Question

In Opportunity for All, the federal government announced it will try to cut Canada’s poverty rate in half by 2030. Advocates of antipoverty programs often claim that fighting poverty is a public good.

a. What are the defining characteristics of a public good?

b. Explain what these advocates mean by classifying charity as a public good.

c. What does this have to do with the need for government intervention?

Answer 1

a. Public goods are the ones that are non-excludable and non-rivalry in nature. Non-excludability means that no person can be excluded from using it and non-rivalry means that consumption of it by one individual does not decrease the quantity consumed for another individual. Examples of public goods are parks, public libraries, air, national defense, etc.

b. Charity creates a positive externality to society, which means they can be provided as a public good. Charity is provided to the poor and needy for their betterment. Thus providing charity benefits the society and creates positive externalities and positive effects on society.

c. There is a need for government intervention because public goods are provided by the government of the country. On the other hand, private goods are provided by private companies and are excludable and rivalry in nature. The government even charges taxes when there are negative externalities created by an individual or firm to society. These taxes charge the amount of negative costs that the firm or individual creates on society.