According to Due & Friedlender (1977), ‘ Unlike apples or automobiles, which can be purchased individually by different people, these goods can only be consumed collectively-that is, jointly and indivisibly – by society as a whole. These are known as public goods.’ In the words of W.J. Boumol (1980), ‘ A pure public goods is one which can serve a small or large number of persons at exactly the same total cost. The marginal cost of an additional user is zero.’ Musgrave & Musgrave( 1989) states,’ Social or public goods are goods the benefits of which are available in a nonrival fashain, such that A’s pertaking in the benefits does not interfere with B’s .” According to Prof. Samuelson a public goods is consumed by the individuals in equal quality and is indivisible and hence jointly consumable. Non appropriability, non rivalary in consumption and non excludability are the characteristics of public goods (Due & Friedlender, 1977). A public goods is nonrival ie jointness in consumption such as street lightening. The cost and benefits of a goods may be internal or external. In ‘internal’ the costs and benefits are enjoyed exclusively by producers and consumers of that goods. But the costs and benefits accrue to the third parties in ‘extenal’ Externalities may be called ‘spill overs’, ‘social costs’ or ‘ neighbourhood effects’. Watson & Gaze (1995) has rightly stated, ‘ The essence of all concept of externality is the absence of compensation. Those receiving benefits in the form of greater utilities or lower costs do not pay for them, and those causing others to have higher costs don’t pay anything to offset the higher costs.’ Pappas & Brigham (1979) defines externalities as, ‘ those benefits (and costs) which affects persons and concern other than the producers and consumers of a goods.’ The different types of externalities include consumption externalities ( positive , negative), production externalities ( positive, pecuniary, technological, and negative). Pappas & Brigham ( 1979) states, ‘ The market imperfections or market failures, situations, where the market does not provide the appropriate cost or benefit signals, give rise to an active government role in the workings of the economy.’ Watson & Gaze writes, ‘ although externalities are a common feature of modern economics, the expense and difficulty of government action are justified only when the value of externalities is large.’
Posted on: Sat, 26 Oct 2013 02:21:05 +0000