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Forums - General - Another George Bush for US?

ManusJustus said:
That private entity has to have the ability to force customers to pay. If a harbor operates a lighthouse or pays a private lighthouse by charging ships that land there it would work, but it will never be as efficient as a publicly funded lighthouse because there are ships that can still use the lighthouse and do not pay a fee. Maybe they dock eleswhere, just passing through, etc.

In economics its referred to as a free rider problem.

 

If you actually read my post, you would know that I agreed that a lighthouse is a non-excludable service; however, that does not prevent it from being efficiently operated by a private entity. The harbor benefits from paying for or operating its own lighthouse. When a ship docks, it will have to pay for the benefits it received. If a ship is passing through and does not pay at this particular lighthouse, it will eventually have to port and pay for the benefits it obtained. It cannot escape from paying for the benefits it receives. All the ports would eventually benefit, and the ports that do not make enough money would close because there is not enough demand for a port in that particular location. 

There are also other public goods (goods that are non-excluable and non-rivalrous) that are distributed by private entities. Free television and free radio are both examples of public goods provided by private entities. Once a broadcast network broadcasts a television show, it cannot exclude anyone from it nor does someone watching it preclude someone else from enjoying the television show; however, advertisers pay the bill and government does not have to fund the public good.



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The lighthouse cannot force all ships who use its services to pay.  If the ship happens to dock in the port then it can be forced to pay a fee, but ships passing by or docking elsewhere who use the lighthouse do not have to pay a fee.  Thus, free rider problem and the lighthouse is less efficient.

Yes, many public goods can be provided by private companies through government regulation.  The government must heavily regulate these companies though because they have little incentive to provide cheap and quality goods or services.  A private water company operating the only pipeline in town has a monopoly, so you have to buy their water, and they have no incentive to provide water cheaply nor do they have an incentive to provide clean water.

In these cases the private company usually leases the right to provide the good from the government who is the actualy owner/overseer of the good.  Why not cut out the middle man?  What use is there for a private business if there is no room for competition and improvement from it?  Publicly ran facilities usually run better anyway (sometimes not in America do to lack of oversight, no bid contracts, etc.  but you have that problem at the top too), with profits going to city hall instead of a business owner who has to turn a large profit on his investment.

You'll also find the government heavily involved in traditionally private goods, such as food.  Thankfully government regulation is there so I dont have to worry about samonella in my spinach (how did it get there in the first place?)