I’m increasingly convinced that the way economists teach undergrads about public goods and externalities is needlessly confusing. Here’s my radical solution: Purge discussions of public goods and bads, and replace them with discussions of positive and negative externalities.

Is this a libertarian stealth strategy? Hardly. Just because you’ve stopped talking about public goods, doesn’t mean you can’t talk about big externalities.

But doesn’t the concept of public goods have extra content? Yes – and that’s why it’s pedagogically confusing. According to the textbook definition, a public good is both “non-excludable” and “non-rival.” But all that “non-rival” really means is that the marginal cost of production is zero. And there’s already a chapter in the textbook where we discuss the problem of price exceeding marginal cost – namely, the chapter on monopoly. Blending externalities and monopoly problems together when students are struggling to separately understand them makes little sense.

Once economists clean up our undergraduate teaching, we can immediately clean up our internal communications. In my experience, the way the economists apply the concept of “public goods” to the real world is extremely sloppy. How many times have you heard an economist say that “education is a public good,” when at most he means that “education has positive externalities”? Given this sloppiness, I suspect that my terminological switch wouldn’t just be better for undergraduate instruction; it would also clarify the thinking of professional economists.

If you’ve ever lectured on the subject of public goods – or listened to such a lecture – I’d like to hear your thoughts. Would my approach have clarified the subject without significant loss of content?

P.S. Here’s my current lecture on externalities and public goods. It doesn’t actually drop all discussion of public goods, but it does reduce it to a special case of externalities.