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Lesson 1.3: Public Goods and Services

Objective
Government’s role extends beyond creating and enforcing laws. Governments also provide us with public goods and services. This lesson introduces the concept.

Teacher's Background Information: Foundational Reasons for Public Goods and Services?
Generally, public goods are goods that have shared consumption and are non-exclusionary. To illustrate these two concepts, consider a local park. The park allows shared consumption because many people receive the benefit from it at one time. The park is also non-exclusionary because everyone is entitled to use it, regardless of social or economic status.

The same logic applies to roads, sidewalks, and bridges, which are all public goods. Most museums and libraries are also public goods. In Canada, the vast majority of health care and K-12 education fall into the realm of public goods, though they are often referred to as public services.

Public goods and services are paid for by taxes. Sometimes, the costs are offset by user fees. For example, consider public transportation. Governments invest tax dollars in public transportation systems. However, we also pay a fare when we board a bus. Together, the government subsidy and the user fees cover the full cost of the bus service.

Because bus fares have a greater impact on low-income earners like students and seniors, certain people are eligible for discounted fares. Basing fares on ability to pay helps ensure that the cost is more fairly distributed. Some critics, however, say that a good like the bus is not truly public unless it is free for everyone.

According to the Henry George Foundation of Great Britain—named after the influential 19th-century social reformer—“the value of [public] services does not relate to the cost of providing them but rather to the value that would be lost if they were not provided.” Think again of the example of public transportation. It provides an affordable means to travel, be it for work, shopping, or socialising. This helps individuals, businesses, and community groups. There is also the advantage of reducing the number of vehicles on roads. Reduced traffic benefits people who use their own car. As well, reduced traffic cuts back on pollution, improving the overall health of society and the environment. Thus, the value of public transportation cannot be reduced to the simple cost of running busses.

Think about other public services, such as fire and police protection, sewage and sanitation systems, public housing, and health care and education. Their value as a whole simply cannot be measured by their financial cost. Their value must be considered in the broader context of how the good or service contributes to the well-being of society as a whole.

Another reason why governments provide particular goods and services is due to a concept called market failure. Market failure exists when:

  • a good or service would not or cannot be adequately provided by the private sector, or
  • the risk to society is high if the private-sector provider failed

To illustrate market failure, consider water utilities. It is doubtful that it would be economically feasible for a private-sector provider to build a city’s entire water system. Even if a private provider built the infrastructure, if they went bankrupt the company could just walk away, leaving the public without access to safe water. After all, private-sector organisations are ultimately responsible to their shareholders, not their customers. The public sector, on the other hand, is ultimately responsible to all citizens, accountable through the democratic process. Since the state will always be there, it is best-suited to provide cities with water.

Of course, the government does not provide non-necessary goods and services that can be provided by the private sector. For example, a functioning society would not be at risk if there was a collapse in the provision of pantyhose. Therefore, government does not manufacture, distribute, or sell pantyhose.

Public goods and services fulfill a unique social purpose. They help create an equal, functioning, and healthy society. Further, public goods and services have a democratic function. With public goods and services, every citizen is an equivalent owner. Thus, every citizen—regardless of wealth or social status—has an equal say in how these goods and services are provided.

Procedure
1.To introduce the idea of public spending, discuss the idea of how K-12 schooling is a public good.
KEY QUESTIONS

  • Are citizens unable to attend public school if they are unable to pay?
  • Would that be different if schooling was not a public good?
  • What would the short-term and long-term consequences be if education was not a public good, but rather based on ability to pay?

2. Using background information, discuss the concept of public goods and services. The overhead Government of Saskatchewan Public Spending can help illustrate this point.

3. Lead classroom reading of The Purpose of Public Spending.
KEY QUESTION
• All citizens are equal. Why must we ensure that certain goods and services are equally available to all citizens?

4. Students may research and report on the goals, benefits, and critiques of a particular public good or service. Starting points for research could include policy think-tanks, such as the Canadian Centre for Policy Alternatives and the Fraser Institute.

FURTHER EXPLORATIONS
5. To introduce some ways that public goods and services are accountable to citizens, check out Ombudsman Saskatchewan. Their learning resources offer:

  • information about the role of the Ombudsman
  • case studies about how the Ombudsman ensures fairness for citizens
  • guest speakers for classrooms

6. Social Services and Assistance is the third-biggest area of provincial expenditure. Social Assistance is direct cash payments to citizens whose incomes are inadequate to meet basic needs. Nick Falvo, Director of Research and Data at Calgary Homeless Foundation, has written a useful introduction for understanding the purpose and shortcomings of social assistance. Check out “Ten Things to Know About Social Assistance in Canada.”

Government of Saskatchewan Public Spending

Overhead

The Purpose of Public Spending

Handout

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