Glossary: Public Goods
- additional external cost
- additional costs incurred by third parties outside the production process when a unit of output is produced
- biodiversity
- the full spectrum of animal and plant genetic material
- command-and-control regulation
- laws that specify allowable quantities of pollution and that also may detail which pollution-control technologies must be used
- externality
- a market exchange that affects a third party who is outside or “external” to the exchange; sometimes called a “spillover”
- free rider
- those who want others to pay for the public good and then plan to use the good themselves; if many people act as free riders, the public good may never be provided
- intellectual property
- the body of law including patents, trademarks, copyrights, and trade secret law that protect the right of inventors to produce and sell their inventions
- international externalities
- externalities that cross national borders and that cannot be resolved by a single nation acting alone
- market failure
- When the market on its own does not allocate resources efficiently in a way that balances social costs and benefits; externalities are one example of a market failure
- marketable permit program
- a permit that allows a firm to emit a certain amount of pollution; firms with more permits than pollution can sell the remaining permits to other firms
- negative externality
- a situation where a third party, outside the transaction, suffers from a market transaction by others
- nonexcludable
- when it is costly or impossible to exclude someone from using the good, and thus hard to charge for it
- nonrivalrous
- even when one person uses the good, others can also use it
- pollution charge
- a tax imposed on the quantity of pollution that a firm emits; also called a pollution tax
- positive externalities
- beneficial spillovers to a third party or parties
- private benefits
- the dollar value of all benefits of a new product or process invented by a company that can be captured by the investing company
- private rates of return
- when the estimated rates of return go primarily to an individual; for example, earning interest on a savings account
- property rights
- the legal rights of ownership on which others are not allowed to infringe without paying compensation
- public good
- good that is nonexcludable and nonrivalrous, and thus is difficult for market producers to sell to individual consumers
- social benefits
- the dollar value of all benefits of a new product or process invented by a company that can be captured by other firms and by society as a whole
- social costs
- costs that include both the private costs incurred by firms and also additional costs incurred by third parties outside the production process, like costs of pollution
- social rate of return
- when the estimated rates of return go primarily to society; for example, providing free education
- spillover
- see externality
