A Level Economics Essay November 1995 - Market Failures
...a public good because there is no opportunity cost for extra consumers. For efficiency, the government needs to pay for public goods through taxes. A merit good is a good that society, or usually the government, deems is undervalued by consumers in normal market exchanges. As such, governments typically promote the consumption of merit goods through policies such as price subsidies or direct government provision. Merit goods are often near-public goods or have externality benefits, such as education. Education is an externality benefit when members of society other than students benefit from a more educated population. Examples of merit goods are education and health care. For near-public goods, it is easy to keep people away, and thus you can charge them a price for consuming, but there is no real good reason to do so. This is because in terms of efficiency, the more people who consume a quasi-public good, the better off society. The river control implemented by the UK government in this case will benefit the people in general because the pollution of the river, a potentially hazard to public health, would be lessened or eliminated. In light of this, it may be said that the river control is a public good. However, the definition stated for a merit good is that it is a good that is undervalued by society in normal market exchanges. Since the average person would most probably undervalue the importance of the river’s cleanliness in their daily proceedings, river control may also be a merit good. In this case, the government’s actions in protecting the river is more of a merit good because the government has shown greater foresight than the average person ever would. While the average person may possibly think of the dangers of the river’s pollution, it is doubtful that he would see the less obvious implications of excessive building development along the river and the possibility of flooding in areas around the river. Thus, the government has taken action to promote a good (river control) which is in my opinion undervalued by society. Hence, river control is a merit good rather than a public good. River control is not a private good simply because it would be nearly impossible to prevent non-paying consumers from benefiting from it. Also, the benefit (consumption) of it by one person will not deny another of the same benefit. Thus the criteria for a private good are not met by river control and therefore it is not a private good. However, river development is a private good. The industrialists looking to build factories or ...