Description of three public goods and how they impact society domestically and internationally
Three examples of public goods provided by public institutions include national defense,
street lights, and public infrastructure. All of these three goods are both non-excludable and non-
rivalrious. For instance, a country’s military protects every citizen of the country, including those
who do not pay taxes. Additionally, protection of one citizen does not prevent another citizen
from receiving similar protection simultaneously. Similar attributes apply to street lights and
public infrastructure.
Provision of these public goods has a major impact to the society. One impact is
enhancement of security. The military and police keep members of a country from being harmed
from both external and domestic threats. Street lights too enhance public safety as any criminal
act can be easily identified. Public infrastructure such as roads also improve security by allowing
members of security agencies to quickly access areas where their services are needed. Apart
from security, public goods also enhance trade, both local and international. Public infrastructure
works such as ports and railways make it easier for goods and people to move in and outside a
country.

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How demand and supply of public goods is affected by external, environmental, economic, and
political factors
When deciding whether or not to provide a public good, governments often carry out
cost-benefit analysis (Dasgupta, 2017). This analysis involves determining the cost of providing
a particular good and the potential benefit of the good. The costs and benefits of a public good
are both financial and non-financial. Generally, the government is likely to provide a public good
if its benefits to the public are great and unlikely to provide it if the costs are too high and
benefits minimal. For instance, the government may decide against building a port if it is going
to destroy the environment regardless of the potential benefits of the port to the society. It may
also decide to provide a public good for political reasons. For instance, a government may seek
political support when elections are nearing by building multiple roads in a region it seeks the
support from.
Arrow’s Impossibility Theorem
Arrow’s Impossibility Theorem states that when adhering to mandatory principles of fair
voting procedure, it is impossible to determine a clear order of preferences (Elahi, 2017). These
principles of fair voting procedure include non-dictatorship (putting into consideration wishes of
all voters), Paretto Efficiency (respect for unanimous individual preferences), and independence
of irrelevant alternatives (order of choices should not change if one choice is removed) (Elahi,
2017). Since voting is the main method used to determine a common good, Arrow’s
Impossibility Theorem suggests that serious flaws in ranked voting system prevent such system
from establishing what the common good is. According to the theorem, it is impossible to have a
collective democratic will. The theorem’s effect on political process is that it rejects concepts of

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democracy such as the belief that laws and policies should reflect the people’s will since it is
impossible to determine the will of the people.

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References

Dasgupta, P. (2017). Kenneth Arrow on Public Goods, Public Policy, and Environmental
Economics. Econometrics Society.
Elahi, K. Q. I. (2017). A difficulty in Arrow’s impossibility theorem. International Journal of
Social Economics.