Wednesday, March 10, 2010

Snow Removal from Roads

In our economy, most goods and services are provided privately, meaning that a firm - whether it is a sole proprietorship, a partnership or a corporation - employs resources for the purpose of generating profits. Most likely your computer, your clothing, your food was produced, distributed and sold by a firm. Not so with snow removal on roads.

As I discuss in Prin. of Micro, goods like snow removal are public goods, since they are both non-rivalrous and non-excludable. What does that mean? Well, let's take them in order.

Non-rivalry means that the benefits of consuming a snow cleared road are indivisible or that one person's consumption of a snow cleared road does not prevent another persons consumption of that snow cleared road. That is not true of the hamburger I had for lunch. My eating (consumption) of the hamburger does prevent you from eating the same hamburger.

Non-excludability means that one person cannot prevent another person from consuming the benefits from consumption. Thus once the road is cleared of snow, there is no rationing mechanism to keep others from benefiting from the road being cleared from snow.

These two reason result in public goods being under-produced by private markets from a social standpoint, and thus we have government step in and provide these services. In an interesting article, The New York Times reports that heavy snows are depleting snow removal budgets and leading to tough decisions by local communities.

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