13: Positive Externalities and Public Goods
- Page ID
- 181245
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 13.0: Introduction
- This page examines the economic principles of technological advancements through the example of NASA's Voyager I. Launched in 1977, Voyager I yielded valuable data and societal benefits, highlighting the government's role in fostering innovation. It discusses the importance of government support in the development of modern technologies, such as GPS.
- 13.1: Investments in Innovation
- This page explores the positive externalities of technology and education, noting the gap between private and social benefits. It highlights competition's dual role in innovation and the underinvestment in research due to social benefit distribution. Walter McMahon underscores education's societal advantages, prompting government subsidies, while Carlota Perez addresses ICT's potential for environmental improvements alongside challenges.
- 13.2: How Governments Can Encourage Innovation
- This page discusses the role of intellectual property rights, like patents and copyrights, in driving innovation by providing exclusive rights to inventors. It highlights U.S. government policies that support research and development through funding, tax incentives, and collaboration between universities and industries.
- 13.3: Public Goods
- This page explores public goods, characterized as nonexcludable and non-rival, leading to free-rider challenges that necessitate government intervention for funding through taxes. It also discusses common resources, like conch, and how community-managed approaches can prevent overharvesting without external regulation. Additionally, the text highlights public health advancements that boosted life expectancy, while warning about technological inequalities that may exacerbate skill and wage gaps.
- 13.4: Key Terms
- This page defines key concepts of externalities and public goods: positive externalities provide benefits to uninvolved third parties; free riders benefit from public goods without contributing. Intellectual property laws safeguard inventors' rights. Public goods are nonexcludable and nonrivalrous, complicating their sale. Social benefits blend private and external gains, while social rates of return highlight societal advantages, exemplified by initiatives like free education.
- 13.5: Key Concepts and Summary
- This page emphasizes the critical role of innovation in competitiveness while addressing the challenges inventors face from easy imitation. It discusses the importance of capturing social benefits from new technologies and advocates for government policies like patents and funding to foster innovation. Furthermore, it defines public goods, highlighting their nonexcludable and non-rival nature, alongside the free rider problem and the necessity for funding mechanisms to support these goods.
- 13.6: Self-Check Questions
- This page explores market demand curves, externalities, and the impacts of R&D investments, highlighting how positive externalities influence profits and societal benefits. It uses examples of companies' investment plans and the advantages of cleaner neighborhoods. The text also examines the dual benefits of education and discusses nonexcludable goods and non-rival consumption, aiming to understand their implications for policy and economic outcomes.
- 13.7: Review Questions
- This page examines the effects of company R&D investments on positive externalities and demand for borrowing, highlighting the private market's lack of incentives for technology development. It also addresses governmental strategies for fostering new technology, outlines the characteristics and examples of public goods, discusses the free rider problem, and explains the reasons for federal funding in national defense.
- 13.8: Critical Thinking Questions
- This page discusses the differences between public and private goods, government involvement in technology funding, and public broadcasting financing challenges. It questions whether companies can capture all social benefits from their innovations, the need for government support, and how public television manages free-rider problems.
- 13.9: Problems
- HighFlyer Airlines seeks to enhance passenger comfort and ticket sales by increasing cabin space through evaluated R&D projects, considering both financial and social returns. Meanwhile, government intervention could promote fuel-efficient car production by mitigating the disparity between private and social costs. Additionally, sisters Becky and Sarah struggle with coordinating room cleaning, potentially resulting in neither of them completing the task effectively.