Reprise of Public Goods
Returning to Figure 5.2, we summarize the efficiency implications of the var ious types of market failures involving public goods. To reprise, the major problem with toll goods (NE alry, excludability) is underconsumption quadrant-nonriv arising from economically inefficient pricing rather than a lack of supply, per se. Con- gestion usually further complicates these problems by introducing the need for variable pricing to achieve efficiency. In the case of pure and ambient public goods (SE quadrant nonrivalry, nonexcludability), the pervasiveness of free riding gen erally leads to no market supply at all. In specific circumstances (a privileged or in termediate group in which one or a few persons account for a large fraction of demand), however, there may be some, and perhaps even nearly efficient, market supply. In the case of open access resources (SW quadrant-rivalry, nonexclud- ability), inefficiency results because individuals do not equate marginal social costs with marginal benefits but, rather, marginal private costs with marginal benefits. Hence, they inefficiently overconsume and inefficiently underinvest in enhancing open access resources.