In this chapter and the previous chapter, we explained that some "commodities" cannot be fully provided by the market. The market cannot guarantee that the air we breathe is clean, nor can it guarantee that our country will not be invaded by foreign countries. On the contrary, society relies on the government to protect the environment and provide national defense.
Although the problems we consider in these two chapters originated from many different markets, they have a common center. In all cases, the market cannot allocate resources effectively because property rights are not well established. In other words, something of value has no legal right to control its owner. For example, although no one doubts that clean air or national defense is valuable, no one has the right to price it and profit from its use. The pollution in the factory is so serious that individuals charge those who are protected for profit.
When the lack of property rights leads to market failure, the government may solve this problem. For example, sometimes, in the case of selling pollution permits, the solution is for the government to help determine property rights, thus reviving market forces. Other times, such as when the hunting season is restricted, the solution is for the government to regulate private behavior. Sometimes, for example, in the case of providing national defense, the solution is that the government provides goods that the market cannot provide. In all cases, if we can plan and implement policies well, we can improve the efficiency of resource allocation and thus improve economic welfare.
abstract
The difference between articles lies in whether they are exclusive and competitive. If it is possible to exclude someone from using something, it is exclusive. If one person's enjoyment of an item excludes others' enjoyment of the same item, then the item is competitive. Market operation is most suitable for exclusive and competitive private goods. Market operation does not apply to other types of goods.