Public goods

Public goods are commodities or services, such as lighthouses and national defence that can only be provided by governments, because it is not possible to devise a pricing system to enable them to be marketed.

The origins of the concept

According to Adam Smith

"The third and last duty of the [government] is that and erecting or maintaining those public institutions and those public works, which, although they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could not repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain."

According to John Stuart Mill, it would be impossible to try to charge seamen according to their use or benefit from the lighthouse, and might therefore be most convenient for the government to provide the lighthouse and pay for it out of tax moneys.