Public Goods, Externalities and the City

Abstract

We explain the concept of public goods as understood in economics. That is, non-rivalrous and non-excludable goods as opposed to rivalrous and excludable private goods. We also explain the concept of externality as the effect on society as a whole. We show how markets cannot effectively provide neither public goods nor goods that involve externalities. We argue that cities, as a tangle of public goods and externalities, need effective governance and thus regulation.