'Like, it's the creative vibe, man' (3)

In this series of posts my aim is to argue for deliberate and intentional actions that support creativity in cities and towns, in schools, everywhere.  I am arguing for public art, for public education, for public library services .. the list could go on.

I can already hear the libertarians arguing that this is all a waste of money, that public art and public education means we have to tax people and so we take away their freedom of choice (in terms of how they might choose to spend the money that they lose in taxes). In doing so they show that they either cannot or will not understand some fundamental aspects of their own free market models. They completely miss the mark in understanding anything at all about public and merit goods in a market economy.

Public goods are defined as follows:

"A public good has two characteristics:

Non-rivalry: This means that when a good is consumed, it doesn’t reduce the amount available for others. e.g. benefiting from a street light doesn’t reduce the light available for others but eating an apple would.

Non-excludability: This occurs when it is not possible to provide a good without it being possible for others to enjoy. For example, if you erect a dam to stop flooding – you protect everyone in the area (whether they contributed to flooding defences or not.

A public good is often (though not always) under-provided in a free market because its characteristics of non-rivalry and non-excludability mean there is an incentive not to pay. In a free market, firms may not provide the good as they have difficulty charging people for their use."   

(Source: https://www.economicshelp.org/micro-economic-essays/marketfailure/public-goods/ )

While the street light example is perhaps the economics teacher's classic example of a public good, public art is also a public good under the economic definition. The fact that I look at a piece of public art doesn't in any way diminish anyone else's experience in looking at it (provided I don't get in the way). It isn't 'used up' when I gain its benefit, it isn't 'used up' by my own act of consumption, so it is non-depletable, and non-rival. It is also difficult or impossible for a private provider to charge for its use because by definition these works are in public spaces. 

Merit goods are defined as follows: 

"A merit good has two characteristics:

People do not realise the true personal benefit. For example, people underestimate the benefit of education or getting a vaccination.

Usually, these goods also have a positive externality.

Therefore in a free market, there will be under consumption of merit goods." 

(Source: https://www.economicshelp.org/micro-economic-essays/marketfailure/merit-demerit-goods/ )

The spill over benefits of increased education will not typically be recognised by those consuming it, and so it will be under consumed.  Increased levels of education are for example related to greater worker productivity, and decreased crime. There does seem to be a causal link rather than a simple correlation with regard to crime. Yet these benefits are often not directly available to the consumer of that education, and so are not factored into decisions about the quantity of education that an individual will consume.

Put simply, to use the jargon of the free market, these are examples of market failure. i.e. the market fails to provide the quantities of these goods that are optimal for society. This is exactly WHY it falls to governments (central and local) to provide these goods. The argument most often is not about whether or not to provide these goods, but rather about how much of these goods to provide. I suspect that many libertarians might argue for none at all.

I won't go into the graphical analysis of externalities of consumption as they relate to this issue. Feel free to dig deeper yourself.