classic solutions Archives — LIRNEasia


COLLOQUIUM April 1, 2005 In accordance with standard economic principles, an all-hazards early warning system is a public good that is both non-rivalrous (consumption by one economic agent does not prevent consumption by another) and non-excludable (a user cannot be excluded from consuming the good without significant effort) in nature. Given these characteristics and the related “free-rider” syndrome, pure public goods will not be supplied by the market. Goods with significant public-goods-characteristics tend to be undersupplied. The two classic solutions to the problem of funding and the supply of public goods are taxation and the bundling of a public good with a private good. The latter solution is an innovative one that has not been fully explored in the public goods literature nor is there much evidence that such a solution has been deployed in practice.