Public good is an economic term with a narrow definition. But higher education is unambiguously not a public good. It is excludable, since universities can force students to pay tuition before receiving an education.

In contrast, oil or coal are both rivalrous and excludable, making them private goods, A country can prevent people or firms from using the coal or oil (without paying) and there is a finite amount of coal or oil available in a given area, that is once a well or mine is exhausted, it does not replenish.

While public schooling is certainly not a public good, it may be “good for the public” if it increases overall education levels without any unintended consequences. Even Milton Friedman claims that, because schooling may be an economic merit good, a valid argument may be made for government funding of schools.

For education, the positive externality is the benefits that accrue to me from your education. I think that those benefits tend to be pretty small. You get a higher income, and most of those benefits flow to you. You also get the consumption benefits of your education.

Positive Externalities

• When you consume education you get a private benefit. But there are also benefits to the rest of society.
• A farmer who grows apple trees provides a benefit to a beekeeper.
• If you walk to work, it will reduce congestion and pollution; this will benefit everyone else in the city.

At the moment, there is some evidence of positive externalities of higher education. Especially the effects of higher education on taxes and social contributions net of human capital investments are well documented. However, those positive externalities that have been documented seem rather limited in magnitude.

In the case of education, which is widely considered to be a merit good, pupils and students cannot possibly know the specific private benefit to them of getting good grades at school, college or university.

A number of government services are examples of public goods. Public goods have positive externalities, like police protection or public health funding. Not all goods and services with positive externalities, however, are public goods.

Public goods are goods or services which, if produced, the producer cannot limit its consumption to paying customers and for which the consumption by one individual does not limit consumption by others. Public goods create market failures if some consumers decide not to pay but use the good anyway.

Examples of goods under-provided include merit goods and public goods. Fire service could be considered a public good. Because fire prevention and fire extinguishing services share the characteristics of public goods.

What is it called when demand fails to account for the buyer’s full willingness to pay? Demand-side market failure.

Public goods are necessary due the problem of market failure when people do not benefit or pay for the costs of marketplace interaction. Besides providing public goods, what two purposes can a government serve in a market economy? They can improve the infrastructure of society.

But the outbreak of COVID-19 has prompted many experts to point out that health insurance and preventative care are really “public goods,” resources that everyone uses and shares for everyone else’s benefit.

A pure public good is a good or service that can be consumed simultaneously by everyone and from which no one can be excluded. A pure private good is one for which consumption is rival and from which consumers can be excluded. Some goods are non-excludable but are rival and some goods are non-rival but are excludable.

The private sector comprises of business which is owned, managed and controlled by individuals. On the contrary, public sector comprises of various business enterprises owned and managed by Government.

In economics, there are four different types of externalities: positive consumption and positive production, and negative consumption and negative production externalities. As implied by their names, positive externalities generally have a positive effect, while negative ones have the opposite impact.

Positive externalities refer to the benefits enjoyed by people outside the marketplace due to a firm’s actions but for which they do not pay any amount. On the other hand, negative externalities are the negative consequences faced by outsiders due a firm’s actions for which it is not charged anything by the market.

An externality is a cost or benefit caused by a producer that is not financially incurred or received by that producer. An externality can be both positive or negative and can stem from either the production or consumption of a good or service.

Negative consumption externalities. When certain goods are consumed, such as demerit goods, negative effects can arise on third parties. Common example include cigarette smoking, which can create passive smoking, drinking excessive alcohol, which can spoil a night out for others, and noise pollution.

Externalities both positive and negative lead to market failure because a product or service’s price equilibrium does not accurately reflect the true costs and benefits of that product or service.

The problem with public goods is that they have a free-rider problem. This means that it is not possible to prevent anyone from enjoying a good, once it has been provided. Therefore there is no incentive for people to pay for the good because they can consume it without paying for it.

The National Health Service is therefore not a ‘pure’ public good, defined as accessible to all, and where one persons’ use of the good or service does not reduce the ability of other people to also benefit.