Why do governments often provide public goods instead of private firms?

Governments often provide public goods because private firms may not find it profitable due to non-excludability and non-rivalry characteristics.

Public goods are goods that are non-excludable and non-rivalrous. Non-excludability means that once the good is produced, no one can be excluded from using it. Non-rivalry means that one person's use of the good does not reduce its availability to others. These characteristics make it difficult for private firms to charge for public goods and make a profit, which is why they are often provided by the government.

For example, consider a lighthouse. Once it is built, it is impossible to prevent any ship from using its light (non-excludability), and one ship's use of the light does not diminish its availability to other ships (non-rivalry). Therefore, a private firm would find it difficult to charge ships for using the lighthouse and would likely not find it profitable to build and maintain it. This is where the government steps in, providing the lighthouse as a public good.

Furthermore, the provision of public goods often involves large-scale infrastructure projects, such as roads, bridges, and public parks. These projects require significant investment and long-term planning, which may be beyond the capacity or interest of private firms. Governments, on the other hand, can spread the cost of these projects over a large tax base and plan for the long term, making them better suited to provide these goods.

In addition, the provision of public goods often has positive externalities, or benefits to society that are not captured in the price of the good. For example, public parks can improve public health and community cohesion, benefits that are not reflected in the cost of maintaining the park. Private firms, which are primarily motivated by profit, may not take these external benefits into account when deciding whether to provide a good. Governments, however, can consider these broader societal benefits when deciding to provide public goods.

In conclusion, due to the characteristics of public goods, the large-scale investment required, and the potential for positive externalities, governments are often better suited than private firms to provide these goods.