Public Goods

The Government provides the following definition for a public good (pdf):

A commodity or service which if supplied to one person can be made available to others at no extra cost. A public good is this said to exhibit non-rival consumption: one person’s consumption of the good does not reduce its availability to anyone else… The extreme or `polar’ case of a `pure’ public good has been defined by Paul A. Samuelson as a good which is: 1. non-rival in consumption; 2. has the characteristic of non-excludability – that is, if the good is provided the producer is unable to prevent anyone from consuming it. This latter characteristic prevents private markets from functioning since a seller would be unable to ensure than only those individuals who paid for the good could obtain it… Where exclusion is possible or where consumption is not completely non-rival we have an example of a mixed good(or impure public good)…

`Where consumption of a good is non-rival, the charging of a price for the good or service is, in terms of the Pareto principle, inefficient. This is so because adding an extra unit of consumption provides a benefit to the consumer without imposing any costs, while the charging of a price would prevent some consumption from taking place – thus causing a net loss of satisfaction or utility. It follows that, even when it is possible, the provision of a public good through a private market will not enable the best or `optimal’ level of output to be produced. As we have seen, in the case of non-excludability, a market cannot operate at all.

`The provision of a public good is a matter of collective choice. Generally, we expect to find public goods provided by governments and paid for through compulsory taxation. An alternative solution would be for all the members of a community to make a voluntary agreement to provide and pay for the good. The difficulty with this solution is that individuals may conceal their true valuation of the good in order to escape payment (ie they may seek to be free riders)….’

`Examples of public goods include national defence, street lighting, and environmental protection…’ [Pearce 1986]

`Goods which, because they cannot be withheld from one individual without withholding them from all, must be supplied communally. For example, it would not be possible to exclude any one individual from `consuming’ national defence, street lighting or general police protection…. Since the state can raise revenues by taxation, it alone can finance the provision of public goods… Note that this definition does not apply to all goods publicly supplied. Many of the goods supplied by the state could be supplied privately, and some indeed are; the best examples being housing, education and specific police protection. The non-pure, or `quasi’ public goods, are supplied by the state and financed out of taxation because it is considered that their quality and/or quantity of supply would be inadequate under private provision.’ [Bannock et al. 1984]

Under this definition public information are public goods and subject to policy choice. Publicly produced information were treated as public goods by the second edition of the Australian Government Cost Recovery Guidelines and current Public Data Policy is for open access.

The diagrams below summarise the economic reasoning to publicly fund public information. The Marginal Costs v Benefits diagram shows the marginal or additional cost for each additional use in black and the marginal benefit or additional revenue from each use in green. The Cost v Benefits diagram shows the total values at each level of use. Note the lack of additional cost from reuse and the high level of benefits available from having public goods used as much as possible even if benefits are low for individual users.

Other than for access costs there are no further production costs to access or use public information. The information is left unchanged.

The Government may decide on a new policy to implement use charges for publicly produced information. If so then that would redefine the role of general government services in the economy.