1. Providing Public Goods, A Safety Net

2.  Public Goods
 A shared good or service for which it would be
inefficient or impractical to make consumers pay for
individually or exclude nonpayers.
 Ex: Roads, Dams
 Taxes are used to pay for public goods.
 So we don’t get private bills for public projects.
 Everybody can use public goods.
 The value is not significantly reduced by people.
 The cost is not significantly raised by people.

3.  Cost is the driving force behind public goods.
 Public goods:
 1. Are cheaper to provide publically than they would be to
provide privately.
 2. Benefit society more than they cost.
 Public goods fall into the public sector category.
 Free Riders
 Someone who would not choose to pay for a good or
service but gets the benefit of them if they are provided
as a public service.
 Ex: Public Park

4.  Free-Riders are a market failure.
 Externalities
 An economic side effect that generates benefits or costs to
someone other than the person deciding how much to
produce or consume.
 Positive Externality
 Ex: Fixing up an old house.
 Negative Externality
 Ex: Pollution
 Externalities are also market failures.
 The government encourages positive externalities but aims
to limit negative externalities.

5.  Wealth is spread unevenly throughout society.
 The government tries to help people that are
poor.
 Welfare
 Collected from taxes and given to eligible poor people.
 Began under FDR following the Great Depression.
 Cash Transfers
 Are direct payments of money to poor, disabled, or retired
people.
 1. TANF (Welfare) is for the poor.
 2. Social Security is for the retired.
 3. Unemployment is for the temporarily out of work.
 Must show an effort to get a job.
 4. Workers’ Compensation is for workers injured on the job.

6.  In-Kind Benefits
 Goods and services provided for free or at greatly reduced
prices.
 Ex: food stamps, subsidized housing, legal aid.
 Medical Benefits
 Medicare
 Health Insurance for the elderly and disabled
 Medicaid
 Health Insurance for the poor.
 Education
 The government funds different programs for
impoverished students.

7.  In-Kind Benefits
 Goods and services provided for free or at greatly reduced
prices.
 Ex: food stamps, subsidized housing, legal aid.
 Medical Benefits
 Medicare
 Health Insurance for the elderly and disabled
 Medicaid
 Health Insurance for the poor.
 Education
 The government funds different programs for
impoverished students.