The Concepts of Private, Public and Merit Goods

In this chapter I expand on Adam Smith’s observation that roads and education cannot be conceptualized satisfactorily by the concept of private goods. The concepts of public and merit goods need to be added. I reduce the eighteen different characteristics of public goods, found in the economic literature, to the two crucial ones of non-rivalness in consumption and non-exclusion possibility of non-payers. I build upon the partial insight of Samuelson to claim that the three concepts of private, public and merit goods are ideal concepts which can be present jointly and in varying degrees in every economic event. Given that both Samuelson and Olson show the need for the government to make, in some cases, a decision without sufficient scientific evidence (Samuelson) or on ethical considerations (Olson), I argue that the concept of public goods demands the ethical concept of merit goods as introduced by Musgrave. I provide the different definitions and justification given by Musgrave. A discussion of the secondary literature allows me to strengthen Musgrave’s own confession that he has only been able to give a partial justification of the concept of merit goods. I announce that in the next chapter I will provide a Kantian inspired justification for merit goods.