Application Of Public Goods Theory:

A pubic good, as defined by economic theory, is a good that once produced, can be consumed by an additional consumer at no additional cost. Goods having such a characteristics will be underproduced in the private sector, or may not be produced at all, following the conventional wisdom. So, economic efficiency requires that the government force the people to contribute to the  production of public goods, and then allow all citizens to consume them.

Government produces national defense, highways and dams, which are generally available for the benefits of its citizens. Nobody can be excluded from its benefits. In the real world application of public goods theory has certain problems.  First, as many public goods are successfully produced in the private sector; so government production is not necessary.  Second, many of the goods actually  produced do not correspond to economic definition of public goods.

Thus, public goods certainly exist but production in the public sector neither necessary nor sufficient for the efficient production of public goods. The market for television broadcast can also examine preference for the public goods. If the broadcast were financed by tax revenues, produced by the government, and distributed free of charge to viewers, then the government would have no way of telling which broadcast were more valuable to its viewers. But if market distributed the broadcasts then producers could use market indicators.  If viewers paid for each viewing, or if advertisers paid and wanted their advertising to be shown with broadcast that  appealed to their consumers, the producers would come forward to broadcast such programmes as are paid for.

If public goods were sold on the market like movie tickets, then some inefficiency would result from the exclusion of individuals who  valued the good, but less than the market price. Innovations in market, whether regarding locations, products types or potential new markets etc. can generate profits from it.

Public good can generate problem through tax- financed public -sector production i.e. the tax system imposes an excess burden on the economy. This includes costs of the tax system over and above the revenue collected and administrative and compliance costs that the tax system produces.

Cable television systems often have premium channels, which are scrambled to exclude non-paying customers. The premium channels could be extended at no additional cost to all viewers who have cable but the cost of exclusion are low enough that the cable  company can extend the premium channels only to those who pay. Public goods are applied in microcomputer software whereas the  computers that run the software are private goods. Even then public good on the market have been much more profitable than those selling private goods to the same market. Donations itself is a private good to the recipient, because a rupee given to one recipient is a rupee less available to another, but it may be a public good among potential donors. Thus, in order to provide the optimal amount of redistribution the government forces people to contribute.

Knowledge or technology is also a public good as it is non- rival, non-excludable and has positive externalities. Since technology is transformative it can convert some public goods into private ones and vice-versa.

Print books is undoubtedly a private good which are now available online free of charge for downloads. Thus online books are pure  public goods as it is non-rivalrous, non-excludable good with positive externalities.

Education used to be a private good with positive externalities, but now it is also free of cost available online, radio, television,  government institutions, etc which has transferred it to a public good.

Thus, both public and private goods are interlinked at one point of time it is public and at another point of time it is private. Therefore, it is undoubtedly a good which is widely applicable and which in turn benefits the society.  It is rightly said that the consumers cannot be excluded from consuming the public good once it is produced.