What Characteristics Make a Product a Public Good - Essay Example

What characteristics make a product a public good? Essentially, a product is considered distinct as a public good if it is non-rival (Samuelson & Marks, 471). This means that a public good can be enjoyed by all members of the society without lessening its usefulness. Unlike a private good that individuals compete for its consumption, a public good is consumed simultaneously with others without competing for its value. Thus, the use of a public good by one person does not present a barrier to others to use the same product.

The second distinct quality is non-excludability (Samuelson & Marks, 471). Any product that is considered a public good can be purchased or consumed by members of the society without preventing anyone. Even if one does not have the money to buy the product, an individual can still access it. An example is fireworks. Whether you pay for it or not, if it is set off everyone will enjoy the lights. In contrast, the accessibility of a private product is determined by the owner, and the buyer can do with it as he pleases once he purchases it.

A private product, say a car, for instance, individuals have to compete to buy it, and once one buys it the buyer excludes others from buying it. Using contagious disease control as an example of a public good, suggest the difficulties of comparing program costs and benefits First, comparing costs and benefits in contagious disease control is extremely difficult because it requires examining needs and taking into account the constraints from which to compare them. Hence, determining the optimal utility for each person becomes difficult because there are those will overstate or understate its value (Samuelson & Marks, 483).

Secondly, there is the difficulty of estimating the marginal benefits and marginal costs in money terms. As far as possible, the management of contagious disease must be based on minimum costs. However, it is difficult to determine the standard units when comparing costs and benefits (Samuelson & Marks, 475). Finally, it becomes difficult to compare costs and benefits of the program especially if there is unsatisfactory information (Samuelson & Marks, 484). Thus, true costs and benefits of contagious disease control can only be sufficiently compared when there is perfect information of the program (Samuelson & Marks, 484).

Why is equity often ignored in benefit-cost analysis? Basically, equity is often ignored based on the assumption that the gain by one person will offset the loss by another (Samuelson & Marks, 475). Thus, the marginal utility remains stable. Another rationale is that even if equity is unsatisfactory, often no one is made worse off. Rather, there is someone who is made better. The third reason is the lack of an objective way to evaluate the value of benefit distribution for each individual.

Whereas it is easy to measure the costs of production for a given resources, it is difficult to compare what benefits each individual gets. As such, there is the lack of objectivity in comparing the utility (benefit) for each person for a given costs (Samuelson & Marks, 476). Fourth, distribution of costs and benefits requires a tax structure. However, to have a structure in place it must pass through some political legislation. Thus, even it is evident that there is unfairness in the distribution of benefits; changes can only be effected through the same process.

Hence, it is easier to ignore equity in benefit-cost analysis. Finally, it is assumed that inequities in the distribution of benefits can be offset in the long-run by investing in many projects (Samuelson & Marks, 476). Discuss the challenges of relying on elected officials to determine the management of public goods. One of the reasons is that it is difficult to make corrections where equity is not satisfactory because making changes will involve policymaking from the elected officials. For this reason, it will require time to effect the changes.

In another way, making decisions must involve the approval of the elected officials. Secondly, decisions by elected officials are more influenced by political manipulations than by worthwhile benefit-cost analysis (Samuelson & Marks, 473). Finally, because elected officials reach their decisions based on votes, this process may not lead to true benefits and costs for everyone. Work Cited Samuelson, William F., & Marks, Stephen G. Managerial Economics. Massachusetts, MA: John Wiley & Sons, Inc., 2012. Accessed on 24/10/2014.

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