Have a Non-Rivalrous and Non-Excludable 4th!
By Sarah Skwire
Sarah Skwire and Steve Horwitz
Here’s what we do every July 4th. First we grill some kind of meat, and then we eat pie. Then we sit on the back porch, and we wait for it to get dark. When we have decided that it’s dark enough, we gather up the kids, the bug spray, and a big beach blanket, and we drive a few subdivisions over to a spot just across from the summer home of the Indianapolis Symphony Orchestra. There, we join a small group of neighbors and plant ourselves outside the gates of the concert shell, where we can listen to Sousa marches and the 1812 Overture and wait for the fireworks to begin.
And some people say there’s no such thing as a true public good.
The classic economic definition of a public good is a good that is non-rivalrous and non-excludable. This means that no matter how many fireworks and Sousa marches we enjoy, our neighbors can still enjoy just as many along with us. And even though we didn’t buy the tickets the symphony would like us to buy, they can’t keep us from enjoying the show. Compare this to most goods. If I eat an apple it’s unavailable to anyone else, and apple sellers can ensure that people who want to eat apples have to pay for them. True public goods are rare, but fireworks are a great example. That’s why so many economists use them to teach the concept.
However, even fireworks have their limits as a public good, especially if we put stress on the word “good.” On July 4th, people want to see and hear fireworks and some are even willing to pay to do so. That they do so tells us that on July 4th, fireworks are an economic good. That’s not always the case. In Indiana, July 4th seems to extend from sometime in late June until sometime around mid-July. Fireworks are a constant sight, and especially sound, for weeks and weeks in the summer.
For many people, and even more dogs, this turns the public good of fireworks into a negative externality, or a kind of “public bad”. Kids are trying to sleep, adults want some peace and quiet, and dogs are just trying to stay sane. The same elements that make fireworks a public good on the 4th make them a real problem on other nights. The enjoyment of those who set them off does not make them invisible or inaudible to the rest of us. And no one can restrict the sights and sounds to those who are setting them off. The “publicness” of fireworks becomes a challenge when neighbors don’t want to experience them.
One of the central messages of economics is that actions and choices are always contextual. Fireworks serve nicely as an example of a public good, but only on the assumption that the context is one in which people wish to consume them. That won’t likely be true of fireworks every day of the year.
The fireworks are quiet this year, and the symphony won’t be playing. As with a lot of public goods–like Joni Mitchell’s paved over paradise–we don’t know what we’ve got til it’s gone. This year, we’ll sit on the porch until it gets dark, and let the lightning bugs be our fireworks. But next year? We’ll be right back where we were, just outside the gates non-rivalrously enjoying our favorite public good.