Public goods and their importance to the society -USA
Divy Dangi
Public good is a good that is non-rivalrous, which means
that the good’s consumption by one person will not reduce it consumption for
someone else. For example, if a person uses a road, it doesn’t reduce its
consumption for the other person travelling on the same road. Another
characteristic of public goods is that they are non-excludable, which means
that it is not possible to exclude anyone from using it. For example, in a
public garden, everyone is allowed to enter and it is not possible to exclude
anyone from visiting the park. It is a good with positive externalities. That
is it provides positive side effects or external benefits to a third party that
wasn’t a part of the decision that caused it. The marginal social benefits are
more than the marginal social costs for public goods.
However, public goods are underprovided in the market.
This is because of the free rider problem that occurs when people consume the
public goods without paying for it. The free rider problem is a problem that
arises from the non-excludability of the public goods. Since people who do not
pay for the good cannot be excluded, the private firms do not produce the good
since it would not be profitable for them to do so. Therefore the market fails
to allocate resources to their production. Thus, Private markets do not provide
some necessary goods and services, such as national defense.
As a result of the free rider problem the government
must usually take over the decision about how and how much of these products to
produce. In order to allocate the resources efficiently produces the good or it
pays private firms to make these products. The payment for these goods are
financed out of tax revenues and are made available to the public free of
charge. However, it is very difficult, in the case of public goods, for the
government to calculate the benefits arising from the public goods because they
are provided free of cost to the public. Therefore, the government uses surveys
and cost-benefit analysis to decided weather or not to produce the public good
or no. If the benefits are more than the costs, then the government provides
the good and vice versa. However,
calculating the benefits is difficult as people may exaggerate the worth of the
good and provide misleading surveys.
Free-to-air
describes television and radio services broadcast are broadcasts that allow any
person with the appropriate receiving equipment to receive the signal without
requiring a subscription. In USA, there are eight major
over-the-air or 'free to air’ broadcast networks: CBS, ABC, NBC, Fox, PBS, The
CW, My Network TV and Ion. The CBS, ABC, NBC and Fox are called the Big Four
since they are the largest of the broadcast networks. PBS (Public Broadcasting
Service) relies on financial support from its viewers rather than government
taxes and license fees. The CW, My Network TV and Ion are smaller
‘mini-networks’ and have fewer local affiliates than the Big Four and are not available
in all areas of the country.
Since free to air broadcasting
is a public good, the free rider problem arises here too. The private firms are
not willing to provide the good since because of the free rider problem the
firms cannot make a profit and people can view or listen to the broadcasting with
paying for it. Therefore, to fund themselves and make profits, they advertise
on the broadcasting media. However to fix this problem and increase the quality
of their broadcasts by reducing advertisements, the
free-to-air services fund themselves using other ways. Taxpayer funding is the
most common way to fund free to air television. The government provides the
private companies funds to run these channels since these channels are used for
emergency broadcasts. Some channels enforce a levy of a license fee for
transmission and production costs. Some are funded with a voluntary donation
for local transmission and production costs (e.g., PBS). Some are also financed
using commercial advertising for transmission and production costs and surplus
revenues returned to the government (e.g., CBC Television). Some channels turn
to Commercial sponsorship of Consumer products and services where part of the
cost goes toward television advertising and sponsorship
To make the free to air
television more widely available and cheaper the US government provides a coupon-eligible converter box (CECB). It’s a
digital television adapter. The subsidy is provided to provide over-the-air
television viewers with an inexpensive way to continue receiving free digital
over-the-air television services after the nation's television service
transitioned to digital transmission.
The use of
government tax revenue and subsidies are useful in providing the free to air
broadcasting and in correcting the under allocation of this type of broadcasting. However, the use of tax revenue to provide these products leads to opportunity cost. The
money used to provide these goods could be used to provide another good that
could be more important like free education, free healthcare or national
defense. It also creates a larger tax burden on the taxpayers as the government
will increase the taxes to fund the free to air broadcasts.
References
http://en.wikipedia.org/wiki/List_of_United_States_over-the-air_television_networks#English-language_American_commercial_over-the-air_television_networks
http://en.wikipedia.org/wiki/Free-to-air#Funding
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