How does the government address the issue of public goods' non-excludability?

The government addresses the issue of public goods' non-excludability by providing these goods and services themselves or regulating their provision.

Public goods are characterised by two main features: non-excludability and non-rivalry. Non-excludability means that once a good is provided, no one can be excluded from using it. This characteristic often leads to what economists call the 'free-rider problem', where individuals have no incentive to pay for the good, expecting others to do so, and then using it for free. To address this issue, the government steps in to ensure the provision of these goods and services.

The government can directly provide public goods. This is often the case for goods like national defence, public parks, and street lighting. The government uses tax revenue to fund the production and maintenance of these goods. By doing so, they ensure that everyone, regardless of their contribution to the tax pool, has access to these goods. This is a common solution in many countries, where the government plays a significant role in providing essential services to its citizens.

Alternatively, the government can regulate the provision of public goods. In some cases, public goods are provided by private companies under government regulation. For example, in the UK, water and sewerage services are provided by private companies but are regulated by the government to ensure fair access and pricing. The government sets standards and rules that these companies must follow, ensuring that the services are accessible to everyone and that the companies cannot exclude anyone from using them.

In some cases, the government may also use a combination of direct provision and regulation. For example, in healthcare, the government may provide some services directly through public hospitals, while other services may be provided by private companies under government regulation.

In conclusion, the government plays a crucial role in addressing the issue of non-excludability of public goods. Through direct provision, regulation, or a combination of both, the government ensures that these goods and services are available to all, preventing the free-rider problem and ensuring social welfare.