Question

Our government provides many goods and services, e.g. police, national defense, and roads, but most goods

and services are provided by the private sector, e.g. cars, food, etc. In recent years most stadiums (e.g.

Century Link Field, Safeco Field, and the Seattle Coliseum) have been provided by city and/or county

governments.

Develop criteria for when the government rather than private sector should produce certain items. What types

of items should be produced by the private sector (capitalism), and what type should be produced by the

government (socialism)?

For items meeting your criteria, explain why their production shouldn’t be left to

the private sector.

Think of how capitalism decides what and what not to produce.

How do your criteria

relate to golf courses and indoor ski hills? Should the government or the private sector provide them?

Address who pays the cost of the item if it's produced by the government and if it’s produced by the private

sector. Who should pay the cost? Address economic efficiency; is the right amount produced, i.e., with

capitalism are we at the optimal point on the PPC or would too many or too few golf courses and indoor ski

hills be produced.

Answer 1

There are mainly three types of goods as far as consumption is concerned- Public, Private and Mixed.

Public goods are the ones where the consumption by one doesn’t exclude other. For example, a US armed forces defend all US citizens. Me being protected will not make anyone else less protected. Private goods are the ones where consumption by one would reduce someone else’s consumption. A simple example of it would be liquor. If I consume a bottle of whiskey, that’s one bottle less for the overall public. Mixed ones are where there are both public and private benefits. City transport would be an example of it. There are subways and public buses available, but so are Uber and Taxis for hire. In this case government provided for all transport is available, but so is better transport for those want to and can pay more.

Public goods should be produced by the government while private goods should be produced by the private sector.

The reasoning behind this is two fold. The main reason is that public goods are inherently hard to predict the demand and supply for. How much of defence to produce? How much for defence is each citizen willing to pay? If there is no idea of demand and supply, its not possible for the private sector to produce that particular product.

The second reason is that there are certain goods that everyone in a society should have access to. This includes defence, as included above, roads, public shelter and more. This should be without the personal paying capacity of the individual. The private sector, being profit driven, cant be expected to produce these goods for everyone.

The private sector should provide for golf courses and skis. If they get produced by the government, public as taxpayers would be funding the projects. As a private sector production, people willing to pay for them would be paying for them. Private users who will be using them should pay for them.

Capitalism will indeed produce the right amount of golf courses and skis. As long as there is demand and profits to be made, private sector will build the courses and skis. When demand equates supply, there will be no more profits to be made and the building of these would stop. This would lead to the exact right amount being produced.