A widely accepted concept is that the goods that markets cannot or fail to provide efficiently, are provided by the government or public institutions. Public goods include both goods and services (Anomaly, 2015). These goods are called public goods and they include both goods and services. This essay discusses about the impact a few public goods have domestically and internationally and how their demand and supply are affected by different factors. It also gives insights on the Arrow’s Impossibility Theorem and its effect on the political process.
A very common public good that is provided by all governments is vaccination. Public institutions provide vaccination for diseases like measles, polio, small pox and other such diseases to the citizens (Halonen-Akatwijuka, 2012). This at a domestic level helps in preventing the prevalence of these diseases, as they are communicable as it improves the quality of life and life expectancy of the country’s individual at the same time. At the international level this will not spread further diseases across borders to countries that are not as advanced to have technologies to prevent the rampant spread of these diseases. Education that is public schools is also another public good as both government and society will reap benefits from increased schooling. After obtaining education when the labour enter the market not only would they earn more, but also the quality of their output would be higher. When this labour would migrate then the international terms of trade for the country will improve and this will lead to an increased welfare. Lastly, postal services is another public good which if provided efficiently leads to increased benefits. These range from quicker trade due to faster delivery of goods to lesser loss due to damage and displacement. Moreover, when the postal service is in the hands of the government it builds a sense of trust and faith, which helps increase business activities making the economy open to production and trade.
The supply of public goods is dependent on the economic considerations because production of some goods, if not taken into the hands of the government leads to market failures. Government also take the decision to supply a particular good if it realizes that it is more efficient for the good to be produced by the government and not privately. The level of demand will also be a deciding factor in making supply decisions and only those goods with a widespread demand should be publically supplied (Hyman, 2014). On the demand side however, there is no proper way to gauge the demand of goods. Contingent valuation can be used to gauge demand. Environmental factors also lead to the supply of public goods, as it is important for public institutions to step in if the good can pose less threat to the environment or for that matter political economy.
The arrow’s impossibility theorem is a social choice theory where when an individual has three or more choices and two or more decision makers there exists no preference ranking, which would satisfy the conditions of non-dictatorship, unanimity and independence of alternatives that are not relevant and respects transitivity (Pierre, 2015). This has been applied in the political issue of social choices, which says that there is no social choice that will satisfy the interest of all.
Anomaly, J. (2015). Public goods and government action. Politics, Philosophy & Economics, 14(2), 109-128.
Halonen-Akatwijuka, M. (2012). Nature of human capital, technology and ownership of public goods. Journal of Public Economics, 96(11-12), 939-945.
Hyman, D. N. (2014). Public finance: A contemporary application of theory to policy. Cengage Learning.
Pierre, J. (2015). Varieties of capitalism and varieties of globalization: comparing patterns of market deregulation. Journal of European public policy, 22(7), 908-926.