Finally, some goods are neither excludable nor rivalrous. These are called
public goods or sometimes collective consumption goods. The classic case
of a public good is national defence. All residents of Canada are equally
protected and defended by the Canadian Armed Forces. It is not possible
to provide national defence to some residents and not to others.
Information is also often a public good. Suppose a certain food additive
causes cancer. The cost of discovering this fact needs to be borne only
once. The information is then of value to everyone, and the cost of
making the information available to one more consumer is approximately
zero. Furthermore, once the information about the newly discovered
carcinogen is available, it is impossible to prevent people from using that
information. Other public goods include street lighting, weather forecasts
(a type of information), and some forms of environmental protection.
All these examples raise what is called the free-rider problem. Since public
goods are (by definition) not excludable, it is impossible to prevent
anyone from using them once they are provided. If the provider charged a
price, non-payers would take a free ride at the expense of those individuals
with a social conscience who do pay. But the existence of free riders, in
turn, implies that the private market will generally not produce public
goods because producers would not be able to collect the payments
required to cover their costs. The obvious remedy in these cases is for the
government to provide the good, financed from its general tax revenues.
Because of the free-rider problem, private markets will usually not provide public goods. In
such situations, public goods must be provided by government.