Wanna Argument?
Taxes - to cut or not to cut?
Public goods and private goods
There are certain goods that won't be provided if we leave things completely to the market. For some goods it is impossible to charge for them in the conventional sense. Private goods are goods which firms can restrict to those who pay for them. Once the good has been bought, the person can then consume it themselves and get the benefits from consumption. Public goods are different in nature. They have two important characteristics:
- Non-rivalry - one person consuming the good does not reduce the amount available for other people
- Non-excludability - once the good has been provided, it is not possible to prevent people consuming it, whether they have paid or not. The traditional example given for a public good is defence. Defence is common to everyone and so it is possible for people to become "free-riders" and be defended even though they may not have paid for it. It is also true that one person individually being defended does not reduce the amount by which others are being defended, also making the good non-rivalled in terms of consumption. In contrast, a private good like a Mars bar is rivalled in consumption. Once you've consumed it no-one else (barring regurgitation) is going to be able to consume it. The only way to provide goods of this nature is therefore through taxation. This is where your taxes come in.