Are Public Goods Myths?

Abstract

This paper makes the case that nonrivalness and nonexcludability properties of public goods are still relevant and crucial considerations. Although these characteristics of publicness may be socially endogenous with institutional choice, these properties are not necessarily determined by this choice. For club goods, a wide range of institutional structures are consistent with the same properties of publicness. Even when these publicness properties are endogenous, the resulting characteristics of the public good are still important for comparing equilibrium outcomes with social optima. Although public good theory has been misused by some to support public provision of such goods, this misuse does not mean that the modern theory is devoid of interest.